What Does Medicaid Consider Income?

Table of Contents

Types of Income Counted by Medicaid

Medicaid includes several sources of income when determining eligibility:

  • Social Security Benefits: Regular payments from Social Security, including retirement, disability, and survivor benefits. These are typically counted as income.
  • Pensions and Retirement Income: Monthly payments from private or employer-sponsored pension plans, including distributions from retirement accounts.
  • Wages and Earnings: Income from employment, including self-employment, is considered when calculating eligibility.
  • Interest and Dividends: Earnings from investments, savings accounts, and stocks. Interest and dividends are counted as income.
  • Rental Income: Funds received from renting out property or real estate. This income is factored into Medicaid eligibility assessments.
  • Alimony and Child Support: Payments received from former spouses or for the support of children are included in income calculations.

What is Not Counted by Medicaid?

Certain types of income and financial resources are generally excluded from Medicaid’s income calculations:

  • In-Kind Support and Maintenance: Non-cash benefits like food, shelter, and clothing provided by others are not counted as income. For instance, if someone provides free room and board, it is not considered income.
  • Certain Benefits: Specific benefits like Supplemental Nutrition Assistance Program (SNAP) benefits and housing assistance are generally not counted as income for Medicaid eligibility purposes.
  • Gifts and Inheritances: Monetary gifts or inheritances received occasionally are not considered regular income but may impact asset limits.
  • Life Insurance Proceeds: If a life insurance policy pays out, the proceeds may not count as income but could affect asset limits depending on how the funds are managed.

Income Limits and Eligibility

Medicaid eligibility depends on meeting both income and asset limits. These limits vary by state and program type. Medicaid has different programs, such as long-term care Medicaid and community Medicaid, each with specific income limits.

  • Long-Term Care Medicaid: This program generally has stricter income limits because it covers institutional care, such as nursing home services.
  • Community Medicaid: Often used for home and community-based services, this program may have different income thresholds, which could be higher than those for long-term care Medicaid

 

Waiver Programs: Some states offer Medicaid waiver programs that allow for higher income limits for individuals needing long-term care services at home or in the community. These programs are designed to help individuals avoid institutionalization by providing support for services in less restrictive settings.

If an individual’s income exceeds the program limits, they may not qualify for Medicaid benefits unless they use specific planning strategies.

Income vs. Assets: Understanding the Difference

Medicaid distinguishes between income and assets, both of which impact eligibility:

Income: Money received on a regular basis, such as wages, Social Security, or rental income.
Assets: Resources owned by the individual, such as savings accounts, property, or investments.


While income affects eligibility for Medicaid, asset limits also play a crucial role. Different rules apply to income and assets, and both must be considered when planning for Medicaid benefits.

Strategies to Manage Medicaid Income Limits

To help individuals qualify for Medicaid benefits despite high income, various strategies can be employed:

  • Qualified Income Trusts (Miller Trusts): By diverting excess income into a Miller Trust, individuals can lower their countable income and potentially qualify for Medicaid benefits.
  • Medically Needy Spend Down: Individuals can reduce their countable income by paying for medical expenses, debt, or other allowable expenses.

What Are Medicaid Income Disregards?

Medicaid income disregards are provisions that allow certain types of income to be excluded or “disregarded” when determining an individual’s eligibility for Medicaid benefits. These disregards are essential in the eligibility process as they help reduce countable income, which can impact whether a person qualifies for Medicaid.

Disregards are used to account for specific financial situations or needs that might otherwise disqualify an individual due to their income level. Understanding which incomes are disregarded and how they affect Medicaid eligibility is crucial for effective planning and qualification.

Types of Income Disregards

To help individuals qualify for Medicaid benefits despite high income, various strategies can be employed:

  • Qualified Income Trusts (Miller Trusts): By diverting excess income into a Miller Trust, individuals can lower their countable income and potentially qualify for Medicaid benefits.
  • Medically Needy Spend Down: Individuals can reduce their countable income by paying for medical expenses, debt, or other allowable expenses.
 

Types of Income Disregards

Medicaid disregards various types of income depending on federal guidelines and state-specific rules. Common types of income disregards include:

  • Earned Income Disregards: A portion of income from employment or self-employment may be disregarded. This can include work-related expenses or an earned income disregard amount set by state Medicaid programs.
  • Certain Social Security Benefits: In some cases, Social Security benefits, such as Supplemental Security Income (SSI), may be partially disregarded.
  • Child Support Payments: Child support payments received are often disregarded when calculating Medicaid eligibility.
  • Alimony Payments: Similar to child support, alimony received may be disregarded depending on state rules.
  • Housing Costs: Certain housing-related expenses, like rent and utility costs, may be considered for disregard in specific situations.

 

How Income Disregards Affect Medicaid Eligibility

Income disregards play a critical role in determining Medicaid eligibility by reducing the amount of countable income. This reduction can make it easier for individuals whose income is slightly above the Medicaid limit to qualify for benefits.

For example, if a person’s total income is $1,500 per month, but their state disregards $500 of earned income, their countable income would be reduced to $1,000. This could potentially bring them under the eligibility threshold for Medicaid.

Examples of Income Disregards

Here are a few examples of how income disregards work in practice:

Example 1: Earned Income Disregard

Scenario:
Susan is a 64-year-old working part-time and applying for Medicaid long-term care benefits. Her monthly gross earned income is $2,200. In her state, the earned income disregard for Medicaid eligibility is $300.

Calculation:

  • Gross Monthly Income: $2,200
  • Earned Income Disregard: $300
  • Countable Income: $2,200 – $300 = $1,900

Outcome: Susan’s countable income for Medicaid eligibility purposes is $1,900. This amount is compared to the Medicaid income limit in her state. If $1,900 is below the limit, Susan qualifies for Medicaid. If it exceeds the limit, Susan may need to explore other eligibility strategies.

Example 2: Housing Costs Disregard

Scenario:
John is 70 years old and applying for Medicaid benefits. He receives a monthly Social Security benefit of $1,500 and pays $600 per month in rent and $150 for utilities. In his state, there is a housing cost disregard of up to $700 for rent and utilities combined.

Calculation:

  • Monthly Social Security Income: $1,500
  • Total Housing Costs: $600 (rent) + $150 (utilities) = $750
  • Housing Cost Disregard Limit: $700
  • Countable Income: $1,500 – ($750 – $700) = $1,500 – $50 = $1,450

Outcome: John’s countable income, after applying the housing cost disregard, is $1,450. This amount is compared to the Medicaid income limit in his state. If $1,450 is below the limit, John qualifies for Medicaid benefits. If it exceeds the limit, John might need to consider other options to adjust his countable income.

  • Earned Income Disregards: Some states offer higher disregards for earned income compared to others.
  • Housing and Utility Costs: States may have different rules for disregarding these expenses based on local living costs.

 

Strategies for Managing Income Disregards

To effectively utilize Medicaid income disregards, consider the following strategies:

  • Review State Regulations: Understand your state’s specific disregard rules to ensure all eligible income is excluded.
  • Document Expenses: Keep thorough records of allowable expenses, such as housing and work-related costs, to ensure they are correctly accounted for in the disregard calculations.
  • Seek Professional Advice: Consult with a Medicaid planning specialist or elder law attorney to maximize the benefit of income disregards and navigate complex eligibility rules.

 

State-Specific Variations

While federal guidelines set the general framework for income and income disregards, specific rules and amounts can vary by state. States have the flexibility to adjust disregards based on local policies and economic conditions. Therefore, it’s essential to understand the specific disregards applicable in your state.

Consulting with a Medicaid Planning Professional

Medicaid planning can be complex and requires careful consideration of income and asset rules. Consulting with a knowledgeable elder law attorney or Medicaid planning professional can provide valuable guidance tailored to individual circumstances. They can help navigate the process, ensure compliance with regulations, and develop effective strategies for qualifying for Medicaid benefits.

Frequently Asked Questions (FAQs)

How does Medicaid handle income from a spouse?

Medicaid considers spousal income differently. When one spouse applies for Medicaid, certain income allowances or spousal impoverishment protections may apply to ensure the healthy spouse retains sufficient resources.

Can income from a trust affect Medicaid eligibility?

Yes, income from a trust can impact Medicaid eligibility. The effect depends on the type of trust and its terms. For instance, income from a revocable trust is typically considered available, while an irrevocable trust may have different implications.

How often does Medicaid update income limits?

Medicaid income limits are generally updated annually based on changes to federal poverty levels and cost-of-living adjustments. State-specific updates may also apply.

What are the consequences of exceeding Medicaid income limits?

Exceeding Medicaid income limits can result in denial of benefits. However, there are legal strategies to address high income, such as using a Qualified Income Trust to lower countable income.

Can income be legally redirected to qualify for Medicaid?

Yes, redirecting income to cover allowable expenses or placing it into a Qualified Income Trust can help individuals qualify for Medicaid by reducing countable income.