How Much Does Medicaid Cost?

Medicaid is unlike Medicare and other health insurances in that there is no monthly premium cost. Long-term care Medicaid is intended for persons who have limited financial means (low income and assets). Beneficiaries may, however, have to contribute the majority of their income towards their care costs. Phrased differently, what Medicaid benefits actually cost an individual depends on their income. Persons with very low income may receive Medicaid for free while middle-income persons may have to contribute a significant portion of their monthly income to receive benefits.

Being over Medicaid’s income limit is not automatic cause for Medicaid denial. Approximately half of the states allow Medicaid applicants to create irrevocable (cannot be cancelled or changed) Qualified Income Trusts (QITs) in which “excess” income is deposited and no longer counts as income for Medicaid eligibility purposes. This allows Medicaid applicants to meet Medicaid’s income limit. A trustee (someone other than the Medicaid applicant) is named to manage the trust and the income deposited into the trust can only be used for very limited reasons. For example, it may go towards the cost of the Medicaid beneficiary’s long-term care.

States that do not allow Qualified Income Trusts may offer a Medically Needy Pathway to income eligibility. These states are sometimes referred to as “spend down” states and allow Medicaid applicants to spend their “excess” income on medical expenses until they reach the medically needy income limit. Once they have done so, they are income-eligible for the remainder of the spend down period.

It’s important to mention that Medicaid nursing home recipients must contribute the majority of their income towards the cost of their nursing home care. Stated differently, even when the income limit is met, they are not able to retain monthly income up to this level. Instead, they are only able to keep a monthly Personal Needs Allowance. The amount varies based on one’s state, but is approximately $30 – $200 / month. Furthermore, married applicants with a non-applicant spouse may be able to transfer a portion of their income to their non-applicant spouse as a Spousal Income Allowance, also called a Monthly Maintenance Needs Allowance.