Learn About Medicaid Income Limits and Rules

Understanding Medicaid Income Limits Across States

Medicaid income limits determine whether someone's household earnings fall within the range that makes them potentially relevant for the program. These limits vary significantly from state to state because each state sets its own rules within federal guidelines. What counts as too much income in one state might be acceptable in another state next door.

Income limits are typically expressed as a percentage of the federal poverty level. For example, some states set their limit at 138% of the federal poverty level, while others use 100%, 150%, or different percentages depending on the specific program category. In 2024, the federal poverty level for a single person is approximately $15,060 per year, and for a family of four, it's around $31,200 per year. A state using 138% of poverty level would allow higher incomes than a state using 100%.

Several factors explain why income limits differ between states. States that expanded Medicaid under the Affordable Care Act (ACA) generally have higher income limits than states that did not expand. Expanded states often cover adults earning up to 138% of federal poverty level. Non-expansion states may only cover parents, children, pregnant women, or people with disabilities using their own income limits, which can be significantly lower.

The program also has different income limit categories depending on who you are:

• Children often have higher income limits than adults in the same state
• Pregnant women may have different limits than non-pregnant adults
• People over 65 may fall under different rules
• People with disabilities sometimes have separate income thresholds

Practical takeaway: Check your specific state's Medicaid website to learn the exact income limits that apply to your situation. Income limits change annually, so what was true last year may differ this year. Write down your household's monthly gross income and compare it to your state's current limits for your category.

How Income Is Counted in Medicaid Determinations

Understanding what counts as "income" for Medicaid purposes is crucial because not all money counts the same way. Medicaid has specific rules about which types of income are counted and how they are measured. This is different from how the IRS counts income for tax purposes, which can confuse people trying to understand whether they might be relevant for the program.

Generally, Medicaid counts earned income, which is money you make from working. This includes wages, salary, tips, and net income from self-employment. If you work and receive a paycheck, that money counts as income. If you run a business, your net profit (earnings minus business expenses) is counted. Medicaid also counts unearned income, which includes unemployment benefits, Social Security benefits, pensions, rental income, and interest from savings accounts.

Some types of income are excluded or not counted at all. These exclusions vary slightly by state and situation, but commonly excluded income includes:

• Supplemental Security Income (SSI) in some circumstances
• The first $65 per month plus one-half of remaining earned income (for certain categories)
• Child support payments in some states
• Grants and scholarships used for education expenses
• Food assistance (SNAP) benefits
• Home energy assistance
• Certain types of life insurance proceeds

Income counting also depends on the time period used. Most states count monthly gross income (earnings before taxes). However, some calculations use annual income. There's also the concept of "prospective" versus "retrospective" income determination. Prospective means Medicaid looks at expected future income to decide if someone might be relevant. Retrospective means they look at what someone actually earned in a past period. Most states use prospective income.

Practical takeaway: Gather your pay stubs for the last two months and list all income sources (wages, benefits, child support, etc.). Contact your state Medicaid office to ask which types of income are excluded in your situation, then calculate your countable income to compare against limits.

Household Size and Income Calculation Rules

Medicaid defines "household" differently than you might expect, and this definition directly affects income limits. The household size used for Medicaid is not always the same as your tax household or the people living in your home. Understanding household composition rules is essential because a larger household has a higher income limit than a smaller household.

Generally, a Medicaid household includes the person applying, their spouse (if married), and their children under age 21 (in most cases). However, the rules become complicated when you have step-parents, step-siblings, or other family configurations. In some states, parents' income counts toward an adult child's application if the child is under a certain age. In other states, adult children's income doesn't count toward a parent's application at all.

The rules also depend on whether you are applying as an adult, a child, a pregnant woman, or a parent. For example, when a child applies for Medicaid, many states count the parents' income even if the parents themselves don't intend to use Medicaid. This is called "parental deeming." The parents' income is "deemed" to be part of the child's household income. However, most states allow an income deduction for the parent's household members, meaning you subtract an amount for each other person the parent supports.

Some household situations create special considerations:

• Unmarried partners' income is typically not counted toward each other
• Adult children's income usually doesn't count toward elderly parents' applications
• Foster children may have special rules where their income doesn't count
• Sponsored immigrants have different household counting rules
• Separated spouses may have their income counted differently depending on state

The income limit itself also increases with household size. A household of one might have a limit of $1,255 per month, while a household of four might have a limit of $4,273 per month. States publish these numbers in grids or tables that show the limit for each household size.

Practical takeaway: List all household members according to Medicaid's definition for your state (not just who lives with you). Then locate your state's income limit table and find the limit for your household size. If any family member's income should be included, add it to determine total household countable income.

Resource Limits and Asset Rules

While income limits determine whether you might be relevant based on earnings, resource limits set boundaries on how much in assets or savings a person can have. Resources and income are different things. You can have low income but high resources, or high income but low resources. Both income and resources affect Medicaid relevancy in most states.

Resource limits vary by state and category. In many states, the resource limit is $2,000 for an individual or $3,000 for a couple. However, some states have higher limits, lower limits, or no resource limits at all, particularly for certain categories like pregnant women or children. It's important to check what your specific state allows.

Many types of assets are not counted as resources. These non-countable resources include:

• Your primary residence (the home you live in)
• One vehicle (usually), depending on value and state rules
• Household goods and personal items
• Irrevocable burial accounts or prepaid burial contracts (up to certain amounts)
• Life insurance policies with low face values
• Retirement accounts like IRAs, 401(k)s, and pension accounts (in many states)
• ABLE accounts for people with disabilities
• Education savings like 529 plans (with some limitations)

Resources that do count typically include liquid assets like cash, savings accounts, checking accounts, stocks, bonds, and money market accounts. Real property other than your primary home counts as a resource. Vehicles beyond the allowed one or two count. Life insurance policies with higher face values may count.

Some states have simplified this by eliminating resource limits entirely for certain categories, particularly for children and pregnant women. This is called "