Alabama Medicaid Eligibility for Long Term Care: Income & Asset Limits

Alabama Medicaid Long-Term Care Definition

Medicaid is a health insurance program for low-income individuals of all ages. While coverage is provided for varying groups of Alabama residents, our focus is on long-term care Medicaid eligibility for Alabama elders, aged 65 and over. In addition to nursing home care, Alabama Medicaid pays for non-medical supports and services that help frail seniors remain living in their homes. There are three categories of Medicaid long-term care programs for which AL seniors may be eligible.

1) Institutional / Nursing Home Medicaid – An entitlement; anyone who meets the requirements will receive assistance. Benefits are provided in nursing home facilities.

2) Medicaid Waivers / Home and Community Based Services (HCBS) – Not an entitlement; there are a limited number of participant enrollment slots and waiting lists may exist. Intended to prevent and delay the need for nursing home admissions, benefits are provided at home, adult day care, and in single adult foster care homes. More on Waivers.

3) Regular Medicaid / Medicaid for Elderly and Disabled (E&D) – An entitlement; anyone who is eligible will receive services. Various long-term care benefits, such as personal care assistance or adult day care, may be available.

While Medicaid is jointly funded by the state and federal government, it is administered by the state through the Alabama Medicaid Agency.

Income & Asset Limits for Eligibility

The three categories of Medicaid long-term care programs have differing financial and medical (functional) eligibility requirements. Further complicating financial eligibility is that the requirements change annually, vary with marital status, and Alabama offers multiple pathways towards Medicaid eligibility.

The table below provides a quick reference to allow Alabama seniors to determine if they might be immediately eligible for a Medicaid long-term care program.
Alternatively, one can take the Medicaid Eligibility Test. IMPORTANT: Not meeting all of the criteria does not mean one is ineligible or cannot become eligible for AL Medicaid. More.

Income Definition & Exceptions

Countable vs. Non-Countable Income
Nearly any income from any source that a Medicaid applicant receives is counted towards Medicaid’s income limit. This includes employment wages, alimony payments, railroad retirement, black lung, pension payments, Social Security Disability Income, Social Security Income, IRA withdrawals, and stock dividends. Nationally, Holocaust restitution payments do not count as income. Furthermore, in AL, the VA Aid & Attendance Allowance, which is above and beyond the Basic VA Pension, does not count.

Treatment of Income for a Couple
When only one spouse of a married couple applies for Nursing Home Medicaid or a Medicaid Waiver, only the income of the applicant is counted. The income of the non-applicant spouse is disregarded and does not impact their spouse’s income eligibility. The non-applicant spouse, however, may be entitled to a Minimum Monthly Maintenance Needs Allowance (MMMNA) from their applicant spouse. This is a Spousal Impoverishment Rule and is the minimum amount of monthly income to which a non-applicant spouse is entitled.

The MMMNA in AL is $2,643.75 / month (eff. 7/1/25 – 6/30/26). If a non-applicant spouse has monthly income under this amount, income can be transferred to them from their applicant spouse to bring their monthly income up to this level. If the non-applicant spouse has income equivalent to $2,643.75 / month or more, they cannot receive any monthly income from their applicant spouse.

Income is counted differently when only one spouse applies for Regular Medicaid / Medicaid for Elderly and Disabled; the income of both the applicant spouse and non-applicant spouse is calculated towards the income eligibility of the applicant. Furthermore, there is no Monthly Maintenance Needs Allowance for a non-applicant spouse. More on how Medicaid counts income.

Asset Definition & Exceptions

Countable vs. Non-Countable Assets
Assets that count towards Medicaid’s asset limit include cash, stocks, bonds, investments, promissory notes, bank accounts (credit union, savings, and checking), and real estate in which one does not reside. In Alabama, IRA’s and 401K’s are also counted. There are also many assets that Medicaid does not count; they are exempt. The cash surrender value of life insurance policies with a combined face value of up to $5,000 are exempt. While prepaid burial contracts and burial funds are also exempt up to $5,000, the exemption amount for burial funds is decreased by the face value of one’s life insurance policies. Other exemptions include personal belongings, such as clothing, household furnishings, an automobile, and generally one’s primary home.

Treatment of Assets for a Couple
All assets of a married couple are considered jointly owned (regardless of the long-term care Medicaid program for which one or both spouses is applying). A Spousal Impoverishment Provision, however, permits the non-applicant spouse of a Medicaid Nursing Home or Waiver applicant a Community Spouse Resource Allowance (CSRA). In 2025, the CSRA allows the community spouse (the non-applicant spouse) to retain 50% of the couple’s assets, up to a maximum of $157,920. If the non-applicant’s share of the assets falls under $31,584, 100% of the assets, up to $31,584 can be retained by them. Note: There is no CSRA for Regular Medicaid.

Medicaid’s Look-Back Rule
It is vital that assets not be gifted (including sold for less than fair market value) within 60 months of applying for Nursing Home Medicaid or a Medicaid Waiver. This is because Alabama has a Medicaid Look-Back Period that immediately precedes one’s application date. During the “look back”, the Medicaid agency scrutinizes all asset transfers. If assets have been transferred for under fair market value, a Penalty Period of Medicaid ineligibility will be calculated. Note: There is no Look-Back Period for Regular Medicaid.

The U.S. Federal Gift Tax Rule does not extend to Medicaid eligibility. In 2025, this rule allows individuals to gift up to $19,000 per recipient without filing a Gift Tax Return. Gifting under this rule violates Medicaid’s Look-Back Period.

Alabama Medicaid Home Exemption Rules

For home exemption, the Medicaid applicant or their spouse must live in their home. If there is no spouse in the home, there is a home equity interest limit of $1,097,000 (in 2025). Home equity is the value of the home, minus any outstanding debt against it. Equity interest is the amount of the home’s equity that is owned by the applicant. Furthermore, if neither the Medicaid applicant nor their spouse live in the home, the applicant must have Intent to Return. Note: There is no home equity interest limit for Regular Medicaid. Other exemptions exist.

While one’s home is usually exempt from Medicaid’s asset limit, it is not exempt from Medicaid’s Estate Recovery Program. Following a long-term care Medicaid beneficiary’s death, Alabama’s Medicaid agency attempts reimbursement of care costs through whatever estate of the deceased still remains. This is often the home. Without proper planning strategies in place, the home will be used to reimburse Medicaid for providing care rather than going to family as inheritance.

Medical / Functional Need Requirements

An applicant must have a functional need for long-term care Medicaid. For Nursing Home Medicaid and Medicaid Waivers, a Nursing Facility Level of Care (NFLOC) is required. Furthermore, certain benefits may have additional eligibility requirements specific to the particular benefit. For example, for home modifications to be covered via a waiver, an inability to safely live at home without modifications may be required. For long-term care services via the Regular Medicaid program, a functional need with Activities of Daily Living (ADLs) is required, but a NFLOC is not necessarily required.

Qualifying When Over the Limits

For Alabama elderly residents (aged 65 and over), who do not meet the financial eligibility requirements above, there are other ways to qualify for Medicaid.

1) Qualified Income Trusts (QIT’s) – Also called Miller Trusts, or in Alabama, Qualifying Income Trusts, these trusts are for Nursing Home Medicaid and Medicaid Waiver applicants who are over Medicaid’s income limit, but still cannot afford their long-term care costs. Overly simplified, QITs allow Alabama seniors to become income-eligible by depositing “excess” income into the trust, which must be irrevocable. This means the terms of the trust cannot be changed or reversed. A trustee has legal control over trust funds, which can only be used for very specific purposes (i.e., paying long-term care services / medical expenses accrued by the Medicaid enrollee). Furthermore, after the death of the Medicaid beneficiary, any remaining funds (up to the amount the state paid for care) must to go the State of Alabama Medicaid authorities.

2) Asset Spend Down – Seniors who have assets over Medicaid’s assets limit can “spend down” excess assets on non-countable ones to become asset-eligible. Examples include making home modifications (i.e., addition of a first floor bedroom, wheelchair ramps, roll-in showers, pedestal sinks, and stair lifts), vehicle modifications (i.e., wheelchair lifts, adaptive control devices, and floor modifications to allow one to drive from a wheelchair), prepaying funeral and burial expenses, and paying off debt. Recall that due to Medicaid’s Look-Back Period, all asset transfers made for 60-months immediately preceding one’s application for Nursing Home Medicaid or a Medicaid Waiver are reviewed to ensure none were gifted. It is recommended that documentation of how assets were spent are kept as proof this rule was not violated.

3) Medicaid Planning – The majority of persons considering Medicaid are “over-income” and / or “over-asset”, but they still cannot afford their cost of care. For these persons, Medicaid planning exists. By working with a Medicaid Planning Professional, families can employ a variety of strategies to help them become Medicaid-eligible, as well as to protect their home from Medicaid’s Estate Recovery Program. Connect with a Medicaid Planner.

Specific Alabama Medicaid Programs

In addition to paying for nursing home care, Alabama Medicaid offers the following programs relevant to the elderly that help them to live at home or in the community.

1) Alabama Elderly and Disabled Waiver (E&D) – Provides home and community based services that promote independent living, such as meal delivery, homemaker services, personal care assistance, and adult day health. Program participants can self-direct their own care services via the Personal Choices Program, allowing them to hire, train, manage, and even fire, their own caregiver. This includes relatives, such as an adult child, and in some cases, a spouse. A waiting list for E&D Waiver benefits may exist.

2) Alabama Community Transition Waiver (ACT) – Assists nursing home residents with transitioning back home, the home of a family member, or an adult foster care home that serves only that individual. Program participants must require a level of care consistent to that which is provided in a nursing home residence. Benefits include home modifications, respite care, personal emergency response systems, companionship services, and adult day care.

3) Program of All-Inclusive Care for the Elderly (PACE) – The benefits of Medicaid, including long-term care services and supports, and Medicare are combined into one program. Additional benefits, such as dental and eye care, may be available.

4) Money Follows the Person (MFP) – Also called Gateway to Community Living in Alabama. This federal program helps institutionalized persons who are eligible for Medicaid to transition back home or into the community.

How to Apply for Alabama Medicaid

Seniors can apply for Medicaid in Alabama online, over the phone by calling Alabama Medicaid at 1-800-362-1504, or filling out and submitting an Application / Redetermination for Elderly and Disabled Programs. For application assistance, one can contact their local district Medicaid office. One’s local Area Agency on Aging office may also be helpful. The application process may vary based on the program for which one is applying.

It is vital that Alabama Medicaid applicants be certain that all eligibility requirements are met prior to applying for benefits. Elderly AL residents who are over the income and / or asset limit(s), or are unsure if they are, should strongly consider Medicaid planning for the best chance of acceptance into a Medicaid program. Familiarizing oneself with general information about the long-term care Medicaid application process can be helpful.