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

Iowa Medicaid Long-Term Care Definition

Medicaid (Title 19) is a health care program for low-income individuals of all ages. While there are varying coverage groups, our focus is on long-term care Medicaid eligibility for elderly Iowa residents (aged 65+). In addition to nursing home care, IA Medicaid pays for care services and supports to help frail seniors continue to live at home or in assisted living. There are three categories of Medicaid long-term care programs for which IA seniors may be eligible.

1) Institutional / Nursing Home Medicaid – An entitlement; anyone who meets the eligibility requirements is offered assistance. Benefits are provided only in nursing homes.

2) Medicaid Waivers / Home and Community Based Services (HCBS) – Not an entitlement; the number of participant slots is limited. Once the enrollment cap has been reached, there are wait lists. Benefits are intended to prevent and delay nursing home admissions and are provided at home, adult day care, or in assisted living. More on Waivers.

3) Regular Medicaid / Aged Blind and Disabled – An entitlement; if eligibility criteria is met, services can be received. Long-term care benefits, such as personal care assistance or adult day care, may be available.

While Iowa’s Medicaid program is state and federally funded, it is administered by the state under federally set parameters. The Iowa Department of Health and Human Services (HHS) is the administering agency. IA Health Link is a Managed Care Program that serves the majority of Medicaid beneficiaries.

Income & Asset Limits for Eligibility

Each of the three Medicaid long-term care programs have varying financial and medical (functional) eligibility requirements. Further complicating financial eligibility is that the requirements change annually, vary with marital status, and Iowa offers multiple pathways to eligibility.

The table below provides a quick reference to allow seniors to determine if they might be immediately eligible for long term care from an Iowa Medicaid 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 Medicaid in Iowa. More.

Income Definition & Exceptions

Countable vs. Non-Countable Income
Nearly all income received is counted towards the income limit. Examples include employment wages, alimony payments, pension payments, Social Security Disability Income, Social Security Income, annuities, IRA withdrawals, and stock dividends. Nationally, Holocaust restitution payments are not counted as income. In IA, the VA Aid & Attendance and Housebound, which is above and beyond the Basic VA Pension, does not count.

Treatment of Income for a Couple
When one spouse of a married couple applies for Institutional Medicaid or a Medicaid Waiver, only the income of the applicant is counted towards income eligibility; the non-applicant’s income is disregarded. Furthermore, the non-applicant spouse may be entitled to a Monthly Maintenance Needs Allowance (MMNA) from their applicant spouse. The MMNA is the minimum amount of monthly income a non-applicant is said to require to avoid spousal impoverishment.

In 2025, the MMNA in IA is $3,948 / month. If a non-applicant spouse has monthly income under this amount, income can be transferred to them from the applicant spouse to bring their monthly income up to this level. A non-applicant spouse who already has a monthly income of $3,948 or more is not entitled to a MMNA / Spousal Income Allowance.

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

Asset Definition & Exceptions

Countable vs. Non-Countable Assets
Countable (non-exempt) assets are counted towards Medicaid’s asset limit. This includes cash and most anything that can easily be converted to cash. Examples include stocks, bonds, investments, bank accounts (credit union, savings, and checking), and real estate in which one does not reside. In Iowa, 401K’s and IRA’s are counted. There are also many assets (resources) that are exempt (non-countable). Exemptions include personal belongings (i.e., clothing), household furnishings, an automobile, an irrevocable funeral contract, burial spaces, 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). There is, however, a Community Spouse Resource Allowance (CSRA) that protects a larger portion of the couple’s assets for the non-applicant spouse (community spouse) of a Nursing Home Medicaid or Medicaid Waiver applicant. In 2025, the CSRA allows the non-applicant spouse to keep 50% of the couple’s assets, up to $157,920. If the community spouse’s half of the assets falls under $31,584, they can keep 100% of the assets, up to $31,584. Note: There is no CSRA for Regular Medicaid.

Medicaid’s Look-Back Rule
Iowa has a Medicaid Look-Back Period of 60 months that immediately precedes one’s Medicaid application date for Nursing Home Medicaid or a Medicaid Waiver. During the “look back”, Medicaid scrutinizes all asset transfers to ensure none were sold or gifted under fair market value. This includes asset transfers made by one’s spouse. Intended to discourage gifting assets to meet Medicaid’s asset limit, violations are penalized with a Penalty Period of Medicaid ineligibility. Note: The Look-Back Rule does not apply to Regular Medicaid.

The U.S. Federal Gift Tax Rule does not extend to Medicaid eligibility. This rule, in 2025, allows individuals to gift up to $19,000 per recipient without filing a Gift Tax Return. Gifting under this rule violates Medicaid’s 5-year Look-Back Period.

Iowa Medicaid Home Exemption Rules

For the home to be exempt, the Medicaid applicant or their spouse must live in it. If there is no spouse in the home, there is a home equity interest limit of $730,000 (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 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 generally not counted towards Medicaid’s asset limit, it is not exempt from Medicaid’s Estate Recovery Program (MERP). Following a long-term care Medicaid beneficiary’s death, the state 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. For Nursing Home Medicaid and Medicaid Waivers, a Nursing Facility Level of Care (NFLOC) is required. Furthermore, some program benefits may have additional eligibility requirements specific to that benefit. For instance, for home modifications to be covered under a waiver, an inability to safely live independently without modifications may be necessary. For long-term care services via the Regular Medicaid program, a functional need with Activities of Daily Living is required, but a NFLOC is not necessarily required.

Qualifying When Over the Limits

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

1) Medically Needy Pathway – Iowa has a “Spenddown” program for persons applying for Regular Medicaid / Aged Blind Disabled who have income over the Medicaid limit. This program allows applicants to become income-eligible for Medicaid services by spending “excess” income on medical expenses (i.e., overdue medical bills, Medicare premiums, health insurance premiums, and medical bills not covered by Medicaid). In 2025, the medically needy income limit (MNIL) for individuals is the same as for married couples and is $483 / month. The amount one must “spend down”, which can be thought of as a deductible, is the difference between one’s monthly income and the MNIL. In IA, the spend down is calculated for a 2-month period. Once one has met their “spend down” for the period, they are Medicaid income-eligible for the remainder of the period. The medically needy asset limit is $10,000 per household.

2) Miller Trusts – Also called Qualified Income Trusts (QITs), or specific to Iowa Medicaid, Medical Assistance Income Trusts (MAITs). Irrevocable MAITs allow persons applying for Nursing Home Medicaid or a HCBS Medicaid Waiver who have “excess” income to become income-eligible. In simple terms, “excess” income is deposited into the trust, the terms of which cannot be changed or canceled. A trustee has legal control over trust funds, which are no longer counted as income for Medicaid eligibility. Furthermore, trust funds can only be used for very specific purposes (i.e., paying medical expenses and long-term care costs accrued by the Medicaid enrollee). Effective 7/1/24, the income cap for a MAIT is $10,653.75 / month.

3) Asset Spend Down – Persons who have assets over Medicaid’s asset limit can “spend down” excess assets on non-countable ones to become asset-eligible. Examples include making home modifications (i.e., adding wheelchair ramps or stair lifts), prepaying funeral and burial expenses, and paying off debt. Remember, one must not gift assets or sell them under fair market value within 60 months of applying for Nursing Home Medicaid or a Medicaid Waiver. Doing so is a violation of Medicaid’s Look-Back Period. When “spending down”, it is best to keep documentation of how assets were spent as evidence this rule was not violated.

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

Specific Iowa Medicaid Programs

In addition to paying for nursing home care, Iowa Medicaid offers three programs relevant to the elderly that helps them remain living at home or in assisted living residences.

1) HCBS Elderly Waiver – Benefits may include personal care assistance, adult day care, home modifications, personal emergency response systems, and more. Program participants have two options of directing their own care: Consumer-Directed Attendant Care (CDAC) and Consumer Choices Option (CCO). Both options allow participants to hire the care attendant of their choosing, including their own adult child or spouse.

2) Program of All-Inclusive Care for the Elderly (PACE) – Combines the benefits of Medicaid, including long-term care, and Medicare into a single program.

3) Money Follows the Person (MFP) – Also called The Partnership for Community Integration Project in Iowa. This federal program helps institutionalized persons who are eligible for Medicaid to transition back home or into the community.

How to Apply for Iowa Medicaid

Elderly Iowa residents can apply for Medicaid online at the Iowa HHS Services Portal, by calling the HHS Contact Center at 855-889-7985, in person at their local DHS office, or by completing and submitting an Application for Health Coverage and Help Paying Costs. One’s local Area Agency on Aging office may be helpful in providing additional program information and / or application assistance. The HHS Contact Center can also provide application assistance at 855-889-7985. The application process may vary based on the program for which one is applying.

Prior to applying for Medicaid, it is imperative that seniors are confident that they meet all of the eligibility requirements. For those who have income and / or asset(s) greater than the allowable amounts, or are unsure, Medicaid Planning can play an instrumental role. Applying for long-term care Medicaid is frequently a complicated and lengthy process. Familiarizing oneself with general information about the application process can be helpful.