Medicaid can pay for long-term nursing-home care once a person needs that level of care and meets their state's income and asset rules. The resident's own monthly income, less certain protected amounts, goes toward the bill, and Medicaid pays the rest. Federal law sets the framework, but each state sets its own limits and procedures.
Most people facing this question are sitting with a parent's bank statements, a spouse's discharge papers or a nursing home's admission packet, trying to work out whether savings will run out and what happens to the house. The worry is often less about the rules in the abstract than about one concrete fear: that the husband or wife still at home will be left with nothing, or that a gift made to a grandchild years ago will come back to cause trouble.
This page walks through the chain the way it tends to unfold: the state you live in, the care your family member needs, the eligibility rules, the assets and family facts, and then the application, any appeal and what happens after death.
What Medicaid Nursing Home Coverage Actually Covers
Medicaid is a joint federal and state program, as Medicaid.gov's eligibility overview explains. In California, for example, the program is called Medi-Cal.
Medicaid.gov describes Medicaid as the primary payer across the nation for long-term care services, covering care in settings from institutions to the community. Nursing-home Medicaid is often called institutional Medicaid. According to CMS's institutional care page, the institutional benefit is comprehensive care that includes room and board, billed as a single bundled payment. What a state folds into that rate varies. Facilities must be licensed and certified by the state according to federal standards, and families typically confirm whether a particular home participates in Medicaid before admission.
Coverage continues while the person stays eligible under the state's rules.
Medicaid is not Medicare. This page covers Medicaid only and does not cover Medicare, private long-term-care insurance or veterans' benefits.
Who Qualifies: Medical and Financial Eligibility
Eligibility for nursing-home coverage has a medical side and a financial side. The first is medical: the state decides whether the person needs nursing-facility level of care. CMS notes that eligibility may be figured differently for residents of an institution, and access to some services is tied to that need. The second is financial: income and assets must fall within the state's limits.
A countable asset is one the state adds up against its limit. Bank accounts, investments and real estate other than the home are typical examples. An exempt asset is one the state leaves out of that count. Each state sets its own asset limit for a single applicant. California's figures, for instance, are covered in the page on Medi-Cal asset limits, and Florida Medicaid planning covers Florida's figures.
Married couples follow a separate federal framework in 42 U.S.C. § 1396r-5. It uses the term community spouse, meaning the husband or wife who stays at home while the other receives nursing-home care.
Income rules also vary. Some states apply an income cap. The CMS 2026 chart lists an "Income Cap Limit (300%)" of $2,982 a month, effective January 1, 2026. Other states use a spend-down approach, and whether a given state uses a cap depends on that state's current rules.
After eligibility is set, the post-eligibility calculation decides what the resident pays toward care, often called the patient pay amount. In plain terms, the resident keeps a few protected amounts each month, and the rest of their income goes to the nursing home. The calculation takes the person's total income and subtracts certain amounts, including:
- a personal needs allowance of at least $30;
- a community spouse income allowance, where it applies;
- a family allowance, where it applies;
- certain medical expenses.
The remaining income goes to the facility, and Medicaid pays the rest.
Exempt Assets: What Medicaid Does Not Count
Not everything a family owns is weighed against the asset limit, and knowing what sits outside the count often changes the picture considerably. The family home is where most of the worry tends to land. Many states treat the primary home as exempt while the applicant intends to return or while a spouse or a dependent relative lives there. The exact conditions are each state's rules.
There is a federal ceiling. Under 42 U.S.C. § 1396p(f), a person whose home equity is above a set limit cannot receive Medicaid long-term-care coverage unless a spouse, a child under 21, or a blind or disabled child lives in the home. The CMS 2026 standards chart lists the home-equity limits, effective January 1, 2026: a minimum of $752,000 and a maximum of $1,130,000. Each state's own figure falls within that range. So the home is not excluded whatever its value. Federal law also directs a process for waiving the limit in a demonstrated hardship.
Beyond the home, families commonly ask about a handful of everyday possessions and arrangements, including:
- one vehicle;
- personal property and household goods;
- prepaid burial arrangements;
- retirement accounts such as an IRA.
How each of these is treated, and any value limits, depends on the state's current rules. This list is partial, and treatment of retirement accounts in particular differs from state to state.
The Look-Back Period and Transfer Penalties
A gift made to help a grandchild through school can feel very far from a nursing-home application, and this is the part of the law that connects the two.
The look-back period is the window of time before the person is both institutionalized and has applied, during which the state reviews transfers of assets. Under 42 U.S.C. § 1396p(c)(1)(B)(i), the federal look-back date is:
"36 months (or, in the case of payments from a trust or portions of a trust that are treated as assets disposed of by the individual … or in the case of any other disposal of assets made on or after February 8, 2006, 60 months) before the date specified in clause (ii)."
For any transfer made on or after February 8, 2006, then, the federal look-back is 60 months. States do not all use the same look-back. California's period and its start date are set by California's own rules.
A penalty period is a stretch of time when Medicaid will not pay for nursing-home care. It equals the total uncompensated value transferred divided by the average monthly private cost of nursing-facility care in the state, and states may not round fractions down. Under 42 U.S.C. § 1396p(c)(1)(D)(ii), the penalty starts on the later of two dates:
- the month of the transfer; or
- the date the person is eligible and would otherwise be receiving institutional-level care based on an approved application.
Because of that start rule, a gift made four years ago is penalized the same way as one made last month, as long as both fall inside the look-back. A penalty does not start during another period of ineligibility.
Not every transfer is penalized. The statute lists exceptions, including transfers to the person's spouse, which carry no transfer penalty under 42 U.S.C. § 1396p(c)(2)(B)(i). Buying an annuity also counts as a transfer for less than fair market value unless the state is named as a remainder beneficiary in the position the statute requires, and 42 U.S.C. § 1396p(c)(1)(G) separately sets conditions on the annuity itself. More on how these rules play out appears in the page on Medicaid crisis planning.