Becoming Medicaid Eligible When Exceeding the Financial Limits

Many people research Medicaid Long Term Care eligibility and are discouraged by the strict income and assets limits. But even if you are over the limits, there are still ways you can qualify. This article is an overview of the most common alternative pathways to Medicaid eligibility. These strategies can be complicated, and their rules and availability can change depending on where you live, so we recommend consulting with a Medicaid planning professional before attempting any of them on your own.


Understanding Medicaid Long Term Care's Financial Limits

In order to qualify for Medicaid Long Term Care, applicants must meet two financial requirements – an asset limit and an income limit. Some applicants must also meet functional (medical) requirements, but those will not be discussed in this article. To learn more about functional requirements, click here.

In general, the asset limit and the income limit are low, because Medicaid is intended for financially needy people. In most cases in 2024, the individual asset limit is $2,000, and the individual income limit is between $943/month and $2,829/month, but there are many exceptions and a wide range of limits. These financial limits can vary depending on the state where you live, if you’re married, if both spouses in a married couple are applying or just one, and which of the three Medicaid Long Term Care programs you’re applying for – Nursing Home Medicaid, Home and Community Based Services (HCBS) Waivers or Aged, Blind and Disabled (ABD) Medicaid.

 Toolbox: To discover the criteria for your specific situation, use our Medicaid Eligibility Requirements Finder.

Most of your financial resources will be counted toward these limits – bank accounts, retirements accounts, stocks, cash, Social Security benefits, pension payments, wages, rental income, etc. However, there are some assets and some income sources that are exempt, which means they won’t be counted toward your limit. For homeowners, the home is usually exempt, which we’ll discuss later. Household appliances, furniture, your primary vehicle and personal items like wedding rings are also exempt from the asset limit in most cases. Almost all income is counted, with the only exceptions being things like Holocaust restitution payments and COVID-19 stimulus checks.

If your countable assets or income are over the limits, there are still ways you can qualify for Medicaid, which is the point of this article and will be detailed below. But first you should understand that you can not simply give away your assets or income in order to meet these limits. To make sure you don’t, Medicaid uses the Look-Back Period.

In most states, the Look-Back Period is 60 months (five years), which means your state Medicaid offices will look back into your financial history for the 60 months before you submitted your Medicaid application to make sure haven’t given away any income or assets, or sold them at less than fair market value. If you have, your application will be denied and you will likely be penalized with a period of Medicaid ineligibility. However, the Look-Back Period does not apply to ABD Medicaid, only Nursing Home Medicaid and HCBS Waiver. And the state exceptions are California, where there is no look back for HCBS Waivers and it’s 30 months for Nursing Home Medicaid, and New York, where the Look-Back Period is 60 months for Nursing Home Medicaid and there is no Look-Back for Community Medicaid (similar to HCBS Waivers in other states), although that may change in 2025.


Alternative Pathways to Eligibility If You Are Over the Asset Limit

The following strategies can be used when you have assets that are over Medicaid’s limit for eligibility. These strategies can be complicated, and their guidelines are usually updated annually and can vary by state. And there are more complexities when it comes to many people’s most valuable asset – their home. That’s why it’s recommended that you consult with a Certified Medicaid Planner or Elder Law Attorney before attempting to use one of these alternative pathways on your own.

Medicaid Spend Down

Medicaid spend down is a common strategy to use when you are over the asset limit. Essentially, you spend your excess assets until they are down to the asset limit. However, you can only spend on yourself or your spouse because spending on others (like paying for a grandchild’s education) is considered giving away your assets and will violate the Look-Back Period. And you shouldn’t spend on any items that can be easily liquidated and will end up counting toward the asset limit anyway, things like second cars, vacation homes, expensive jewelry, etc. To learn more about Medicaid spend down, click here.

Irrevocable Funeral Trusts

Any funds in an Irrevocable Funeral Trust (IFT) are exempt from the asset limit, and purchasing an IFT does not violate the Look-Back Period. So, if you’re over the asset limit, you can buy an IFT at any time to get below the limit. However, most states put a $15,000 limit on the amount of money that will be exempt from the asset limit if it’s in an IFT. To see what the limit is in your state and to learn more about IFTs, click here.

Medicaid Compliant Annuities

An annuity is a financial product, usually sold by insurance companies. You buy the annuity with a lump sum of money and the company you bought it from pays you back that lump sum in monthly payments. If you buy a Medicaid Compliant Annuity, it will not count toward your asset limit. However, the monthly payments will count toward your income limits. Medicaid Compliant Annuities must meet certain standards, like being irrevocable, immediate and fixed, to name a few. To learn more about Medicaid Compliant Annuities, click here.

Medicaid Asset Protection Trusts

Any assets placed in a Medicaid Asset Protection Trust (MAPT) will be exempt from the asset limit, including property and vehicles. Creating a MAPT violates the Look-Back Period, so in most cases you would need to do it five years in advance of applying for Medicaid Long Term Care. MAPTs must follow certain guidelines to be Medicaid-compliant, such as being irrevocable. They are also expensive to create, so it’s only recommended if you have $100,000 or more in assets.

Assets in a MAPT are also protected from your state’s Medicaid Estate Recovery Program, which might seek reimbursement for your long term care after your death by forcing a sale of the home. Estate recovery is a different topic that you can learn more about by clicking here, but there is significant overlap (and confusion) with assets being exempt from the asset limit and exempt from estate recovery.

To learn more about MAPTs, click here.

Spousal Transfer

When only one spouse in a married couple is applying for either Nursing Home Medicaid or HCBS Waivers, the non-applicant spouse is allowed to keep up to $154,140 in assets in most states in 2024. This is known as the Community Spouse Resource Allowance (CSRA), which you can learn more about by clicking here. The CSRA amount can change by state (it’s $129,084 in Illinois, for example), and it does not apply to ABD Medicaid.

Half a Loaf

“Half a loaf” strategies knowingly break the Look-Back Period by giving away assets to family members. In simple terms, you would keep enough of your money to pay for long term care during the penalty period for violating the Look-Back Period and give away the rest of your assets as an “early inheritance,” which would be safe from Medicaid estate recovery in many cases. Using these strategies is complicated and can have many consequences, so it’s strongly recommended that you consult with a Certified Medicaid Planner or an Elder Law Attorney before attempting to use them.

Home Ownership and the Asset Limit

If you own a home, chances are good its value would put you over Medicaid’s asset limit. However, your home will be exempt in most cases, depending on the state where you live, who may be living in the home, your intent to return home and the percentage of the home you actually own, known as home equity interest. To learn more about these variables and how your home might impact your Medicaid Long Term Care eligibility, click here.

Even if your home is exempt from the asset limit, it may not be protected from your state’s Medicaid Estate Recovery Program, which we discussed earlier and you can learn more about by clicking here. But there are several strategies that will keep your home protected from both the asset limit and estate recovery:


Alternative Pathways to Eligibility If You Are Over the Income Limit

People who have monthly income over their Medicaid income limit can use the strategies listed below to reduce their income and qualify for Medicaid Long Term Care and maintain their coverage. These strategies, like the ones used for the asset limit, are complicated and can vary by state. This is why we recommend consulting with an Elder Law Attorney or Certified Medicaid Planner rather than attempting them on your own.

Medically Needy Pathway

In some states, Medicaid applicants/recipients with income over the limit can spend their excess income on medical expenses to gain eligibility. This is known as the Medically Needy Pathway, and you can learn more about it by clicking here. In short, Medicaid applicants/recipients spend income on pre-approved medical expenses until they reach their state’s Medically Needy Income Limit and then Medicaid will cover the rest of their medical expenses for a designated amount of time (usually 1-6 months). At the end of that time period, the process starts again, much like an insurance deductible.

As of 2024, the following states offer a Medically Needy Pathway: Arkansas, California, Connecticut, Florida, Georgia, Hawaii, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Pennsylvania, Rhode Island, Utah, Vermont, Virginia, Washington, West Virginia and Wisconsin, as well as the District of Columbia.

Qualified Income Trusts

States that don’t offer the Medically Needy Pathway are known as Income Cap states. In those states, Medicaid applicants/recipients who are over the income limit can become Medicaid eligible by depositing their excess monthly income into a Qualified Income Trust until they reach the income limit. To learn more about Income Cap states and Qualified Income Trusts (also known as Miller Trusts), click here.

As of 2024, the Income Cap states are Alabama, Alaska, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Idaho, Indiana, Iowa, Kentucky, Mississippi, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas and Wyoming.