Benefits

By the Retiree Report Editorial Team · Updated 2026-07-05 · 7 min read

This article is general information, not medical advice. Talk with a licensed clinician before making any decision about your care.

Medicaid and nursing home care in 2026: what you keep, what you lose, and the five-year rule

If a nursing home stay is on the horizon for you or a parent, here’s the number that matters most: Medicare pays for almost none of it. Medicaid is the program that covers long-term custodial care in this country, and to qualify, a single applicant in most states can hold no more than $2,000 in countable assets. That threshold, the five-year look-back on gifts, and the rules that shield a healthy spouse are what this piece walks through.

Why doesn’t Medicare cover the nursing home?

People are often stunned by this one. Medicare covers doctors, hospitals, and short rehab stays — but according to Medicare.gov, it generally does not pay for long-term custodial care, the day-to-day help with bathing, dressing, and eating that a nursing home mostly provides.

There is one narrow exception. After a qualifying hospital stay, Medicare Part A can cover up to 100 days of skilled nursing care, and even then your share climbs sharply after day 20 (we cover the details in our guide to the skilled nursing 100-day rule). Once that window closes, the bill is yours. With a semi-private nursing home room running well past $100,000 a year in much of the country, most families face a hard choice: pay out of pocket, lean on a long-term care insurance policy, or turn to Medicaid.

Medicaid is the one that pays 100% of qualifying nursing home costs — but only after you’ve spent down to its limits.

The 2026 asset limit and what “countable” means

In most states, a single person applying for Nursing Home Medicaid in 2026 can keep just $2,000 in countable assets. A few states run higher: California, for instance, has moved away from an asset test entirely, and New York and Illinois use figures well above the $2,000 floor. Check your own state, because these limits genuinely differ.

Not everything counts, and that distinction saves families real money. Countable assets are things like checking and savings, stocks, and a second property. Exempt assets — the ones Medicaid ignores — typically include your home (within an equity limit, more on that below), one vehicle, personal belongings, and a prepaid funeral. AARP notes that spending down doesn’t have to mean throwing money away; approved moves include paying off debt, making home modifications, prepaying a funeral, and buying a car.

Your home gets special treatment while you intend to return to it or a spouse still lives there. But equity above a state ceiling can disqualify you. For 2025, the most recent confirmed figures, that home equity limit ran from $730,000 in some states up to $1,097,000 in others; the 2026 figures are indexed slightly higher. And a change is coming: under the 2025 federal budget law (H.R. 1), a hard national cap of $1 million on exempt home equity takes effect in 2028, with no state allowed to exceed it.

What is the five-year look-back period?

This is the rule that trips people up, so read it slowly. When you apply for Nursing Home Medicaid, the agency reviews your finances for the 60 months — five years — right before your application date. Any assets you gave away or sold for less than fair market value during that window get flagged.

The penalty isn’t a fine. It’s a stretch of time during which Medicaid won’t pay, even though you now qualify on paper. The state takes the total you transferred, divides it by the average monthly cost of nursing home care in your area, and that’s roughly how many months you wait. Hand your daughter $90,000 two years before applying, in a state where care averages $9,000 a month, and you could be looking at about ten months of ineligibility — starting when you’re already broke and in the home. Ouch.

A handful of states differ. California has historically used a shorter 30-month look-back and, as of 2026, is phasing the transfer penalty out for nursing home applicants. Almost everywhere else, AARP confirms the five-year standard applies. The practical takeaway is blunt: gifts to grandkids, tithes, even generous holiday checks can come back to haunt an application. Planning years ahead — ideally with an elder law attorney — is the only clean way around it.

How much does the healthy spouse get to keep?

Here is where the rules turn humane. When only one spouse needs care, Congress didn’t want the other left destitute, so it built the spousal impoverishment protections back in 1988. KFF explains that these rules shield a slice of the couple’s income and assets for the spouse who remains at home — the “community spouse.”

Two figures do the heavy lifting. The Community Spouse Resource Allowance (CSRA) lets the at-home spouse keep a chunk of the couple’s savings on top of the applicant’s $2,000. In 2026, the federal floor is $32,532 and the ceiling is $162,660. Most states let the community spouse keep half the couple’s combined countable assets, bounded by those two numbers — though some states simply grant the full maximum.

Income is protected separately through the Monthly Maintenance Needs Allowance (MMMNA). If the at-home spouse’s own income falls short, some of the nursing home spouse’s income can be shifted over to reach a monthly floor. Effective July 2026, that minimum is $2,705 a month in the 48 contiguous states and D.C. (Alaska and Hawaii run higher), and the maximum a community spouse can be allotted is $4,066.50 a month.

The spouse in the facility, meanwhile, keeps only a small personal needs allowance — usually between $30 and $200 a month, depending on the state — with the rest of their income going toward the cost of care.

What to do before you apply

Don’t wait for a crisis to learn these rules. Because the look-back reaches back five years, the smartest planning happens long before anyone needs a bed. Sit down with an elder law attorney or an accredited benefits counselor who knows your state’s exact figures, since asset limits, look-back length, and spousal allowances all vary at the state line.

If a nursing home stay is near-term, focus on legitimate spend-down rather than gifting — paying off the mortgage, updating the house, buying a reliable car, and settling debts all reduce countable assets without triggering a penalty. It’s also worth weighing whether coverage you already have fits; our look at whether long-term care insurance is still worth it may help you decide. To find your state’s Medicaid office and the local State Health Insurance Assistance Program (SHIP) for free counseling, start at the official state directory linked from Medicare.gov. This article is general information, not legal or financial advice — your own numbers deserve a professional’s eyes.

What to remember

Medicare won’t cover a long nursing home stay, so Medicaid becomes the payer for most families — and it demands you spend down to about $2,000 in countable assets first. The five-year look-back means gifts you made years ago can delay your coverage, so plan early and lean on legitimate spend-down rather than giving money away. And if you’re married, the spousal impoverishment rules exist precisely so the healthy spouse isn’t left with nothing; in 2026 they can keep up to $162,660 in assets and draw a monthly income allowance up to $4,066.50.