A Comprehensive Guide to Understanding Medicaid and Nursing Homes

Medicaid is a joint federal and state health insurance program that primarily serves low-income populations, including eligible Americans ages 65 and over. Because Medicaid is a state-administered program, eligibility, benefits, and coverage may vary from state to state.

It’s important to note that while they sound similar and sometimes provide similar benefits, Medicaid is a separate program from Medicare.

As of 2021, Medicaid provided health insurance coverage to approximately 60 million Americans — this accounts for 18.2% of the U.S. population.^[01] In terms of long-term care, Medicaid was the primary source of payment for 62% of certified nursing facility residents in 2022.^[02]

What is a nursing home?

Nursing homes, which are different from skilled nursing facilities, typically provide a combination of skilled nursing, rehabilitation, and long-term care services to people with significant mental or physical health conditions. Residents receive 24/7 supervision in secured facilities with trained staff on-site.

Read related article:Medicare, Medicaid, and Long-term Care

Let our care assessment guide you

Yes, Medicaid may cover the cost of nursing home care (also called nursing facility services) for qualified beneficiaries at eligible facilities.^[03] While Medicaid typically covers 100% of nursing home costs, how much Medicaid pays to nursing homes varies depending on the state and even the facility that your loved one receives Medicaid through.

Nursing homes that accept Medicaid typically designate a select number of beds in their community as Medicaid beds — this designation means that they’ll accept Medicaid for these beds for payment.

It can be a lengthy process to have Medicaid cover the costs of nursing home care. Your loved one will have to meet eligibility requirements to be considered for Medicaid and the Medicaid nursing home benefit.

Because Medicaid is a joint federal and state program that’s administered by individual states, its requirements vary. Visit the Medicaid website to learn about the specific requirements in the state your loved one wishes to apply in.

The application process for Medicaid nursing home benefits will vary by state. However, you can generally follow these basic steps:

1. Determine if your loved one meets the eligibility requirements in their state.
2. Gather any documents deemed necessary by the state Medicaid agency, such as proof of income, banking documents, etc.
3. Complete the Medicaid application through the state Medicaid agency.
4. Wait for the Medicaid application acceptance or denial.

It may be a good idea to consult with your local Area Agency on Aging or an elder law attorney with Medicaid expertise in your loved one’s state prior to applying for Medicaid nursing home benefits. You can find elder law attorneys by location through the National Academy of Elder Law Attorneys directory.

Do you have to be currently living in a nursing home to apply?

No, someone does not have to be living in a nursing home to apply for Medicaid.

Because Medicaid is a needs-based program, eligibility has specific financial and medical requirements. There are some stipulations that can make seniors ineligible for Medicaid.

Asset limits

Generally, Medicaid has a limit of $2,000 in countable assets for individuals age 65 and older.^[04] If an applicant exceeds these amounts, they typically won’t be eligible for Medicaid.

This area of law can be complicated, so it may be a good idea to visit with an elder law attorney or Certified Financial Planner® (CFP©) to learn about your unique situation.

Asset transfers

If your loved one transferred assets, they may be subject to scrutiny under the Medicaid look-back period. In most states, this look-back period examines asset transfers from the last 60 months. If assets weren’t transferred legitimately, your loved one may face a penalty and be prohibited from receiving Medicaid benefits.

It’s a good idea to work with an elder law attorney with experience in Medicaid law or a Certified Financial Planner® (CFP©) at least five years prior to your loved one needing care, as these professionals can help you understand how to appropriately transfer assets.

Income limits

A person must typically meet income eligibility requirements to qualify for Medicaid, and income limits vary by state. If your loved one isn’t low-income, they may not qualify.

However, some states have Medicaid income limits that are higher for nursing home residents. This means that a person who failed to qualify for Medicaid in the past due to income limits may be eligible as a nursing home resident.^[05]

Medical need

Medicaid representatives must determine that a person’s medical condition requires nursing home services, and it’s possible your loved one’s unique needs may not qualify. Check with your state’s Medicaid agency to learn about specific medical need requirements.

If your loved one has received approval for Medicaid-covered nursing home care, you’re probably wondering what will be covered and how utilizing Medicaid may affect your loved one’s situation over time.

What services are covered under Medicaid?

Under federal requirements, Medicaid-certified nursing facilities must typically provide the following services and supports to eligible residents at no cost:^[03]

• Nursing and related services
• Specialized rehabilitative services
• Medically related social services
• Pharmaceutical services
• Individualized dietary services
• Professionally directed programs and activities that promote resident well-being
• Emergency dental services
• Routine dental services as allowed by a state’s plan
• Room and bed maintenance services
• Common personal hygiene items and services

The above list is not exhaustive, as other necessary services or supports may be covered. Speak with your state Medicaid program to learn more.

What expenses aren’t covered by Medicaid?

Medicaid-certified nursing facilities may require residents to cover some or all of the costs of the following, as noted by the Centers for Medicare and Medicaid Services: ^[03]

• Private room, unless medically necessary
• Specially prepared food
• Telephone, television, or radio
• Personal comfort items
• Additional cosmetic or grooming items and services
• Personal clothing
• Personal reading materials
• Gifts purchased on behalf of a resident
• Flowers and plants
• Social events and activities
• Special care services

Talk with a Senior Living Advisor

In the past, nursing homes have been considered the most likely destination for older adults in need of care. We’re now experiencing a societal shift — this includes state governments — to move toward seniors aging in place in their homes or communities. In fact, most Americans over the age of 50 now want to age at home.^[06]

Reduced Medicaid funding for nursing homes

While nursing home care will likely always be needed and available to some extent, the aging-in-place movement has made homes and retirement communities popular alternatives for seniors in many states — and it’s swaying public policy, as well.

State governments, such as Connecticut’s, are moving away from nursing homes being the primary long-term care mechanism for seniors. As a state with one of the largest population percentages of people 85 and older, Connecticut is taking measures to boost the number of people aging at home instead of being placed in a nursing home.^[07]

As of 2009, the majority of the Connecticut’s Medicaid expenditures (65%) went to nursing homes. As of 2022, the state had shifted to spending just 42% of its Medicaid long-term care funding on nursing homes, and the remaining 58% went to home services.^[07]

Medicaid waivers increase senior care options

States can use Medicaid waiver programs to test new and innovative ways of delivering and paying for health care and long-term care services. These waiver programs may cover long-term care services that aren’t normally covered through the standard Medicaid state plan.^[08]

Through their unique Medicaid plans and waivers, many states are working to help seniors cover the costs of alternatives to nursing homes, including the following:

• Home health care. Medicaid may cover home health services for qualified Medicaid beneficiaries. Medical requirements typically apply.
• Memory care. Depending on the waivers available in your loved one’s state, Medicaid may cover the cost of memory care-related prescriptions and services provided at a senior’s home or in an assisted living community.
• Assisted living communities. Medicaid doesn’t typically cover room and board in assisted living communities, but some care services may be covered by Medicaid under certain circumstances.

It can be challenging to determine the right type of care for your loved one. If they’re not yet in need of a nursing home, they may find a better fit in an assisted living community, in a memory care community, or with in-home care.

The Senior Living Advisors at A Place for Mom can help you or your loved one learn more about long-term care options and connect you with resources that meet your unique needs, all at no cost to your family.