Medicaid Long Term Care Mental Health Benefits for Seniors

Summary
Coverage varies by state, but all states do offer some form of mental health care through their Medicaid Long Term Care programs. Even in states where mental health services are not specifically listed as a Medicaid benefit, those services can often be covered by some part of the Medicaid plan.

What Medical Conditions are Considered Mental Health Issues?

The National Institute for Mental Health estimated that 18.5% of all adults will experience mental illness in any given year. This includes mild to severe cases of depression, anxiety, bipolar disorder, schizophrenia, post-traumatic stress disorder, substance abuse issues and other forms of mental illness. It should be noted that “mental health” is often referred to as “behavioral health” when it comes to Medicaid.

While conditions like Alzheimer’s disease and dementia cause mental impairments, medically they are considered brain conditions and not mental illnesses. The same is true for Mild Cognitive Impairment, which is, in simple terms, considered a lesser form of dementia. However, people with these conditions can often have mental health problems in addition to, and sometimes made worse by, their brain impairment. This combination of conditions can be difficult to treat and any care plan for an individual in this situation should take that into consideration.

Mental Health Benefits with Medicaid Long Term Care

There are three types of Medicaid Long Term Care relevant to seniors – Nursing Home Medicaid, Home and Community Based Service (HCBS) Waivers, and Aged Blind & Disabled (ABD) Medicaid. As the name suggests, Nursing Home Medicaid covers room and board and health care services in a nursing home facility. HCBS Waivers cover in-home care services for people who have high level of care needs but wish to remain living at home or “in the community,” such as with a family member. ABD Medicaid, also known as Regular Medicaid, also provides health services for low-income people who are still living in the community and are over age 65, blind or disabled.

Medicaid state agencies have made recent efforts to integrate their mental health coverage and services into their overall programs. Part of the integration is an updated screening process where the state determines what each individual requires for care and where they might best receive that care. During this process, the state will look for any possible mental health issues and take them into consideration when creating a care plan.

Nursing Homes

Most Medicaid-approved nursing homes have some kind of mental health counselor as part of their full-time or part-time staff. These counselors can help Nursing Home Medicaid recipients cope with the mental health issues that often affect people at this stage of life – anxiety, depression, loneliness and confusion. If the mental health condition required a medical-level of support, a psychiatrist could be covered by Medicaid in some states using their “physician services” category.

Nursing Home Medicaid also covers prescription medications, which may help in some mental health cases. And Nursing Home Medicaid beneficiaries are under constant supervision, so any dramatic change in their mental health condition should be noticed by the facility’s staff.

HCBS Waivers and ABD Medicaid

Medicaid also provides mental health services for Home and Community Based Services (HCBS) Waivers recipients and ABD Medicaid recipients. Each state covers different services in different ways, so it’s important to familiarize yourself with the coverage in your state, but these mental health services can include:

• Individual Counseling/Therapy
• Group Therapy
• Bipolar Disorder Treatment
• Temporary Inpatient Treatment For Severe Mental Illness Episodes
• Vocational Training
• Independent Living Counseling
• Peer Support Groups
• Family Counseling
• Adult Day Care
• Prescription Medications
• Medication Management
• Case Management

Mental Health Coverage with Consumer Directed Care

Another way Medicaid Long Term Care recipients could pay for mental health services is through Consumer Directed Care, which is also known as Consumer Directed Services, Self-Administered Services and by other names. This program gives Medicaid recipients decision-making power when it comes to their health care. This can include the state providing the Medicaid beneficiary with a budget to spend on healthcare, which could include mental health services. However, it should be noted that Consumer Directed Care is typically associated with personal care assistance with daily activities like bathing and eating.

All 50 states offer some form of Consumer Directed Care through an HCBS Waivers, their ABD Medicaid program or both. But Consumer Directed Care is not an option for Nursing Home Medicaid beneficiaries.

Institutions for Mental Disease and Medicaid Long Term Care

If a Medicaid-eligible individual age 65 or over has severe enough mental health issues, Medicaid will pay for them to live in and receive care in an Institution for Mental Disease (IMD). The severity of their mental illness will be determined by a Preadmission Screening and Resident Review, which is a federal requirement to help ensure that people are not inappropriately placed or kept in nursing homes for long-term care when they would be better served in an IMD.

IMDs are also known as psychiatric hospitals, inpatient psychiatric centers, mental institutions and other names. The federal government defines an IMD as a hospital, nursing facility or other institution that has more than 16 beds where individuals reside to be treated for mental illness (including substance use disorders) while also receiving medical and nursing care services.

There are several factors that differentiate IMDs from nursing homes, assisted living facilities and memory care units. First and most importantly is that people must be diagnosed with a severe mental illness during the screening process to be eligible to live in an IMD, but that’s not the case with nursing homes, assisted living facilities or memory care units. IMD’s have a high-security environment, in California part of the definition of an IMD is being a “locked facility,” whereas many nursing homes and assisted living facilities try and promote a sense of freedom among their residents, even if their freedom is restricted to the grounds. And memory care units have specialized professionals, rooms and supplies to specifically help with cognitive disorder, dementia and Alzheimer’s that will likely exceed similar help at an IMD.

Eligibility Requirements for Medicaid Long Term Care Mental Health Benefits

All three types of Medicaid Long Term Care have financial eligibility requirements and functional (or medical) requirements. These can vary by state, marital status and Medicaid program, but in most states in 2025 the eligibility asset limit is $2,000 and the income limit is $2,901/month.

The functional (or medical) requirement for Nursing Home Medicaid in every state and most HCBS Waivers is needing a Nursing Facility Level of Care (NFLOC). This means the applicant needs the type of 24-hour supervision and care usually associated with a nursing home. Exactly how a NFLOC is defined and measured can vary by state.

The assessments used to determine whether or not someone needs a NFLOC will usually include an assessment from their primary care provider and an evaluation of the individual’s ability to perform Activities of Daily Living (ADL) – mobility, bathing, dressing, eating, toileting. Many mental health issues can impact someone’s ability to perform these activities, so it is possible that a mental health condition could help someone become functionally eligible for Medicaid. Brain conditions Alzheimer’s disease or related dementias does not guarantee a NFLOC designation, but these conditions can impair a senior’s ability to perform the ADLs and make them functionally eligible for Medicaid Long Term Care.

Nursing Home Medicaid and ABD Medicaid are entitlements, which means that all eligible applicants are guaranteed coverage without wait. HCBS Waivers are not an entitlement. Instead, they have a limited number of enrollment spots, and once those spots are full additional applicants will be placed on a waitlist.