Medicaid and long-term care: coverage limits U.S. families should know

It didn’t hit me during a doctor visit or a stack of insurance booklets—it hit me on a quiet Sunday when I did the math on what help my loved one might actually need and what our savings could cover. Long-term care isn’t a headline; it’s a set of everyday tasks—bathing, getting dressed, making meals—that can stretch a family thin. I used to assume Medicare would step in if things got serious. Then I learned how much of this world sits under Medicaid, and how the rules—income caps, the five-year look-back, estate recovery—quietly shape what’s possible. Today I’m writing out what finally made sense to me, with the same mix of curiosity and caution I brought to my own kitchen-table planning.

When I realized Medicaid pays for care Medicare doesn’t

The most clarifying moment was understanding that Medicaid is the primary public payer for long-term services and supports (LTSS) in the U.S., including nursing homes and many home-based supports. That’s not Medicare’s job. I went back to basics and read an overview that spelled it out in plain language, which helped me separate medical care from long-term support needs—think help with bathing, dressing, and meals rather than hospital stays or doctor visits. If you’re mapping the landscape, a concise starting point is the federal LTSS overview here.

  • Medicaid can fund nursing facility care and, depending on the state, home- and community-based services (HCBS) through state plans or waivers.
  • Medicare covers skilled, time-limited care (e.g., post-acute rehab) but generally not custodial long-term care. See Medicare’s explanation here.
  • States choose which optional LTSS benefits to offer and how to structure them, so specifics vary widely.

The big limits families miss on the first pass

After the “who pays for what” reality check, the next layer is eligibility and financial rules. These are sensitive topics because they touch savings, the home, and a spouse’s well-being. The terms can sound technical, but seeing the 2025 numbers made them feel concrete.

Spousal protections (2025). If one spouse needs Medicaid long-term care and the other remains in the community, federal rules protect a slice of income and resources for the community spouse. For 2025, the minimum monthly maintenance needs allowance (MMMNA) in the contiguous states is $2,643.75 (higher in Alaska and Hawaii), with a maximum of $3,948.00. The protected resources for the community spouse range from a minimum of $31,584 to a maximum of $157,920. There are also home equity limits—states must set a cap within a federal range, which for 2025 runs from $730,000 to $1,097,000. The official 2025 figures are compiled by CMS here.

Income “cap” states vs. medically needy states. Some states use a “special income limit” tied to 300% of SSI (for 2025, $2,901/month for an individual) when determining eligibility for institutional or certain HCBS services. Other states allow a “spend-down” to meet a medically needy income level. The exact path depends on your state’s program design, but the concept—either fit under a fixed cap (sometimes with a Miller trust/QIT) or spend down to a target—is consistent.

Medicare’s limits. I had misunderstood this for years: Medicare does not cover long-term custodial care if that’s the only care you need. It may cover up to 100 days in a skilled nursing facility after a qualifying hospital stay, but the steady, non-medical assistance many older adults need is outside its scope. Medicare explains its long-term care coverage limits clearly here, and reading that page side-by-side with Medicaid policy made everything click.

How I mapped our numbers without panicking

I’m not a lawyer or a benefits expert, so I started with a simple spreadsheet and a three-part checklist: income, countable resources, and the house. Then I layered in state rules.

  • Income flow — I listed gross monthly income for the person needing care and for the spouse. If you’re in an income-cap state, I flagged whether income exceeds ~300% of SSI (2025: $2,901/month). If yes, I made a note to ask about a Qualified Income Trust (QIT/Miller trust) as a potential path.
  • Countable resources — I separated countable items (cash, investments) from non-countable or excluded items (a properly titled primary residence up to the state’s home equity limit, a single vehicle, certain irrevocable burial funds). Then I mapped how the community spouse resource allowance might apply using the 2025 min/max.
  • The home — Two questions helped: (1) Is home equity under my state’s limit (within the federal 2025 range of $730,000 to $1,097,000 per CMS here)? and (2) Who is living there (spouse, minor child, or a dependent with a disability)? Those factors interact with eligibility and later with estate recovery (more below).

Having real numbers on the page calmed me. It turned the conversation from “we’ll lose everything” into “here’s what the rules protect, and here’s what we need to clarify.”

What the five-year look-back really means day-to-day

This is the policy people mention in whispers, but the basics are straightforward: when someone applies for Medicaid coverage of long-term care, the state reviews asset transfers to see if anything was given away or sold for less than fair market value during a 60-month look-back period (with special rules for some trusts and specific circumstances). If they find transfers, a penalty period (a temporary period of ineligibility) can apply. It’s all in the federal backgrounder on the Deficit Reduction Act, which sets the five-year window here.

  • It doesn’t mean you can’t help family—but gifts during the look-back are scrutinized. Keep records and be ready to document fair value for any sales.
  • Penalty timing matters—for some HCBS cases, CMS guidance clarifies when the penalty clock starts; your state agency can explain how they apply it.
  • There are exceptions—certain transfers, like to a spouse or specific caregiver-related scenarios, may be treated differently under state and federal rules. Ask before you assume.

What helped me most was treating the look-back like a paper trail challenge rather than a mystery: collect statements, note any big transfers, and build a timeline. It’s tedious, but it turns unknowns into phone calls with specific questions.

Estate recovery sounds scary but is knowable

Another phrase that makes people uneasy is estate recovery. Federal law requires states to seek recovery from the estates of some deceased Medicaid beneficiaries for certain costs—especially for those 55 or older who used LTSS, including nursing facility services and HCBS, and related hospital and prescription drug services. There are important protections: states may not recover when a deceased person is survived by a spouse, a child under 21, or a blind or disabled child of any age; and states must have hardship waivers. The core federal explanation is on Medicaid.gov here.

  • What can be recovered? Typically, LTSS costs and related services after age 55 (or for permanently institutionalized individuals), but details vary by state.
  • When is recovery delayed or limited? If a spouse is still living in the home, or a child under 21 (or blind/disabled of any age) is in the household, federal law stops recovery. States may also grant undue hardship waivers.
  • What about the house? Eligibility rules and estate recovery rules are separate but connected. Home equity limits affect eligibility; estate recovery addresses what happens after the Medicaid recipient passes away. Read both sides.

How I compare settings and benefits without getting lost

Choosing between a nursing home, assisted living, or staying at home with services isn’t just about cost—it’s about what Medicaid in your state will cover, under which mechanism, and how waitlists factor in. I made a simple rubric and stuck it on the fridge:

  • Setting — Nursing facility (a Medicaid benefit in every state), assisted living (varies, often through HCBS waivers), or home with HCBS.
  • Mechanism — State plan benefit vs. waiver. Waivers may have caps and waitlists; state plan options are typically open-ended but narrower.
  • Level of care — Does the person meet the clinical “nursing facility level of care” (NF LOC) or the state’s functional criteria for HCBS? States define this differently.
  • Care coordination model — Some states use managed long-term services and supports (MLTSS); others do fee-for-service. Ask how providers are paid and how that affects your choice of agency or facility.

When I felt overwhelmed, I went back to the official benefit descriptions to stay anchored in what’s actually covered and what’s optional. An overview of Medicaid LTSS, including program structures, is here.

Small habits that made a big difference in our planning

Big systems can make you feel powerless. I found confidence in small, repeatable actions.

  • Write down the story — One page that captures diagnoses, medications, functional needs (ADLs/IADLs), and safety concerns. This makes assessments faster and more accurate.
  • Document expenses — Save home-care invoices, adult day receipts, and mileage to appointments. It helps with spend-down tracking and with demonstrating need.
  • Schedule “policy checks” — Every six months, I skim the latest Medicaid and Medicare long-term care pages to see if eligibility numbers, home equity caps, or spousal allowances have shifted (the spousal MMMNA adjusts each July, per CMS). The 2025 updates are compiled here.

Questions I now ask facilities and care managers

These prompts saved me from vague answers and helped me compare apples to apples:

  • “If we start private pay, what happens when we transition to Medicaid? Do you accept Medicaid as a payer and are there waitlists?”
  • “What specific services are covered under Medicaid here, and which ones are not covered or require an add-on?”
  • “How do you coordinate with the state’s assessment for level of care and functional eligibility?”
  • “If our state uses managed LTSS, which plans do you contract with and does that change the network of home-care agencies?”
  • “What documentation will you need from us during the application and redeterminations?”

Signals that tell me to slow down and get expert help

I’m all for learning, but there are moments when a seasoned elder-law attorney, an accredited benefits counselor, or a hospital social worker can save months of churn.

  • Recent gifts or transfers — If your loved one gave away assets within the last five years, the look-back rules can be tricky. The federal backgrounder is here; interpretation depends on state policy.
  • Complex family dynamics — Blended families, co-owned homes, or informal caregiver arrangements warrant careful review, especially with estate recovery rules.
  • Income above the cap — In income-cap states, ask early about QITs (Miller trusts) and how deposits must be handled to count properly.
  • Spousal budgeting — The 2025 spousal impoverishment standards (MMMNA, housing allowance, and resource allowance) are summarized by CMS here. If your numbers are borderline, get tailored advice.

A few myths I gently retired

I used to believe that applying for Medicaid meant forfeiting the home immediately or that Medicare would “kick in” for long-term support after a certain age. Neither is quite true. Medicaid eligibility often excludes a primary residence up to the state’s home equity limit (2025 federal range noted above), and estate recovery generally occurs after death with important protections for a surviving spouse or certain children. Meanwhile, Medicare’s page on long-term care makes it clear that custodial support is not a covered ongoing benefit here. Understanding these nuances turned doom-scroll anxiety into a manageable plan.

What I’m keeping and what I’m letting go

I’m keeping three principles on a sticky note:

  • Start early — Applications take time, and waiver slots can be limited. Early documentation pays off.
  • Use the official numbers — For 2025, I reference the CMS spousal and SSI standards here so I’m not guessing.
  • Separate the threads — Eligibility, look-back, and estate recovery are related but distinct. I read LTSS basics here and then dive into details as needed.

And what I’m letting go: the idea that I must memorize everything. I don’t. I keep a tidy folder, revisit the same five pages that matter for our case, and ask for help when the facts get fuzzy.

FAQ

1) Does Medicaid cover assisted living?
Answer: Sometimes. Many states cover some services in assisted living through HCBS waivers or state plans, but room and board is often not covered. Availability and waitlists vary. A good anchor for understanding what Medicaid can fund in LTSS is the federal overview here.

2) What exactly is the five-year look-back?
Answer: When you apply for Medicaid long-term care coverage, the state reviews asset transfers from the past 60 months to see if any were below fair market value; such transfers can trigger a temporary ineligibility penalty. The federal backgrounder is here. State specifics apply.

3) Will Medicaid take my house?
Answer: Eligibility and estate recovery are separate. For eligibility, a primary residence can be excluded up to state-set equity limits within a federal range (2025: $730,000 to $1,097,000, per CMS standards here). After death, states must pursue estate recovery for certain LTSS costs, with protections for a surviving spouse or qualifying children; see the federal explanation here.

4) My spouse is at home. What stays protected?
Answer: Federal spousal impoverishment rules protect a portion of the couple’s income and assets for the community spouse. For 2025, the MMMNA ranges from $2,643.75 (contiguous states) up to $3,948.00, and the community spouse resource allowance ranges from $31,584 to $157,920, with state variations and special cases. See the CMS 2025 summary here.

5) Why doesn’t Medicare pay for long-term custodial care?
Answer: Medicare focuses on medical and rehabilitative care. Ongoing help with daily activities—bathing, dressing, eating—is considered custodial care and is generally not covered. Medicare explains these limits clearly here.

Sources & References

This blog is a personal journal and for general information only. It is not a substitute for professional medical advice, diagnosis, or treatment, and it does not create a doctor–patient relationship. Always seek the advice of a licensed clinician for questions about your health. If you may be experiencing an emergency, call your local emergency number immediately (e.g., 911 [US], 119).