Medicaid pays for nursing home care, but only after you have spent down most of your own money first

Medicaid does cover nursing home stays — it is one of the few programs that will pay for long-term residential care. But there is a catch: you must be poor enough to meet your state's asset and income limits before Medicaid will start paying. Most people do not walk into a nursing home already poor. They pay out of pocket until their savings are nearly gone, then Medicaid takes over. How much you must spend, and how long that takes, depends on the cost of care in your state and how much money you have now.

The process is not automatic. You have to contact your state Medicaid office, submit financial documents, and wait for a decision. Some nursing homes have staff who help with this paperwork. Others do not. Knowing what documents to gather and what the limits are in your state will save you weeks of confusion.

Key Takeaways

  • Medicaid covers nursing home care once your assets fall below your state's limit, which ranges from roughly $2,000 to $3,000 depending on where you live.
  • You must pay the nursing home directly from your own money until you reach that asset limit; Medicaid does not cover the gap between your savings and poverty.
  • Your state Medicaid office, not the nursing home, makes the final decision on coverage, though the nursing home can tell you whether you are likely to meet the rules.
  • The paperwork takes four to eight weeks on average, so you should start the process before your money runs out, not after.
  • Some states have special programs for people who own a home or have a spouse still living at home, which can protect some assets from being spent down.

Asset and income limits that determine whether Medicaid will pay

Every state sets its own limits for how much money and property you can own and still be poor enough for Medicaid nursing home coverage. The federal floor is roughly $2,000 in countable assets for a single person, but some states allow up to $3,000. Countable assets include bank accounts, stocks, and bonds. They do not include your primary home, your car, or personal items like furniture or jewelry.

Income limits are separate from asset limits. Medicaid will cover your nursing home care if your monthly income is below a certain threshold — usually between $2,000 and $2,500 per month, depending on your state. If your income is above that limit, you may still be covered under something called "spend-down," where you pay the nursing home directly from your income until you fall below the limit. The nursing home then bills Medicaid for the rest.

Your state Medicaid office can tell you the exact limits where you live. You can also ask the nursing home's admissions staff, though they may not have the most current numbers. Do not rely on a number you find online without checking with your state first — these limits change yearly.

How the spend-down process works

Spend-down means using your own money to pay the nursing home until your assets drop below the state limit. During this time, Medicaid is not paying anything. You are. Once your assets fall below the threshold, you submit paperwork to your state Medicaid office, and they begin covering the cost.

The speed of spend-down depends on the cost of care in your area and how much money you have. If a nursing home costs $8,000 per month and you have $50,000 in savings, you will spend down in roughly six months. If you have $200,000, it will take longer. Some people spend down in a year. Others take two or three years. There is no set timeline.

During spend-down, you are responsible for the full bill. The nursing home cannot refuse to keep you there because you are waiting for Medicaid to start, but they can require you to show a plan for how you will pay. Many nursing homes will accept a signed agreement that says you will explore for Medicaid once you meet the asset limit.

What counts as an asset and what does not

Medicaid counts bank accounts, savings accounts, money market accounts, and certificates of deposit. It counts stocks, bonds, and mutual funds at their current market value. It counts cash. It counts vehicles beyond one car, and the value of that one car if it is worth more than a certain amount (usually $4,500 to $5,000, depending on your state).

Medicaid does not count your primary home, no matter how much it is worth. It does not count one vehicle. It does not count personal property like furniture, jewelry, or artwork. It does not count life insurance with a face value under $1,500. It does not count a burial plot or up to $1,500 set aside for burial expenses.

The rules around what counts are strict and specific. If you are unsure whether something you own will count, ask your state Medicaid office or a Medicaid planner before you spend money trying to reduce your assets. Some moves — like giving money to family members — can trigger penalties that delay Medicaid coverage by months.

Protecting your home and your spouse's income

Medicaid will not force you to sell your primary home to pay for nursing care. Your home is protected, even if it is worth $500,000 or more. However, after you die, your state may try to recover what Medicaid spent on your care by placing a lien on your home. This is called "estate recovery." Your state may allow your spouse or minor children to live in the home during their lifetime before recovery happens, or it may waive recovery entirely if your spouse is still living there.

If you are married and one spouse enters a nursing home, Medicaid has rules to protect the other spouse's income and assets. The spouse still at home can keep a certain amount of income each month (usually $3,000 to $3,500, depending on your state) and a certain amount in assets (usually $130,000 to $150,000). This is called the "community spouse resource allowance." These rules exist so the well spouse does not become poor while the other spouse is in care.

These protections vary significantly by state. Some states are generous. Others are strict. Ask your state Medicaid office about the rules in your state before you make any decisions about money or property.

How to start the Medicaid nursing home process

Contact your state Medicaid office or your local department of social services. You can find your state office through the Centers for Medicare & Medicaid Services website or by calling 1-800-MEDICARE. Tell them you want to explore for Medicaid nursing home coverage. They will send you an process or direct you to a local office where you can explore in person.

Gather these documents before you explore: proof of income (pay stubs, Social Security statements, pension letters), bank statements from the past two or three months, proof of assets (investment statements, property deeds), proof of citizenship or legal residency, and a list of any property you own. The nursing home can often provide a checklist of what your state needs.

Submit your process to your state Medicaid office, not to the nursing home. The nursing home cannot make the decision — only your state can. The process usually takes four to eight weeks. During this time, you continue paying the nursing home from your own money. Once Medicaid approves you, they will pay the nursing home directly for future care, though they may not cover care from before the approval date.

What Medicaid nursing home coverage actually pays for

Medicaid covers the cost of a semi-private room (two beds), meals, nursing care, medications, therapy, and basic medical equipment. It does not cover a private room unless your doctor says you need one for medical reasons. It does not cover phone, cable, or internet. It does not cover personal grooming services like haircuts or manicures, though some nursing homes include these as part of their basic services.

Medicaid pays the nursing home a set rate per day. That rate varies by state and by the level of care you need. In some states, the daily rate is $200. In others, it is $350 or more. The nursing home must accept the Medicaid rate as payment in full — they cannot bill you for the difference between what Medicaid pays and what they charge private-pay residents.

You are responsible for a small monthly "personal needs allowance," which is money Medicaid expects you to keep for things like clothing, toiletries, or a small amount of spending money. This allowance is usually $30 to $50 per month, depending on your state. The rest of any income you have goes to the nursing home.

Frequently Asked Questions

Can I keep my home if I am on Medicaid nursing home coverage?

Yes. Your primary home is not counted as an asset, and Medicaid cannot force you to sell it to pay for care. However, your state may place a lien on the home after you die to recover what Medicaid spent. Some states waive this if your spouse or minor children still live there.

What happens if I give money to my children before I explore for Medicaid?

Medicaid looks back five years to see if you gave away assets. If you did, they may delay your coverage by several months. The delay is calculated based on how much you gave away and the cost of care in your state. This is called a "penalty period," and it is one of the most common mistakes people make.

Does Medicaid cover assisted living or memory care, or only nursing homes?

Medicaid rules vary by state. Some states cover assisted living under certain programs. Most states cover only nursing homes. A few cover adult day care or in-home care instead. Contact your state Medicaid office to learn what types of care are covered where you live.

What if I run out of money before Medicaid approves me?

The nursing home cannot discharge you because you cannot pay. Federal law requires them to keep you there while your Medicaid process is being reviewed. However, you should tell the nursing home and your Medicaid caseworker when ready if you are running out of money, so they can prioritize your case.

Can my spouse stay in our home while I am on Medicaid in a nursing home?

Yes. Medicaid protects your spouse's right to stay in the home. Your spouse can also keep a certain amount of income and assets without affecting your Medicaid coverage. The exact amounts depend on your state, so ask your Medicaid office about the "community spouse" rules.