5 Things CFPs Should Know About Medicaid Long Term Care

Paying for care that will allow them to age comfortably is one of the top priorities for the elderly and their families. Properly managed finances can help, but with the high costs of nursing homes, assisted living and in-home care there’s a limit to what most people can afford. This is where Medicaid long-term care comes into play. Applicants need to meet strict financial limits, but even if they are over the limits there are planning methods that can help them qualify. Once they do, Medicaid can cover a range of benefits in a variety of locations that will help provide the quality of life they deserve.

To assist you in helping your elder clients and their families access these benefits, here are five crucial bits of information regarding Medicaid long-term care.

1) There are 3 Types of Medicaid Long-Term Care Relevant to Seniors

Nursing Home Medicaid, Home and Community Based Services (HCBS) Waivers and Aged, Blind and Disabled (ABD) Medicaid are the three Medicaid programs relevant to the elderly and their families. As the name suggests, Nursing Home Medicaid covers nursing home costs for people who require a Nursing Facility Level of Care (NFLOC). The program is an entitlement, meaning all eligible applicants are guaranteed coverage, although they are not guaranteed a spot in any nursing home they choose. Beneficiaries are required to give almost all of their income to the state to help cover the cost of nursing home care.

HCBS Waivers cover long-term care services and supports for individuals who need a NFLOC but want to live in their own home or the home of a loved one. Some Waivers also cover benefits in assisted living facilities, adult foster homes, memory care units for patients with Alzheimer’s disease and other dementias, as well as other settings in the community. Benefits can include in-home nursing, home modifications, meal delivery, personal care assistance with the Activities of Daily Living (mobility, bathing, dressing, eating, toileting) and more. HCBS Waivers are not an entitlement. Instead, they have a limited number of enrollment spots. Once those are full, additional applicants are placed on a waitlist.

ABD Medicaid can also be called state Medicaid or regular Medicaid, but it should not be confused with the regular Medicaid that is available to financially limited people of all ages. There is no medical requirement for ABD Medicaid, but beneficiaries who want to receive long-term care benefits via ABD Medicaid must show a medical need for those benefits. In essence, they qualify for these services and supports one at a time. However, not all states offer long-term care benefits through ABD Medicaid.

The financial requirements for all the three Medicaid programs relevant to seniors can change depending on a variety of factors, which we will discuss next.

2) Medicaid Rules Can Vary Dramatically Depending on Multiple Factors

Medicaid is federally funded but run by individual states, so its regulations, benefits and eligibility criteria can all vary by state. They can also vary by the marital status of the applicant/beneficiary and by the program. For example, needing a NFLOC is the functional requirement for Nursing Home Medicaid in all states, but how a NFLOC is defined and measured can change from state to state. And every state has at least one HCBS Waiver, but some have more, and the benefits from those Waivers, plus the availability of those benefits, can vary dramatically between states.

Medicaid’s financial eligibility requirements are also subject to significant variance. In most states in 2026, the individual asset limit is $2,000, but there are major exceptions in some of the most populous states, like Illinois, New York and California. The individual income limit in most states in 2026 for Nursing Home Medicaid and HCBS Waivers is $2,982/month, but there are also exceptions for this limit. And the individual income limit for ABD Medicaid ranges from $9494/month to about $1,800/month depending on the state.

All of these financial limits can also take big swings depending on the applicant/beneficiary’s marital status, how many spouses are applying for Medicaid and the couple’s financial situation.

3) Healthy Spouses Can Be Financially Protected

For Medicaid purposes, the assets of a married couple belong to both spouses. When both spouses are applying, the asset limit in most states in 2026 for all three types of Medicaid long-term care is $3,000 or $4,000. Again, there are many variations to these figures, including a substantial change when only one spouse in a married couple is applying for either Nursing Home Medicaid or HCBS Waivers. In these cases, the non-applicant spouse (also known as the healthy or community spouse) can keep up to $162,660 of the couple’s assets, due to the Community Spouse Resource Allowance (CSRA). The $162,660 total can change depending on the state and the couple’s financial situation, but all states have some level of CSRA.

There’s a similar spousal impoverishment protection in place regarding income – the Minimum Monthly Maintenance Needs Allowance (MMMNA). For married couples with only one spouse applying to either Nursing Home Medicaid or HCBS Waivers, the income of the community spouse is not counted. What’s more, the applicant/beneficiary spouse is allowed to transfer some or all of their income to the community spouse using the MMMNA. In 2026, the MMMNA in most states is $4,066.50/month, which means the community spouse is entitled to have $4,066.50/month in income and the applicant/beneficiary spouse can transfer some or all of their income so the community spouse reaches that total. Like the CSRA, the MMMNA total can change depending on the state and the couple’s financial situation.

To be clear, the CSRA and the MMMNA only apply to Nursing Home Medicaid and HCBS Waivers. They do not apply to ABD Medicaid.

In addition to these basic protections, there are other financial tools and strategies that can help a community spouse live comfortably. Purchasing a Medicaid Compliant Annuity can help reduce an applicant’s assets, provide the community spouse with an income stream and won’t violate Medicaid rules. In some states, retirement accounts in the community spouse’s name are protected. Any asset placed in a Medicaid Asset Protection Trust is protected, but to be effective these trusts need to be created well in advance of the other spouse applying for Medicaid long-term care. And community spouses also have protections when it comes to the home, which are detailed in the next section.

4) Homeowners Can Qualify for Medicaid and Keep Their Home

If the home counted toward Medicaid’s asset limit, homeowners would not be able to qualify, but in many cases the home is exempt. If the Medicaid long-term care applicant/beneficiary lives in the home and has a home equity interest below the state limit, the home is exempt. The home equity interest limit in most states in 2026 is either $752,000 or, in states with higher property values, $1,130,000. There are some exceptions, like California, where there is no home equity interest limit.

If the applicant/beneficiary’s spouse, minor child or blind or disabled child of any age lives in the home, it is exempt regardless of home equity interest. The home can also be exempt even if no one lives there as long as the applicant/beneficiary files an intent to return home statement with the state Medicaid office, although this exemption has a limited time scope.

Just because someone can keep their home and qualify for Medicaid long-term care doesn’t mean the home will be safe after their death. States are required by law to try and collect reimbursement for Medicaid care costs after the death of the beneficiary. They do this via the estate of the deceased beneficiary, and if they were a homeowner, the home is usually the most valuable asset in the estate. However, the home can also be protected from this process, which is known as Medicaid Estate Recovery. If the deceased beneficiary’s surviving spouse, minor child or blind or disabled child of any age is still living in the home, it is protected from estate recovery. There are also some tools that will protect the home from estate recovery, like Medicaid Asset Protection Trusts, the Child Caregiver Exemption and the Sibling Exemption. However, these strategies require advanced planning and qualified adult children or siblings. Click here to learn more about these exemptions and protecting the home from estate recovery.

5) All Financial Transactions Should Be Conducted with the Look-Back Period in Mind

To make sure Nursing Home Medicaid and HCBS Waivers applicants don’t simply give away their assets to meet the eligibility limit, Medicaid uses the Look-Book Period. In most states, the Look-Back Period is 60 months (five years). This means the state will look back into the applicant’s financial history for the 60 months prior to their application date to make sure they haven’t given away any assets or sold them at less than fair market value. This includes things like paying for a grandchild’s education or giving gifts. If the state finds a violation, the application will be denied and the applicant will face a penalty period of ineligibility. The length of this period depends on the total amount of the violating assets and the cost of nursing home care in the state, known as the Penalty Divisor, but it could last months or even years.

To be clear, the Look-Back Period only applies to Nursing Home Medicaid and HCBS Waivers, it does not apply to ABD Medicaid.

To satisfy the Look-Back Period, individuals must supply paperwork that clearly documents their financial history when they apply for Nursing Home Medicaid or HCBS Waivers. The burden of proof is on them to show they have not violated the Look-Back Period, it’s not on the state to prove they have. Collecting all the proper documents from the right sources is usually the most time-consuming part of the application process.

The two exceptions to the Look-Back Period are California and New York. In California, the Look-Back Period is 30 months for HCBS Waivers. New York uses the standard 60-month Look-Back for Nursing Home Medicaid, but there is no Look-Back for New York’s Community Medicaid (similar to HCBS Waivers). There are also some financial transactions that won’t violate the Look-Back Period but might help an applicant gain Medicaid eligibility, like purchasing a Medicaid Compliant Annuity or an Irrevocable Funeral Trust or transferring their home using the Child Caregiver Exemption.

To learn more about exceptions to the Look-Back Period, the impact of home ownership, spousal protections or anything else concerning Medicaid long-term care for the elderly, connect with our team of professionals at Eldercare Resource Planning.