Medicaid Rules Every Family Caregiver Should Know

Caring for a loved one who relies on Medicaid can feel overwhelming, especially when you’re trying to sort through rules, services, and paperwork while also meeting daily care needs. More than 20% of people enrolled in Medicaid are either over the age of 65 or have a diagnosed disability. Yet this group accounts for over half of Medicaid’s total spending because they often need more support or longer-term care. For caregivers, that can mean navigating a system that feels big, complex, and hard to understand. 

By learning more about the Medicaid landscape, you’re better able to support your loved one’s needs and more confidently navigate state and federal policies. This Medicaid caregiver guide is here to make that first step easier.

What Family Caregivers Should Know About Medicaid vs. Medicare

Medicaid and Medicare are often discussed together in conversation because they’re both government-funded programs that aim to reduce healthcare costs. The Department of Health and Human Services (HHS) oversees both programs through the Centers for Medicare and Medicaid Services (CMS), the HHS’s largest department. Qualifications for each program differ based on age, income, diagnosis, and state of residence. In some cases, individuals may even be dually eligible for both programs. 

• Medicare is a federal program for individuals 65+ or individuals under 65 with certain medical conditions such as End Stage Renal Disease or Amyotrophic Lateral Sclerosis (ALS), or who have been determined “disabled” and have been collecting SSDI for two years or more. 
• Medicaid has several levels of coverage for individuals and families living below specific income thresholds. While the program is based on federal requirements with a portion of federal funding to support it, Medicaid is managed by each state, which means income limitations and rules vary depending on where you live.  

For caregivers, one important differentiation between the two programs is that all states have a consumer-directed personal care assistance program available through Medicaid. This program helps individuals receive care from a loved one in the comfort of their home. Medicare, on the other hand, does not provide this type of program.

Income and Asset Limits: What Caregivers Need to Know

Qualifying for Medicaid—and remaining qualified—can feel like threading a needle. If your loved one has an income or savings that are slightly too high, it can impact their eligibility. Although they vary by state, the general rules for Medicaid qualification are:

• No more than $2,000 in assets (savings, investments, property, cash, etc.)
• An income at or below 138% (or 200% if your state has expanded Medicaid access) of the federal poverty limit

However, some states allow for Medicaid spend down, which allows those who may be just above the income qualification to use medical expenses to reduce their monthly income. An example would be if the income qualifier for Medicaid is $2,000 per month, but your loved one’s monthly income is $2,300 a month. If they have $300 in medical expenses (including lab work, medications, copays/deductibles, therapy, and more), that amount can reduce their monthly income to $2,000, allowing them to qualify. Contact your state to find out if they offer a spend down option.

Medicaid Look-Back Period and Asset Transfers

Most state Medicaid programs have a five-year look-back period, meaning they will review financial and asset transactions from that time period to determine qualification. Any transfer of assets, real estate gifts, or inheritances will be included in the assessment. 

Planning intentionally can make all of the difference for your loved one’s qualification. Consider protecting your loved one’s coverage by having them:

• Gift assets at least 5 years before Medicaid qualification
• Consult an elder law attorney to discuss estate and trust planning
• Track bills and expenses for easy future reference and spend down documentation
• Use extra financial assets to pay down debt or make home modifications
• Pre-pay funeral expenses

Individuals may still qualify for Medicaid but can be penalized for financial gifts or sale of assets below market value during the look-back period. Your loved one could then be forced to reverse the transaction or be responsible for a portion of care costs.

Medicaid Waiver Programs and Home-Based Care for Family Caregivers

Medicaid also allows states to use Home- and Community-Based Services (HCBS) waivers, which support individuals requiring caregiving services at home rather than a nursing or memory care facility. Through some HCBS waivers, individuals can receive care from a friend or family member in the comfort of their home, and the caregiver can be compensated for their work. These waiver programs allow the applicant to have a higher income of up to $2,901—this can vary by state and may include a waiver liability.

 
Always keep timing in mind when applying for additional programs and benefits. Plan ahead and work through the application process early to prevent stress and strain on your family. Find the right application by selecting your state on the Medicaid website or by contacting your state’s Medicaid program to learn more.

Medicaid Spousal Impoverishment Rules

If the time has come for your loved one to enter a long-term care facility, but their spouse will remain living independently, there are some unique protections to consider. To protect the spouse remaining at home from experiencing financial hardship while the other spouse is under continual care, Congress passed a “spousal impoverishment” provision, which allows the community-based spouse to have protected funds for their own living and well-being. 

Through the Community Spouse Resource Allowance (CSRA), the community-based spouse can retain an allocated amount of assets ($162,660 in 2026) to support them while the spouse requiring more extensive care can qualify for Medicaid independently. Additionally, the Minimum Monthly Needs Maintenance Allowance (MMNA) is a financial threshold set for the community-based spouse to avoid poverty. The MMNA allows the Medicaid-eligible spouse to transfer some or all of their income to the community-based spouse to avoid extreme financial hardship. It’s also beneficial for the Medicaid-eligible spouse as they can reduce their income for the sake of their Medicaid eligibility.

Medicaid Estate Recovery: What Family Caregivers Should Plan For

After a Medicaid enrollee has passed away, Medicaid may seek reimbursement from the enrollee’s trust to compensate for past paid services and benefits. This is called Estate Recovery, and it applies to individuals who have been permanently institutionalized or are 55+ years old, except those with:

• A surviving spouse
• A child under 21 years of age
• A child who is blind or disabled

Estate recovery happens before any inheritances to family members, and it could include reimbursement for nursing facility costs, HCBS expenses, and other medical expenses using any of the individual’s sole remaining assets. For those with a living spouse, the spousal impoverishment provision comes into play by protecting assets up to a certain threshold to prevent hardship for the remaining spouse. There are also hardship exception options for siblings and adult children.

Some states may put a lien on owned properties even while the Medicaid recipient is still alive, so it’s critical to understand your state’s policies to prevent asset complications down the road. Meet with an elder estate attorney to discuss and help you navigate your options.

Why Documentation and Communication Matter

Good record keeping is a key part of getting and keeping Medicaid. Just like filing taxes or buying a home, you’ll need to stay organized. In the years before applying, save receipts and records for anything related to care including medical bills, home repairs, pharmacy costs, and payments made to caregivers. These documents help show income and expenses and make the Medicaid application more accurate. 

It can help to keep everything in one place, like a folder on your computer or a secure online storage account. Store your loved one’s care information there, including caregiver details, medical and pharmacy receipts, and anything else connected to their care. It’s also a good idea to write down notes from calls or meetings with caseworkers, nurses, or doctors and save them in the same spot. When you’re ready to apply, keep a copy of the Medicaid application here as well, so you always know where to find it.

Once your loved one is a Medicaid enrollee, keep up-to-date on your state’s Medicaid programs, waivers, and benefits by:

• Subscribing to your state’s Medicaid newsletters or distribution channels for the latest information
• Connecting with your local Area Agency on Aging, Disability Hub, or other relevant nonprofits to receive their communications, which may include information on Medicaid program updates

Medicaid Caregivers Can Advocate, Ask Questions, and Stay Informed

The rules are complex, but understanding Medicaid caregiving basics can make a big difference in navigating the system. Through intentional, well-planned steps, you and your loved one will be more prepared for this phase of support. There are valuable resources you can tap into for additional support, such as your state’s Medicaid office, elder law attorneys, your local Area Agency on Aging, and social workers. 

Careforth is always available as a resource for you, too. We provide the support and connections that ensure caregivers feel supported throughout their caregiving journey, including a team of Medicaid Support Specialists to help you navigate eligibility. Visit the Caregiver Support page on our site to learn more about how Careforth supports caregivers or contact us for more information.

Medicaid Rules: FAQs

Who qualifies for Medicaid?

Medicaid qualifications are determined at the state level. However, two general guidelines include: 1. Having no more than $2,000 in assets and 2. Having an income at or below 138% of the federal poverty limit. Check your state’s eligibility requirements to understand if your loved one qualifies. You can also take a Medicaid eligibility assessment to evaluate their qualifications. 

What is a Medicaid waiver, and how does it help caregivers?

Medicaid offers a Home- and Community-Based Services (HCBS) waiver, which gives each state the flexibility to support Medicaid participants with care needs at home. The HCBS waiver supports individuals that would typically be eligible for nursing facility or hospital-level care, but they would rather receive care from home with a familiar caregiver. Through some HCBS waivers in select states, caregivers can be compensated for their work caring for a friend or family member who is elderly or has a chronic diagnosis that requires constant care.  

What documents do I need when applying for Medicaid for a family member?

Documentation requirements vary by state. But generally, plan to have this information on hand when completing a Medicaid application:

• Name
• Social Security number
• Home address
• Date of birth
• Proof of income and citizenship or immigration status
• Information on other benefits, including other federal/state benefits or private commercial insurance from an existing or prior employer 

Can I get help applying for Medicaid or understanding the rules?Each state offers support with completing a Medicaid application or learning more about qualifying. Visit Medicaid’s website to find resources specific to your state or lean on Careforth’s Medicaid Support Specialists who can help you navigate the process.