Financial Protections and Choice for Medicaid Participants and Their Families


Medicaid coverage of long-term services and supports (LTSS) provides a safety net for vulnerable older people—and younger people with disabilities—who have low incomes and few assets. It also provides coverage for those who become impoverished because of medical needs, LTSS needs, or both. In fiscal year 2018, Medicaid paid $197 billion for LTSS (in both institutional and home and community-based settings), or approximately 33 percent of total Medicaid expenditures. Institutional care accounts for the majority (roughly 55 percent) of Medicaid LTSS spending for older people and adults with physical disabilities. 

Financial Eligibility: Federal and state financial eligibility criteria effectively restrict Medicaid eligibility to the very poor. Criteria, as well as the complexity of the eligibility determination process, vary widely from state to state. In most states, older people who are eligible for Supplemental Security Income (SSI) are also considered eligible for Medicaid. To be eligible for SSI in 2021, an individual cannot have countable income over $794 a month and more than $2,000 in assets. Certain states, known as 209(b) states, may impose even more restrictive financial eligibility rules (see also Supplemental Security Income for more information on SSI). 

In determining financial eligibility, Medicaid does not count an individual’s home, one car, and a modest amount of personal goods. However, in 2021, applicants’ equity value in their home must be $603,000 or less. States, however, have the option to exempt up to $906,000 in home equity. 

Medically Needy Programs: States may choose to have a medically needy program that allows people over the age of 65 (and younger people receiving Supplemental Security Income or Social Security Disability Insurance benefits) to spend down their assets and income in order to meet their state’s financial eligibility criteria for Medicaid coverage of nursing facility care. If states do not want to have a medically needy program, they may choose to use a special income rule of 300 percent of the SSI benefit ($2,742 per month in 2023) to qualify individuals for nursing facility care and home- and community-based services (HCBS) waiver programs. 

In states where the eligibility of people with higher incomes is limited to those qualifying under the special income rule, individuals with too much income may still qualify for Medicaid coverage of nursing facility care and HCBS waiver programs by placing their incomes in a Miller Trust. When the person dies, the money in the trust is used to reimburse the state for the amount that Medicaid spent on the Miller Trust owner. 

Personal needs allowance (PNA): In 2020, the federal minimum PNA for nursing facility residents who are Medicaid-eligible was $30 a month. The purpose of the PNA is to cover a resident’s basic expenses such as personal hygiene supplies and phone calls. 

States may allow a higher amount—up to $200 a month. In 2020, only Alaska allowed a PNA of $200. The majority of states have PNAs in the $40 to $60 range. 

Financial protections for spouses: Medicaid requires states to protect the income and assets of spouses of nursing facility residents (called the “community spouse”) to prevent spousal impoverishment. A certain amount of the couple’s combined resources is protected for the community spouse. Depending on the community spouse’s income, a certain amount of the income belonging to the spouse in a nursing home can be allocated for the community spouse. 

The amount of income that a spouse may keep is called the minimum monthly maintenance needs allowance (MMMNA). It varies from state to state, subject to a federal minimum and a maximum. The minimum amount in 2023 is $2,288.75, and the maximum is $ 3,715.50. (The amount changes each year in July.) Any income above the MMMNA must be used to help cover the cost of the consumer’s nursing facility care. The amount of resources the community spouse is allowed to keep is called the community spouse resource allowance. It also varies by state based on the federal minimum of $29,724 and the maximum of $148,620. These amounts are automatically updated annually for inflation. States can offer the same protection to spouses, including same-sex spouses, of Medicaid recipients who receive HCBS under a waiver program. 

Beginning in 2014, states were required to extend spousal impoverishment protections for home and community-based services (HCBS) participants as well as nursing facility residents for a period of five years. Congress has provided several extensions of the requirement for states to provide those protections for HCBS participants, most recently through September 30, 2023. 

Estate recovery: Today, almost every state and the District of Columbia has a program for recovering Medicaid LTSS costs from consumers’ estates. Federal law requires all states to recover Medicaid costs for nursing facility or HCBS care from the estates of people who received benefits at age 55 or older. The law defines “estate” to include assets that are part of the probate estate under state law. States can include other property in which the individual had any legal interest at the time of death, including property passing by joint tenancy or living trust. 

Under federal law, states have the option to implement estate recovery for the receipt of primary- and acute-care services as well. Thus, individuals who enroll in the Medicaid expansion could be subject to estate recovery rules (see also Medicaid State Plan Amendments and Waiver Authority). 

The federal government requires states to perform estate recovery as a condition of participation in the Medicaid program. In addition to having a disparate impact on affected families, fear of recovery causes some people to decline Medicaid and the vital services it provides. 

Recoveries cannot be made while there is a surviving spouse or dependent child. With certain exceptions and exemptions, a number of states recover expenditures by filing liens on the homes of Medicaid recipients. However, no recovery can be made until both the recipient and spouse die, the house is sold, and any surviving children reach the age of 21. 

States may allow liens to be placed prior to an individual’s death. But federal law prohibits states from imposing pre-death liens unless the person is in a nursing facility and expected to be permanently institutionalized. Any pre-death lien must be removed if the individual is discharged from the nursing facility and returns to the community. 

The look-back period for pre-eligibility transfers of assets: When determining Medicaid eligibility, states are required by federal law to ascertain whether an applicant transferred assets for less than fair-market value during the 60 previous months, and for California, 30 months (known as the look-back period). If an applicant is found to have gifted or transferred assets, a penalty period is imposed during which the applicant is ineligible for benefits. Although the look-back is intended to prevent people from sheltering assets in order to qualify for Medicaid inappropriately, many transfers deemed inappropriate were done innocently before the need for LTSS was even apparent. The passage of the Deficit Reduction Act in 2006 tightened the asset transfer rules. Applicants have the option of requesting a hardship waiver of the penalty period. 



Public input

States should have an open contract development, waiver, or state plan amendment process that provides opportunities for meaningful public input. 


Medicaid financial eligibility criteria

All individuals with incomes at or below 100 percent of the poverty line ($14,580 per year in 2023) should be considered categorically eligible for Medicaid. 

The federal government should increase the asset limit for Medicaid eligibility and index it for inflation. 

The federal government should allow home- and community-based services (HCBS) waiver participants to keep more of their income by establishing a minimum community maintenance allowance (CMA) that states must adopt or exceed. A realistic CMA is needed to enable HCBS waiver participants to remain in their homes and communities. 

Transfer-of-assets look-back, penalty periods, and hardship waivers

Look-back period: Congress should repeal the five-year look-back period for asset transfers and return to the previous 36-month look-back window. Other provisions—including one that changed the start date of the penalty period to the date of application for Medicaid benefits (instead of date of asset transfer) and another that imposed a cap on home equity—should also be repealed. Congress should not modify these provisions in ways that further restrict eligibility for Medicaid-funded long-term services and supports. 

Federal and state regulations should define the types of transfers presumed to be legitimate, such as charitable donations and contributions to relatives’ medical and educational expenses. A reasonable level of undocumented expenditures should also be deemed legitimate unless the state can demonstrate an intent to qualify for Medicaid improperly. 

Deliberately abusive practices should also be defined. Government attempts to prevent abusive asset transfers for the purpose of qualifying for Medicaid should focus on deliberately fraudulent or abusive activities and loopholes in state laws, not the ordinary actions of typical families with moderate and low incomes. A threshold limit should be established for transfer-of-asset penalties so that those making reasonable levels of transfers for charities, religious donations, or personal gifts—or who are unable to provide documentation of all purchases over a five-year period—are not penalized. Some asset transfers should be exempt from consideration when implementing the Deficit Reduction Act (DRA). These include: 

  • those resulting from a court order because of fraud or misrepresentation, and 
  • those made before the individual could reasonably have been expected to anticipate the need for long-term services and supports (LTSS) within the next five years, for example, before the onset of a disabling injury or disease. 

The imposition of a penalty period should be delayed until it is determined that the applicant has the income and resources sufficient to pay for all necessary medical and support care and treatment, food, housing, utilities, and other necessities of life for the duration of the penalty period. 

Federal and state regulations should require monitoring during the penalty period to ensure that applicants are not deprived of care or necessities. 

Prior to the imposition of a penalty, applicants seeking a hardship waiver of the penalty should receive assistance in developing a care plan and budget for medical and supportive services and necessities for the duration of the penalty period. 

States should provide advance written notice to the applicant identifying the income and resources available—and the projected costs of medical and support care and treatment, food, housing, utilities, and other necessities of life—during the penalty period. 

Applicants should be afforded the opportunity to appeal state determinations of support costs. 

Hardship Waivers: Federal and state regulations should establish uniform criteria for evaluating whether denial of coverage under stringent DRA provisions causes hardship. 

Federal and state regulations should allow for and promptly process hardship waiver requests and appeals prior to or during the penalty period. 

Federal and state regulations should establish clear guidelines for defining what constitutes a hardship for determining transfer-of-asset penalties. 

Hardship waivers should be granted to individuals who require LTSS but would be denied Medicaid because of prohibited asset transfers. 

Federal and state regulations should establish hardship waivers of the home equity limit in order to protect people who have no other way to pay for needed care and to ensure that people are not forced to sell their homes to get the needed care. 

Federal regulations should require that states give all applicants information about the availability of hardship exceptions. They should ensure presumptive eligibility until a final decision is rendered and provide a standardized appeal process for people whose exemption requests are denied. 

Recovery of transferred assets

States should not impose blanket requirements for applicants to seek the return of all transferred assets. 

States should not mandate civil or criminal legal action to regain transferred assets. States could instead establish a minimum transfer amount for which recovery is required. 

Frivolous recovery efforts lacking any lawful basis and criminal complaints motivating an applicant to file charges of malicious prosecution should be prohibited. 

States should establish hardship exceptions for those unable to make any recovery effort because of functional limitations. 

Home equity barriers to Medicaid eligibility

Federal and state regulations should establish hardship waivers of the home equity limit that protect people with no other way to pay for needed care. 

The federal government should encourage states to provide clear information about other options to individuals denied Medicaid eligibility due to home equity under the deficit reduction act (DRA). 

States should be required to use a fair process to determine an individual’s home equity (i.e., a home’s current fair-market value for property tax purposes, minus any outstanding debts against the home). 

States should increase the home equity cap to the maximum permitted by federal law as permitted by the DRA. 

States should not deny eligibility under the home equity provision if the individual is ineligible for a reverse mortgage or unable to obtain a home equity loan. 

Home equity cap

Federal and state regulations should exempt purchasers from the home equity cap established in the DRA. 

Federal and state regulations should establish hardship waivers of the home equity limit to protect people who have no other way to pay for needed care. 

For individuals who are found ineligible for Medicaid due to home equity under the DRA, states should provide clear information about what other options those individuals have for securing needed LTSS using private resources or through other public programs. 

States should be required to use a fair process to determine an individual’s home equity. For example, obtaining a realtor’s assessment of a home’s current fair-market value, minus any outstanding debts against the home. 

States should increase the home equity cap to the maximum permitted by federal law as permitted by the DRA. States should not deny eligibility under the home equity provision if the individual is ineligible for a reverse mortgage or unable to obtain a home equity loan. 


Impoverishment protection for spouses, domestic partners, and children

Unmarried domestic partners and spouses in same-sex marriages should be provided all the financial protections given to opposite-sex community spouses. 

Current financial protections for spouses, caregivers, and dependent children should be retained and extended to domestic partners. 

Federal and state governments should make permanent financial protections that prevent the impoverishment of spouses of Medicaid HCBS participants. Federal and state governments should continue prohibiting any requirement that adult children or grandchildren of Medicaid participants receiving LTSS assume financial responsibility for their parents’ or grandparents’ care. 

States should set the highest community spouse resource allowance and spousal maintenance needs allowance possible under federal law to provide community spouses with the greatest financial protection. 

Estate recovery programs

The federal government should permit states to opt out of Medicaid estate recovery. 

If estate recovery is utilized, the federal government and states should establish procedures for waiving estate recovery when undue hardship would result. States should be permitted to forgo estate recovery of Medicaid liens for families with low incomes. 

States should use any permitted flexibilities to minimize the impact of estate recovery. This should include limiting the benefits for which the state pursues recovery to only those required by federal law. In addition, hardship waiver policies should be expanded and cost-effectiveness thresholds established. 

Heirs should have an extended period of time to reimburse the state. They should not be forced to sell the deceased person’s home. They should also be protected from coercive tactics designed to force repayment of Medicaid expenditures. 

Federal regulations should require states to use all money recovered from the estates of Medicaid recipients to improve the program. 

The term “estate” under the estate recovery program should be defined no more broadly than it is under state probate law. 

Federal regulations should ensure public accountability by requiring estate recovery programs to provide consistent and readily available data on the total costs of the program and the numbers of participants affected. Other essential information should be included, such as the number of exemptions, deferrals, hardship waivers, liens, and contested recoveries. 

Federal regulations should ensure that consumers are adequately informed about Medicaid estate recovery. Recovery notices should be timely, clear, and easy to read (e.g., published in an adequate type size). They should include vital information concerning exemptions, deferrals, hardship waivers, liens, and consumer obligations and rights. 

Federal regulations prohibiting states from placing liens on the property of Medicaid recipients who receive LTSS in the home and community should remain in force. 

Medically needy programs

The federal government should require all states to implement medically needy programs for people who need LTSS in all settings. 

States with medically needy programs for nursing facility residents should retain them. 

States without medically needy programs should use the special income rule of 300 percent of the Supplemental Security Income benefit level. 

Personal needs allowance (PNA)

The federal government should increase the minimum PNA for Medicaid participants in nursing facilities and residential care settings. The allowance should be adjusted annually to account for changes in the cost of items for personal needs.