You are here: Home Government ... Medicaid 101 How To Qualify ... Summary
Information about all aspects of finances affected by a serious health condition. Includes income sources such as work, investments, and private and government disability programs, and expenses such as medical bills, and how to deal with financial problems.
Information about all aspects of health care from choosing a doctor and treatment, staying safe in a hospital, to end of life care. Includes how to obtain, choose and maximize health insurance policies.
Answers to your practical questions such as how to travel safely despite your health condition, how to avoid getting infected by a pet, and what to say or not say to an insurance company.


In order to qualify under Medicaid income and asset eligibility limits, it is possible transfer assets and income to someone else.

Transfer in general:

  • If the medical care you need is not what Medicaid refers to as "custodial" or "institutional" (such as long term care in a nursing home), in most states you can transfer income and/or assets and  mmediately qualify for Medicaid.
  • If the care you need is "custodial" (Long Term Care) such as nursing home care, there are penalties for transferring assets or income within a "look back" period (a period of time prior to the need for nursing home care).
  • To learn about custodial care, click here.

There are some transfers of assets that do not result in a transfer penalty. For other transfers of assets for the purpose of becoming eligible for Medicaid coverage of long term care costs, Medicaid imposes a penalty. Rules with respect to penalties are different for transfers before and after February 8, 2006. States have the option of applying the penalty to all Medicaid applicants.

Nursing Home Costs: If you want Medicaid to cover nursing home costs, you have to follow transfer rules very precisely.

Undue Hardship: Federal law allows for an exemption from the transfer penalty if it would cause "undue hardship." Undue hardship exists when enforcing the penalty period for asset transfers would deprive the Medicaid applicant of:

  • Medical care necessary to maintain the applicant's health or life OR
  • Food, clothing, shelter or necessities of life.

While the exemption exists, it is advisable not to rely on it. There is never a way to predict how a decision will be made, or how long a positive decision can take.

Moving Out/Divorce: If the household consists of two people who together have income or assets over the Medicaid limit, people have been known to move out of the house in order for one of the two people to qualify for Medicaid. Some have even been known to get a divorce.

For more information, see:

NOTE: To get an idea of the current cost of different types of care in the state in which you live, go to offsite link

To Learn More

Transfers Of Assets That Do Not Result In A Transfer Penalty

Transfers of assets for less than full market value that do not result in a transfer penalty include:

  • Any assets transferred more than 60 months before applying for Medicaid.
  • Transfer of a home to any of the following people:
    • A spouse.
    • A child who is under age 21 or blind or totally and permanently disabled.
    • A brother or sister ("sibling") who has an equity interest in the home and has lived in the home for the past twelve months.
    • A child who was living in the home for at least twenty-four months and whose care postponed confinement in an institution.
  • Assets which were transferred:
    • To or from the individual's spouse or to someone else for the sole benefit of the individual's spouse.
    • To a trust established solely for the benefit of the individual's child.
  • Those assets where there is a satisfactory showing made to the State that one of the following occurred:
    • The individual intended to dispose of the assets either at fair market value, or for other valuable consideration.
    • The assets were transferred exclusively for a purpose other than to qualify for Medicaid.
    • All assets transferred for less than fair market value have been returned to the individual.
    • That the denial of eligibility would work an undue hardship.

NOTE: It is generally permitted to transfer money for such purposes as paying your rent in advance (say for one year) or prepaying medical expenses.

To Learn More

The Medicaid Penalty

The penalty that Medicaid imposes for people is to treat the person as if he or she still owns the assets. Medicaid then calculates a period of months during which it will not cover care in a nursing home. If you are subjected to a penalty, you have to use your own assets or hope that friends or family will pay until the penalty period is over.

The penalty calculation works in the following manner:

  • Medicaid determines how much of the transferred asset would have to be used before there would be Medicaid eligibility. For example, George gave his daughter Shirley his savings of $62,000 which were all of his assets. Medicaid in George's state has an asset limit of $2,000. Therefore, $60,000 ($62,000 - $2,000 = $60,000) is the amount George would have had to spend down if he hadn't given it away
  • Next Medicaid determines the average monthly cost of nursing homes in the applicant's area. For example, in George's area, Medicaid says that a nursing home charge averages $3,000 per month.
  • Medicaid then determines how long George must wait from the date of transfer for Medicaid eligibility by dividing the average monthly cost into the ineligible amount. In George case, $60,000 divided by $3,000 equals 20. George must wait twenty months before becoming eligible for Medicaid.

Another way to look at the penalty is to say that for every (dollar amount equal to the average cost of a month in a nursing home in your area) transferred, you are not eligible for Medicaid nursing home benefits for one month. There is no limit on the amount of months you can be ineligible.

The clock for counting the time that eligibility is delayed due to a transfer of assets starts running on the date of the sale not the date of application for Medicaid. In our example, if George gave Shirley the money 35 months before he entered a home, a penalty would be imposed because the transfer occurred during the 36 months. However, the penalty period has already passed since it only lasted 20 months so he is now eligible for Medicaid to pay for his nursing home care. If he gives his daughter the money the month before going into a nursing home, he would have to wait 20 months from the date of the gift before he is eligible for Medicaid to pay.

The Medicaid Penalty For Transfers Made Before February 8, 2006

If you transferred assets for less than fair market value before February 8, 2006, you will be penalized for the period of time equal to the amount of time in a nursing home that what you gave away would have paid. The penalty starts on the first of the month after the transfer.

For example, you gave $ 50,000 to your son January 1, 2006, and want to check into a nursing home next week. In the state in which you live, Medicaid says a nursing home costs $5,000 a month. That means you are penalized and Medicaid will not pay for a nursing home for 10 months ($50,000 divided by $5,000 a month = 10 months. Since 10 months already passed since you made the transfer, the penalty period is over. You can check into the nursing home.

The Medicaid Penalty For Transfers Made After February 8, 2006

You can transfer assets for less than fair market value, but you will be penalized for a period of time equal to the amount of time in a nursing home that what you gave away would have paid. The penalty starts on the later of:

  • The first day of the first month during or after which assets have been transferred OR
  • The date on which you are eligible for Medicaid and would otherwise be receiving institutional care based on an approved application except for the application of the penalty period. This is interpreted to mean the penalty starts when you are in the nursing home. Using the above example, if you gave $50,000 to your son today, and want to check into a nursing home, look at how much Medicaid says it costs to stay in a nursing home in your area for one month. Let's say that is $5,000 a month. That means Medicaid will penalize you and not pay for a nursing home for 10 months ($50,000 divided by $5,000 a month = 10 months) from the date you are eligible to apply for Medicaid.
  • States are forbidden to round down penalty periods. The penalty period would include a fractional part of a month calculated in days.
  • If there are multiple transfers, the state may count all transfers as one transfer.

Because of the rules applicable to transfers after February 8, 2006, the old "rule of halves" planning technique is no longer applicable. Under the Rule of Halves, people were advised to give away half of their assets and keep the other half. The half they kept was used to pay for nursing home care during the penalty period. This technique permitted to pass 50% of their assets to loved ones.

Keep in mind that if you give away you assets:

  • You won't have money for emergencies or for a treatment that may not be covered by Medicaid.
  • You don't know if your relationship will stay the same with the person to whom you gave the assets and informally depended upon to help out.
  • There is no assurance that the person to whom you gave money will not lose it gambling or through other endeavors, to creditors, in bankruptcy -- or even in a divorce.

NOTE: If you made a transfer before February 8, 2006, the look back rules are different.

To Learn More

More Information

Medicaid: Long Term Care

Moving Out/Divorce

If the household has too large an income, and there are two people in the household,  people who are married have been known to move and live in separate households (generally nearby with a friend or relative).  If the person who moves out is not part of the household, his or her income is not counted toward the Medicaid eligibility limit.

In some states, a divorce may be required to obtain eligibility.

It stands to reason that a tactic like this can have an enormous impact on the family. Two people living apart will naturally see less of each other - and of the children if any. Likely there are other personal disabvantages to this scenario as well.