Medicaid will pay for nursing home care if you meet both a financial test and a medical test. Most people who qualify have countable assets below $2,000 and monthly income under $2,901 (the 2025 limit in most states). Getting there often requires careful financial planning, a formal application with extensive documentation, and sometimes legal help to protect a spouse’s finances. Here’s how the process works from start to finish.
The Two Tests You Must Pass
Medicaid requires you to clear two separate hurdles before it will cover nursing home costs. The first is financial: your income and assets must fall below your state’s limits. The second is medical: you must need a level of care that only a nursing facility can provide. Failing either one means a denial, so it’s worth understanding both before you apply.
The medical test is determined by your state, but it generally focuses on how much help you need with basic daily tasks like bathing, dressing, eating, transferring in and out of bed, and using the toilet. If you need hands-on assistance with several of these activities, or you have a condition like advanced dementia that requires around-the-clock supervision, you’ll typically meet the threshold. People with serious mental illness or intellectual disability go through an additional screening called Preadmission Screening and Resident Review to confirm that a nursing facility is the right placement.
Income and Asset Limits
In 41 states, the income cap for nursing home Medicaid is 300% of the federal Supplemental Security Income (SSI) benefit. For 2025, that works out to $2,901 per month for an individual. All sources count: Social Security, pensions, annuities, rental income, and investment returns.
The asset limit is much tighter. Most states cap countable assets at $2,000 per person. Countable assets include cash, bank accounts, CDs, stocks, bonds, second homes, IRAs, and the cash surrender value of life insurance policies with a face value over $1,500.
Certain assets are exempt, meaning they don’t count toward that $2,000 ceiling:
- Your primary home, as long as equity is below $1,097,000 for a single applicant (no equity limit if your spouse still lives there)
- One vehicle, regardless of value, if you’re married, use it for medical transport, or it’s equipped for a disability
- Personal property and household goods
- An irrevocable prepaid funeral and burial plan
- Wedding and engagement rings
- Necessary medical equipment
- Life insurance with a total face value of $1,500 or less
What to Do If Your Income Is Too High
If your monthly income exceeds the $2,901 limit, you aren’t automatically disqualified. Many states allow you to set up what’s called a Qualified Income Trust, sometimes known as a Miller Trust. This is a simple, irrevocable trust where your income is deposited each month. Because the money flows into the trust rather than directly to you, it’s disregarded when Medicaid checks your eligibility.
The trust must name your state’s Medicaid program as the beneficiary for any funds remaining after your death, up to the total amount Medicaid spent on your care. Setting one up typically requires an elder law attorney, but the cost is modest compared to the benefit. If your state uses this rule and your income is even $1 over the cap, a Qualified Income Trust is the standard solution.
Spending Down Assets Legally
Most applicants have too many countable assets when they first look into Medicaid. The process of reducing those assets to meet the $2,000 limit is called a spend-down. There are several legal ways to do it:
- Pay for care directly. Using savings to cover nursing home bills before Medicaid kicks in is the most straightforward approach.
- Pay off debts. Mortgage balances, car loans, credit cards, and medical bills are all legitimate uses of excess assets.
- Convert countable assets to exempt ones. You can make repairs or improvements to your home, buy a newer vehicle (if it qualifies as exempt), purchase prepaid burial and funeral plans, or buy necessary medical equipment.
What you cannot do is simply give money away to family members or transfer assets for less than fair market value. Medicaid enforces a strict look-back period to catch exactly that.
The Five-Year Look-Back Period
When you apply for nursing home Medicaid, your state reviews every financial transaction from the previous five years (60 months). If you gave away money, transferred property to a child, or sold something below its market value during that window, Medicaid will impose a penalty period during which it won’t pay for your care.
The penalty is calculated by dividing the total value of the improper transfers by your state’s average monthly cost of private-pay nursing home care (called the penalty divisor). If you gave away $100,000 and the average monthly cost in your state is $10,000, you’d face a 10-month penalty. During those 10 months, you’d be responsible for paying the nursing home yourself.
The penalty doesn’t start until you’ve already been admitted to a facility and would otherwise qualify for Medicaid, which can create a dangerous gap in coverage. This is one of the biggest financial traps in Medicaid planning and a key reason to consult an elder law attorney well before you need nursing home care. Planning five or more years ahead gives you far more options.
Protections for Your Spouse
Federal law prevents Medicaid from impoverishing the spouse who stays at home (called the “community spouse”). Two key protections apply in 2025.
The Community Spouse Resource Allowance lets the at-home spouse keep between $31,584 and $157,920 in countable assets, depending on the state and the couple’s total resources. This money is excluded from the applicant’s eligibility calculation, so the community spouse doesn’t have to drain every account.
The Minimum Monthly Maintenance Needs Allowance guarantees the at-home spouse a minimum monthly income of $2,643.75 in most states ($3,303.75 in Alaska, $3,040 in Hawaii), effective July 2025. If the community spouse’s own income falls short of that floor, a portion of the nursing home spouse’s income can be redirected to make up the difference before the rest goes toward the cost of care.
What You Need to Apply
A Medicaid nursing home application is document-heavy. Incomplete submissions are the most common cause of delays, so gather everything before you start. You’ll generally need:
- Identity and legal documents: birth certificate or passport, Social Security cards, marriage certificate, power of attorney or guardianship paperwork
- Insurance and medical records: Medicare card, copies of all health insurance cards (front and back), recent medical bills, long-term care insurance documentation
- Income verification: Social Security statements, pension letters, 1099 forms, check stubs for any income source
- Financial accounts: the most recent statements for every bank account, CD, IRA, 401(k), brokerage account, and savings bonds
- Property and vehicle records: tax assessments for your home, vehicle titles, fair market valuations for any non-home real estate
- Trust and insurance policies: copies of any trust documents, life insurance and burial insurance policies, prepaid funeral contracts
- Transfer records: documentation of any assets sold, gifted, or transferred in the past three to five years
Applications go through your state’s Medicaid office or, in some cases, through the nursing facility’s admissions team. Processing times vary widely by state, from a few weeks to several months. Many states allow retroactive coverage for up to three months before your application date, as long as you were eligible during that time.
Estate Recovery After Death
Medicaid is not free in the long run for everyone. After a nursing home resident dies, the state has the right to recover what it paid from the deceased person’s estate. This most commonly affects the family home, which was exempt during the person’s lifetime but becomes recoverable after death.
There are important exceptions. States cannot pursue estate recovery if the deceased is survived by a spouse, a child under 21, or a blind or disabled child of any age. States can also place a lien on real property while someone is permanently in a nursing facility, but they must remove it if the person is discharged and returns home. And if a spouse, minor child, disabled child, or sibling with an equity interest in the home is living there, no lien can be placed.
Every state is also required to have a process for waiving estate recovery when it would cause undue hardship, such as when the home is the sole income-producing asset for surviving family members.
When to Start Planning
The single most important thing you can do is start early. The five-year look-back period means that strategies available today may not help if you wait until a nursing home admission is imminent. An elder law attorney can review your specific finances, help structure assets legally, set up trusts if needed, and guide the application process. Many offer an initial consultation for a flat fee.
If a nursing home stay is already underway or imminent, focus on gathering documentation, identifying exempt assets, and applying as quickly as possible. The nursing facility’s social worker can often help connect you with your state’s Medicaid office and walk you through the local process.