Life & Income Protection
How Medicaid Spend-Down Works for Nursing Home Care
Federal asset-limit and spousal-protection figures for 2026, cross-confirmed via elder-law and Medicaid-planning sources, updated August 2026.
Medicaid's asset limit for nursing home eligibility has not moved in decades. Here is what actually counts, and how spousal protections keep a healthy spouse from losing everything.
Data sourced from Medicaid Planning Assistance, ElderLawAnswers, California DHCS
The asset limit is lower than most people expect
In most states, an individual applying for Medicaid coverage of nursing home care must have no more than $2,000 in countable assets. This figure is a federal default carried over from the SSI resource standard and has not been raised in decades, it is not adjusted for inflation the way several other Medicaid figures are.
For most middle-class households, reaching that limit means spending down savings, investments, and other non-exempt assets before Medicaid coverage begins.
A home is typically exempt from the asset count while a spouse or dependent lives there, but only up to a home equity limit, $752,000 to $1,130,000 depending on the state for 2026. Equity above that threshold does count as a resource, which matters most in high-value housing markets.
What "spend down" actually means
Spending down does not mean simply giving assets away. It means legitimately reducing countable assets through allowed expenses: paying off existing debt, making necessary home modifications for accessibility, prepaying funeral and burial expenses up to allowed limits, or paying directly for care that is already needed.
Done this way, the money is spent on something of genuine value to the applicant rather than transferred away for less than it is worth.
Transfers for less than fair market value, gifts to family members, for example, made within the 5-year lookback period used in most states are reviewed when you apply.
A transfer inside that window creates a penalty period of ineligibility, calculated by dividing the transferred amount by the state's average monthly nursing home cost, not a flat dollar-for-dollar penalty, but often still a meaningful delay in coverage.
Protecting a spouse who stays at home
Federal spousal impoverishment rules exist to prevent a healthy spouse from being forced down to the same $2,000 limit as the spouse applying for care. The Community Spouse Resource Allowance protects between $32,532 and $162,660 in countable assets for the at-home spouse, with each state setting its own figure within that federal range, and this range adjusts annually.
The applying spouse's own assets still generally need to come down to the individual limit, but the protection exists specifically so one spouse needing care does not financially devastate the other.
California is a notable, and currently shifting, exception
California eliminated its Medi-Cal asset test entirely between January 2024 and the end of 2025, then reinstated a limit on January 1, 2026 at $130,000 individual and $195,000 for a couple, both well above the federal default used elsewhere, along with a shorter 2.5-year lookback period rather than the standard 5 years.
A further reduction to $21,000 individual and $31,000 for a couple is currently scheduled for July 2027. Given how recently and how much these figures have moved, California residents should confirm current status directly rather than relying on any older article, including this one, without a recency check.
Frequently asked questions
What counts as a countable asset for Medicaid?
Generally, cash, bank accounts, investments, and any additional property beyond a set of exemptions. Common exemptions include your primary residence up to a home equity limit ($752,000 to $1,130,000 depending on the state, for 2026), one vehicle, personal belongings, and typically a small designated burial fund.
Retirement accounts are treated differently depending on the state and whether they're in payout status, so they need to be checked individually rather than assumed exempt.
What happens if I give away assets before applying?
Any transfer for less than fair market value made within the lookback window, 5 years in most states, is reviewed when you apply. A transfer inside that window creates a penalty period of Medicaid ineligibility, calculated by dividing the transferred amount by your state's average monthly nursing home cost, not a flat dollar penalty. Gifting assets shortly before needing care rarely works the way people expect it to.
Why does my spouse not have to become impoverished too?
Federal spousal impoverishment rules exist specifically to prevent that outcome. The Community Spouse Resource Allowance lets a non-applying spouse keep between $32,532 and $162,660 in countable assets, with each state picking its own figure within that federal range, on top of the couple's other exemptions.
The applying spouse still generally needs to get down to the individual limit, but the at-home spouse is protected separately.
Why is California so different from other states?
California eliminated its Medi-Cal asset test entirely from January 2024 through the end of 2025, then reinstated a limit effective January 1, 2026, at $130,000 individual and $195,000 for a couple, due to state budget constraints, well above the federal default limit most other states use.
A further reduction to $21,000 individual and $31,000 for a couple is currently scheduled for July 2027. This is one of the fastest-moving figures covered on this site, confirm current status directly if you're in California.