Reasons For Medicaid Long Term Care Denials & What to Do About Them

Summary
If one applies for Medicaid Long Term Care and is denied, it is still possible to receive Medicaid benefits. There are several reasons a person might receive a denial, and while Medicaid is different in every state, there is usually a process for someone who is initially denied Medicaid benefits—including Nursing Home Medicaid and Home and Community Based Services waivers for long-term care—to eventually receive those services nonetheless.

 

Understanding the Basics of Medicaid Denial

After you or your loved has applied for any of the three Medicaid Long Term Care programs – Nursing Home Medicaid, Home and Community Based Services (HCBS) Waivers, or Aged, Blind, and Disabled (ABD) Medicaid – you will receive a formal letter of approval or denial within 90 days. This formal Medicaid letter of denial represents an official denial. A Medicaid caseworker saying you’re not eligible is not an official denial.

The formal Medicaid denial letter will clearly state why you have been denied. Usually, it’s because you are over the income or asset limit for eligibility, or it might be because your medical needs are not severe enough, but we’ll get into those details later. For now, it’s important to understand that denials fall into the three general categories listed below. These aren’t official categories, but understanding your denial in this way will let you know what to do next. In fact, each category comes with corresponding “Next Steps.”

A) Error by applicant leads to denial. Medicaid applications are complicated and mistakes are common. That’s why there is an entire profession that dedicates itself to understanding Medicaid rules and the application process – Certified Medicaid Planners. For this denial, take Next Step 1 described below and, if necessary, follow with Next Step 2.

B) Error by caseworker leads to denial. Medicaid applications are so complicated that even caseworkers make mistakes. In fact, some estimates suggest 25% of all Medicaid denials are the result of a mistake by the state. For this denial, take Next Step 1 described below and, if necessary, follow with Next Step 3.

C) Legitimate reason(s) lead to denial. Even if you’re denied correctly because you don’t meet the medical or financial requirements, there are still ways to become Medicaid eligible. For this denial, take Next Step 2 described below.

 

Taking the Next Steps

After receiving a formal Medicaid denial letter, many people want to immediately file an appeal. However, that’s best used as a last resort and just one of the three potential courses of action.

1) Requesting a Reversal

If the applicant or the caseworker makes an error that leads to a denial, the next step should be requesting a reversal. This is the fastest and most informal means of challenging the denial.

If the applicant has made a mistake, they simply call or email the caseworker to explain the error and provide the corrected information or supply the missing paperwork. Following this basic process can often reverse a denial.

The same process can be followed if the applicant believes the caseworker made a mistake. However, it’s important to be cautious and respectful when it comes to communicating with the caseworker. If you’re feeling upset about being denied, it may be best to take a moment and calm your emotions before contacting your caseworker. In many cases, this is an ideal time to contact a professional Medicaid planner. They can review your application and the denial to see if the state did in fact make a mistake, and they can handle the sometimes delicate communications with the caseworker. In some instances, the caseworker’s supervisor may even need to be involved.

If the request for reversal is granted, the applicant will be enrolled in the Medicaid program. Plus, they will have retroactive coverage dating back to their original application date. This means any healthcare expenses they had during that time period (from the original application date to the denial reversal date) will be covered by Medicaid, as long those expenses are covered by the applicant’s Medicaid program and plan. Medicaid will pay all of the relevant outstanding bills, and in some cases they will reimburse the applicant if they have paid anything out-of-pocket.

2) Reapplying for Medicaid

If a Medicaid applicant has been denied for a legitimate reason, they can always re-apply. In some cases, a person who fills out a Medicaid application on their own doesn’t know which assets are counted toward the limit and which ones are exempt. Or maybe they don’t understand how to correctly implement Medicaid-allowed strategies to spend down excess assets, remain eligible and have no gap in coverage. After a senior in one of these situations gets denied, they can often re-apply and get accepted the second time around by hiring a Certified Medicaid Planner or some other professional who will correctly utilize all possible strategies and advantages, re-work their application and re-submit it to the state.

Details on the rules and strategies for adjusting your financial situation after a denial are described below.

It’s important to note that even if a re-application is successful, coverage does not automatically revert back to the original application date like it does with a successful request for reversal, as described above. Coverage will begin on the date the reapplication was approved. If the state has decided the applicant was not eligible for Medicaid from the time they first applied to the time they reapplied, the applicant is responsible for all of their healthcare costs accrued during that time frame.

3) Appealing the Denial

Appealing the denial is a viable course of action if these two things are true: 1) You or your loved one has requested a repeal that has been rejected by your caseworker or someone else from the state, AND 2) you remain confident that the state made a mistake in denying your Medicaid application.

The formal Medicaid denial letter should explain the appeal process in your state. The legal term for an appeal is “fair hearing.” The exact process may vary somewhat by state, but in all states the appeal must be based on the financial information provided in the original application. The denial letter will also include a deadline to file an appeal. Applicants generally have 30-90 days to appeal a Medicaid denial. After the appeal has been requested, the state will set a hearing date.

Appealing a Medicaid denial can be complicated and possibly contentious. Remember, the state does not believe it made a mistake. For all these reasons, most people hire a Certified Medicaid Planner or Elder Law Attorney to help them appeal a Medicaid denial. If an appeal is successful, the applicant will have retroactive coverage going back to the original application date. This can be extremely helpful because the appeal process can sometimes drag on for months, which could equal thousands of dollars of healthcare a senior would have to cover out-of-pocket if they didn’t have Medicaid coverage of some kind.

 

Financial Criteria: How To Know One’s Specific Limits

The most common reason an applicant is denied Medicaid is income or assets above the eligibility criteria. In most states, an applicant’s monthly income must be less than $2,829/month in 2024, and their assets (including money in bank accounts) must be less than $2,000.

These figures will vary depending on many factors, including state of residence, marital status and the type of Medicaid for which one is applying – Nursing Home Medicaid, Home and Community Based Services (HCBS) Waivers or Aged, Blind and Disabled (ABD) Medicaid. In California, for example, there is no income limit for Nursing Home Medicaid, but the individual income limit for HCBS Waivers is $1,732/month (effective April 1, 2024 – March 31, 2025), while there is no asset limit for either program. In Illinois, on the other hand, the individual income limit for all three Medicaid Long Term Care programs is $1,255/month and the asset limit is $17,500, as of April 1, 2024.

So, it’s a good idea to get case-specific criteria via our quick-and-easy Medicaid Eligibility Requirements Finder tool.

 

What to Do If Denied Medicaid Because of Income or Assets Above the Limit

If Medicaid offices inform an applicant that their benefits were denied due to not meeting financial eligibility criteria, meaning income or assets are above the limits in your state of residence. You can do this with our Requirements Finder tool. You can also check out the page for your specific state of residence, which has an overview of the Medicaid programs, rules and application process in your state.

 

What to Do If Denied Because of Income

If an applicant feels the denial is simply incorrect because they do not have income above the state’s limit, then they should first request a reversal, as described above.

When requesting a reversal with a Medicaid caseworker, be sure to be respectful. It might become necessary to take the case to a supervisor, or someone else slightly higher in the hierarchy at your state’s Medicaid offices.

It might be a good idea to contact a professional Medicaid planner to review an application and Medicaid denial letter before requesting a reversal, especially if one has complicated financial and/or marital issues.

Even if the Medicaid denial was correct, and the applicant does in fact have income above the limits in their state, it is possible to lower one’s countable income, reapply and get accepted into a Medicaid Long Term Care program. Methods to lower income for the purposes of applying for Medicaid include:

These strategies are complicated, so it’s highly recommended that you consult with a Certified Medicaid Planner (CMP) or another Medicaid planning professional before trying to utilize them. They are experts when it comes to Medicaid strategies and rules, and will give you the best chance of implementing these strategies successfully and ultimately enrolling in Medicaid.

What to Do If Denied Because of Assets

If an applicant feels the denial is simply incorrect because they do not have assets above the state’s limit, then they should first request a reversal, as described above.

In many cases, however, this denial is not a mistake – being over the asset limit is the most common reasons for denial. But even if the denial is correct, and the applicant is above the asset limit, there are Medicaid-approved ways to lower assets, reapply and get accepted into a Medicaid Long Term Care Program.

The most common way for someone with excess assets to become eligible is called Medicaid Spend Down. The following are allowable methods for spending down excess assets to become eligible for Medicaid:

  • Care Agreements: paying a caregiver
  • Paying off debt including credit cards, vehicle loans, and mortgages
  • Buying medical equipment not covered by insurance, like hearing aids
  • Installing home modifications including wheelchair ramps
  • Vehicle repairs
  • Irrevocable Funeral Trusts that cover the future cost of one’s burial and funeral

Specifics can vary depending on the state, but spending down in some form is allowed in every state, so long as one does not violate Medicaid’s Look-Back Period. For more on these spend down strategies, click here.

In most states, the “Look-Back” Period is 60 months, or five years. This means state Medicaid offices will look back into the previous five years of the applicant’s financial records to make sure they have not simply given away assets in order to get under the limit for Medicaid eligibility.

Someone who violates Look-Back Period rules can still be approved for Medicaid benefits, but not until after a period of ineligibility for breaking the Look-Back rules. To learn more about Medicaid’s Look-Back Period, click here.

Other strategies to reduce assets include buying an annuity, establishing an asset protection trust, and gifting excess assets to family members through the “Half a Loaf” method. For more details on these planning strategies, click here.

These strategies for reducing assets and gaining eligibility after a Medicaid denial are complicated, just like the ones for dealing with too much income. So, consulting with a Certified Medicaid Planner or another healthcare professional before trying to utilize them is highly recommended.

 

Denied Medicaid Due to Level of Care

It is possible for an applicant to be denied Medicaid benefits because their level of care need does not meet Medicaid’s criteria. An example would be someone who applies for Nursing Home Medicaid when they don’t actually need full-time nursing care, which is referred to as a “Nursing Facility Level of Care” (NFLOC) for Medicaid purposes.

Most Home and Community Based Services (HCBS) Waiver applicants are also required to demonstrate a need for a “Nursing Facility Level of Care” in order to receive benefits through the HCBS Waiver, which is intended to delay nursing home placement. In other words, anyone who applies for Nursing Home Medicaid or HCBS Waivers must show they truly need that level of care in order to live comfortably. To determine level of care need, states will usually conduct an in-person evaluation to assess an applicant’s ability to complete basic activities like bathing, dressing, eating, toileting and moving in and out of bed and between rooms, and assess the applicant’s cognitive and behavioral functioning.

There is no medical criteria for Aged, Blind and Disabled (ABD) Medicaid for anyone age 65 or older. However, to receive long-term care services and supports through ABD Medicaid, seniors must show a need for those long-term care services and supports. That doesn’t mean they’re required to show a need for a Nursing Facility Level of Care, but there must be some medical need for the benefit – such as an ABD Medicaid beneficiary who uses a wheelchair qualifying for a program that will pay for a wheelchair ramp to be added to his residence.

If one receives a letter of denial for Medicaid benefits due to not meeting the level of care need, and feels this was a mistake, it’s important to first review the application. In particular, make sure the Physician’s Statement was correctly filled out, signed and dated by the applicant’s doctor. If you still believe a mistake was made, you should follow Step 1 described above, Request a Reversal, and, if necessary, proceed to Step 3, Appealing a Denial.

If the denial for not meeting level of care need was correct and you applied for Nursing Home Medicaid or Home and Community Based Services (HCBS), you could reapply for Aged, Blind and Disabled (ABD) Medicaid, which does not have a level of care requirement for seniors age 65 and over. However, ABD Medicaid has stricter financial criteria in most states.