Many retirees believe Medicare will pay for nursing-home care because they have paid Medicare taxes throughout their working years. Unfortunately, Medicare generally does not cover extended custodial nursing-home care.
Medicaid may provide this coverage, but eligibility depends on medical need, income, assets and state-specific requirements.
Medicare and Medicaid are not the same
Medicare is federal health insurance primarily for people age 65 and older and certain younger people with disabilities. Eligibility generally is not based on income or assets.
Medicare may cover short-term care in a skilled nursing facility after a qualifying hospital stay when the patient needs rehabilitation or skilled medical services. It does not normally pay for someone to remain indefinitely in a nursing home because the person needs help with bathing, dressing, eating or other daily activities.
Medicaid is a joint federal-state program for financially eligible individuals. It is the country’s principal public payer for extended nursing-home care and other long-term services.
Having Medicare does not automatically qualify someone for Medicaid. A person enrolled in both programs is called a dual-eligible beneficiary.
Who may qualify for nursing-home Medicaid?
An applicant generally must meet these requirements:
- Require a nursing-home level of care
- Satisfy the state’s income rules
- Satisfy the state’s countable-asset rules
- Properly document transfers during the five-year lookback period
- Meet state residency, citizenship or qualified immigration requirements
- Receive care from a Medicaid-certified provider
Financial eligibility alone is not enough. The applicant must also demonstrate a medical need for institutional care.
The important 2026 benchmark: $2,982 per month
Many states use a special institutional income limit equal to 300% of the federal Supplemental Security Income benefit rate.
In 2026, that amount is:
$2,982 in gross monthly income for one nursing-home Medicaid applicant.
This is one of the first numbers retirees should examine when evaluating possible eligibility. However, it is not a universal national limit. Some states use different systems, and income above $2,982 does not always make Medicaid impossible.
What income does Medicaid consider?
Medicaid may count income from:
- Social Security
- Pensions
- Wages and self-employment
- IRA and retirement-plan distributions
- Required minimum distributions
- Annuity payments
- Rental income
- Interest and dividends
- Trust distributions
- Royalties and other recurring payments
Medicaid does not rely only on taxable income reported on a federal tax return. Some nontaxable income may still count.
For retirees and long-term-care applicants, income is commonly evaluated monthly rather than annually.
Example: Income below the benchmark
Maria receives:
- Social Security: $1,850 per month
- Pension: $700
- Annuity income: $350
Maria’s gross monthly income is $2,900. If she lives in a state using the $2,982 institutional limit, she may pass the income test.
She must still satisfy the medical, asset and five-year-lookback requirements.
Even after qualifying, Maria generally cannot keep all $2,900. Most of her income will be contributed toward nursing-home costs after permitted deductions, such as health-insurance premiums, medical expenses and a small personal-needs allowance.
What if income exceeds $2,982?
Suppose John receives $3,200 per month. His income is above the 2026 benchmark, but that does not necessarily end the analysis.
Depending on his state, he may be able to use:
- A Qualified Income Trust, also called a Miller Trust
- A medically needy or income spend-down program
- Permitted medical-expense deductions
- An administrative or court-ordered spousal allowance
A Qualified Income Trust does not hide income. Income is deposited into the trust and used according to Medicaid rules, generally for the applicant’s care and approved expenses.
Married couples: Whose income is counted?
When only one spouse requires nursing-home care, income generally follows the person whose name is attached to it.
If the husband receives $2,500 in Social Security and pension income, that is generally his income. If his wife receives a $2,000 pension in her own name, her income generally belongs to her and is not automatically considered available to him.
The spouse remaining at home may also receive part of the institutionalized spouse’s income if necessary to meet Medicaid’s spousal-maintenance rules.
Assets are treated differently. Medicaid generally reviews countable assets owned by either spouse, regardless of whose name appears on the account.
The bottom line
The $2,982 monthly institutional income limit is an important 2026 screening benchmark used by many states.
Remember:
Income at or below $2,982 does not guarantee eligibility, and income above $2,982 does not always prevent eligibility.
Applicants must also meet the state’s medical, asset and transfer requirements.
-Phan Hoàng Anh-
Sources: Medicaid nursing-facility services, 2026 SSI and spousal-impoverishment standards, and Medicaid eligibility for seniors and Medicare beneficiaries.
The article above is for general educational purposes and do not constitute legal, tax, insurance or financial advice.