Qualifying for Medicaid to cover nursing home care requires meeting both a financial test and a medical test. You need to have limited income and assets, and you need to demonstrate that your health condition requires the level of care a nursing facility provides. The rules are complex, vary by state, and include provisions designed to prevent people from giving away assets to qualify. Here’s what you need to know about each piece of the process.
The Two Tests You Must Pass
Medicaid for nursing home care (often called “Institutional Medicaid”) isn’t like regular Medicaid. It has stricter financial requirements and adds a clinical component. You must satisfy three basic criteria: you need to be 65 or older (or have a qualifying disability), your income and assets must fall below your state’s limits, and a medical assessment must confirm you need nursing-home-level care. Failing any one of these means you won’t qualify, though there are workarounds for some situations, particularly on the income side.
Income and Asset Limits
Every state sets its own financial thresholds, but the structure is similar everywhere. For a single applicant, the countable asset limit is typically very low. In Nebraska, for example, the 2026 limit is $4,000 for the applicant. Countable assets include bank accounts, investments, and most property beyond your primary home. Your car, personal belongings, and a small amount of life insurance are generally excluded.
Your home gets special treatment. If you have equity in your home below a certain threshold, it’s usually excluded from the asset count, at least while you’re alive. For 2026, the federal minimum home equity limit is $752,000 and the maximum is $1,130,000. Each state picks a figure within that range. If your home equity exceeds the limit your state has chosen, you won’t qualify unless you reduce it, typically by selling the property or taking out a mortgage.
Income limits vary widely. In many states, all of your monthly income (Social Security, pensions, other sources) must go toward paying the nursing home, minus a small personal needs allowance of around $75 per month, your Medicare premiums, and potentially an allowance for your spouse. This payment to the facility is called your “patient liability.” Medicaid then covers the remaining cost of your care.
What Happens if Your Income Is Too High
Some states are “income cap” states, meaning if your gross monthly income exceeds a set limit, you’re automatically disqualified. But there’s a legal tool called a Qualified Income Trust (sometimes called a Miller Trust) that solves this problem. You set up a special bank account and deposit enough of your monthly income into it so that the income outside the trust falls within program limits. The trust must be irrevocable, meaning you can’t cancel it, and it can only hold your income, not other assets. When you pass away, any money left in the trust goes back to the state to reimburse Medicaid for benefits it paid on your behalf.
You must make deposits every month you need Medicaid coverage, and the trust agreement has to be reviewed and approved by your state’s Medicaid office. Setting one up typically requires an elder law attorney, though the cost is modest compared to nursing home bills.
Other states use a “medically needy” or “spend down” pathway instead. If your income exceeds the Medicaid limit, you can subtract your out-of-pocket medical expenses from your income until it drops below the threshold. Qualifying expenses include payments for medical care, supplies, and prescriptions that you’re personally responsible for. Insurance payments or bills someone else pays on your behalf don’t count. For long-term care Medicaid, the spend-down budget period is typically six months: once your accumulated medical costs bring your countable income below the limit, you’re eligible for the rest of that six-month window.
The Medical Assessment
Financial eligibility alone isn’t enough. Your state must determine that you genuinely need the level of care provided in a nursing facility. This is called a “Nursing Home Level of Care” (NHLOC) assessment, and it evaluates your ability to handle daily life on your own.
Assessors score you across roughly 12 categories, including mobility, eating, toileting, bathing, dressing, cognition, behavioral needs, medication management, meal preparation, and safety. Each category assigns points based on how much help you need. In Missouri’s system, for instance, you need at least 18 points across these categories to qualify. The threshold and scoring vary by state, but the principle is the same everywhere: you must show that your physical or cognitive limitations require the kind of round-the-clock supervision and hands-on assistance that a nursing facility provides.
If you need help with several activities of daily living, have significant cognitive impairment such as moderate to advanced dementia, or require skilled medical treatments like wound care or IV therapy, you’re likely to meet the clinical standard. A physician’s assessment and medical records documenting your conditions strengthen the case. The evaluation is usually performed by a state-contracted assessor or a nurse from the nursing facility, not your personal doctor.
The Five-Year Look-Back Period
This is where many families get caught off guard. When you apply for Medicaid, your state will review every financial transaction you’ve made over the past 60 months (five years). California uses a shorter 30-month window. The purpose is to identify any assets you gave away or sold below fair market value to reduce your wealth and qualify faster.
If the review finds that you gifted money, transferred property to a family member, or sold assets for less than they were worth during the look-back period, you’ll face a penalty period during which Medicaid will not pay for your nursing home care, even if you otherwise qualify. The length of the penalty depends on the total value of the transferred assets divided by the average monthly cost of nursing home care in your state.
For example, if you gave $20,000 to a family member and your state’s average monthly nursing home cost is about $9,700, the penalty would be roughly two months of ineligibility. In a state where nursing homes average $14,000 per month, the same gift creates only about a 1.4-month penalty. The penalty clock starts on the date you apply for Medicaid, not the date you made the gift. This means you could face months without coverage while still needing full-time nursing care, with no way to pay for it.
Certain transfers are exempt from penalties: transfers to a spouse, transfers to a blind or disabled child, and transfers of a home to a child who lived in the home and provided care that delayed nursing home placement for at least two years.
Protections for a Spouse Living at Home
Federal law includes “spousal impoverishment” rules so that one spouse doesn’t have to become destitute when the other enters a nursing home. The spouse living at home (called the “community spouse”) is allowed to keep a portion of the couple’s combined assets, known as the Community Spouse Resource Allowance. For 2026, the non-applicant spouse can retain up to $162,660 in assets in states like Nebraska. Each state sets its own figure within federal minimums and maximums.
The community spouse also receives a Monthly Maintenance Needs Allowance, which is a portion of the couple’s income set aside for the at-home spouse’s living expenses. Federal guidelines set this between roughly $2,002 and $2,980 per month, though states can adjust the figures. If the community spouse’s own income falls below this floor, a portion of the nursing home spouse’s income can be redirected to make up the difference before the rest goes toward the facility.
What the State Recovers After Death
Medicaid is not free in the long run for everyone. Federal law requires every state to seek reimbursement from the estates of deceased Medicaid recipients who were 55 or older. This “estate recovery” targets the cost of nursing facility services, home and community-based services, and related hospital and prescription drug costs. States can optionally pursue recovery for other Medicaid services as well.
In practice, this most commonly affects the family home. If you owned a house that was excluded from the asset count while you were alive, the state can place a claim against it after you die to recoup what Medicaid spent on your care. However, states cannot pursue estate recovery if you’re survived by a spouse, a child under 21, or a child of any age who is blind or disabled. Money remaining in a Qualified Income Trust at death also goes back to the state, up to the total amount of Medicaid benefits paid.
Steps to Start the Process
Applying for Medicaid nursing home coverage involves gathering extensive documentation: bank statements, tax returns, deeds, insurance policies, and records of any financial transactions over the past five years. Most states allow you to apply through the local Department of Social Services or the equivalent agency. The nursing facility’s social worker can often help initiate the application.
Processing times vary, but expect at least 45 to 90 days, sometimes longer if there are complications with the look-back review or missing documents. Medicaid can be retroactive up to three months before your application date, so if you were already in the nursing home and financially eligible during that window, those costs may be covered.
Planning ahead makes a significant difference. Consulting an elder law attorney well before nursing home care becomes necessary, ideally more than five years in advance, gives you the most options for legally protecting assets while still qualifying. Once a health crisis hits, your options narrow considerably, and the look-back period limits what you can do without penalty.