Dementia is progressive, eventually requiring continuous care and supervision that is financially unsustainable for most families. The annual cost of long-term care often exceeds six figures, quickly depleting personal savings. Medicaid, the joint federal and state public assistance program, serves as the primary payer for long-term care services for Americans who meet strict financial and medical eligibility criteria. It covers sustained, non-medical, custodial care for individuals with advanced dementia, unlike private insurance which typically covers only acute medical events.
The Specific Types of Dementia Care Medicaid Covers
Medicaid provides coverage for dementia care through two main structures: institutional care and community-based services. Federal law mandates that states cover long-term care provided in a Skilled Nursing Facility (SNF). This “Nursing Home Medicaid” is an entitlement for those who qualify financially and medically, covering the full cost of care, including room, board, medical needs, and personal support.
The program also offers Home and Community-Based Services (HCBS) waivers, which states implement optionally. These waivers allow a person with dementia to receive necessary care in their own home, a relative’s home, or an assisted living facility. HCBS waivers typically cover services like personal care assistance, adult day programs, and case management, helping delay or prevent a move to a nursing home.
It is important to distinguish Medicaid from Medicare. Medicare is a federal insurance program that covers short-term, acute medical care, such as up to 100 days in a skilled nursing facility following a qualifying hospital stay. Medicaid, conversely, pays for the long-term, non-medical custodial care—assistance with daily activities like bathing, dressing, and eating—that dementia patients require indefinitely. Since HCBS waivers are not an entitlement, spots are limited, and qualified applicants may face waitlists.
Financial and Medical Qualification Requirements
Medicaid eligibility for long-term care requires meeting strict financial and medical criteria. Financial requirements focus on the applicant’s assets and income, with limits that vary by state.
Financial Requirements
The countable asset limit for an individual applicant is typically $2,000. Countable assets include bank accounts, stocks, and secondary real estate. Excluded assets generally include the primary residence, a single vehicle, and burial funds.
Income limits are also applied, often capped at 300% of the federal Supplemental Security Income (SSI) benefit (the institutional income limit). Applicants exceeding this limit may still qualify in “Medically Needy” states or by using a Qualified Income Trust (QIT). A QIT legally diverts excess income to pay for care. In either scenario, nearly all the recipient’s income, minus a small personal needs allowance, is contributed toward the cost of care.
Medical Requirements
Medical qualification is defined by the “Level of Care” requirement. A physician must certify that the applicant requires the same level of care provided in a nursing facility. This is often termed Nursing Facility Level of Care (NFLOC) and must be met even if the applicant seeks services at home via an HCBS waiver. Dementia severity is a major factor, as cognitive impairment and the need for constant supervision often meet the functional criteria for institutional care.
The Look-Back Period
Medicaid enforces a 60-month, or five-year, “look-back” period on all asset transfers made for less than fair market value before the application date. This rule is designed to prevent applicants from giving away their assets solely to qualify for assistance. If uncompensated transfers are discovered, a penalty period is imposed. During this period, the applicant must privately pay for care before Medicaid coverage begins. The penalty length is calculated by dividing the transferred asset value by the state’s average cost of private nursing home care.
Protecting Assets and Income for a Non-Applicant Spouse
Special federal rules, known as Spousal Impoverishment Provisions, protect the financial stability of a non-applicant spouse when their partner requires Medicaid long-term care.
The Community Spouse Resource Allowance (CSRA) permits the “community spouse” to retain a certain portion of the couple’s combined countable assets. This allowance has federal minimum and maximum limits that are adjusted annually, with the exact figure varying by state.
The Minimum Monthly Maintenance Needs Allowance (MMMNA) ensures the community spouse has sufficient income for living expenses. If the community spouse’s personal income is below the state’s MMMNA threshold, a portion of the applicant’s income can be transferred to them to meet the minimum standard. This income transfer helps prevent the community spouse from falling into poverty.
In rare and complex situations, a non-applicant spouse may invoke “spousal refusal,” refusing to contribute their income or assets toward the applicant’s care. While this may allow the applicant to qualify immediately, the state Medicaid agency can pursue the community spouse to recover costs, potentially leading to a legal dispute. This strategy is highly complex and is not a common course of action.
The Application Process and Estate Recovery
The application for Medicaid long-term care is handled by the state’s Department of Human Services or a similar agency. The process requires submitting a comprehensive application and extensive documentation to verify income, assets, and financial transactions for the five-year look-back period. Although federal rules require a decision within 45 to 90 days, complex financial reviews often result in longer processing times.
A significant consequence of receiving Medicaid long-term care is the federally mandated Medicaid Estate Recovery Program (MERP). MERP allows the state to seek repayment for the costs of long-term care, including nursing home services and Home and Community-Based Services (HCBS) waivers, from the recipient’s estate after death. Recovery is generally limited to costs incurred after the recipient turns 55 years old.
The state’s claim targets assets that pass through probate, with the primary residence often being the most significant asset targeted for recovery. Recovery is delayed or waived if the recipient is survived by a spouse, a child under 21, or a child who is blind or permanently disabled. Families often attempt to mitigate MERP’s impact by planning to keep assets out of the probate estate, such as through specific types of deeds or trusts.