A spouse's cognitive decline often unfolds slowly, then all at once. The moment a family faces the reality of nursing home care, the financial anxiety isn't far behind. Nursing home costs in many parts of the country now run $8,000 to $10,000 a month or more. At that rate, a couple's lifetime savings can disappear in a few years, leaving the spouse still living at home with very little to survive on.
Medicaid is the primary payer for long-term custodial nursing home care in the United States, not Medicare, which only covers short-term skilled nursing stays. But Medicaid has asset and income limits, which leads to an understandable and extremely common question: do we have to go broke before our spouse can qualify?
The answer is no, but the rules are more complicated than most people expect. It's also worth noting that the "One Big Beautiful Bill Act" passed in 2025 includes Medicaid funding changes that could affect some of these rules over time, so consulting with an elder law attorney while current protections remain in place is especially timely.
Federal rules, state variations
Medicaid is jointly funded and administered by both the federal government and individual states, which means the rules are not uniform nationwide. The federal government sets the outer limits (a minimum and maximum) and each state sets its own standards within that range. Two couples in similar financial situations but living in different states can have very different Medicaid experiences, particularly around how much the healthy spouse is allowed to keep.
To illustrate the stakes and the differences, consider two couples facing the same situation: one in Kentucky, one in Florida.
What the community spouse is allowed to keep
When one spouse enters a nursing home and applies for Medicaid, the program looks at the combined assets of both spouses, regardless of whose name those assets are in. Federal spousal impoverishment rules, first enacted in 1988, were specifically designed to prevent the healthy spouse (called the "community spouse") from being left destitute.
The primary protection is called the Community Spouse Resource Allowance, or CSRA. In 2026, the federal maximum CSRA is $162,660. States can set their limits anywhere between the federal minimum of $32,532 and that maximum.
Here is where Kentucky and Florida differ meaningfully. Kentucky is a "50% state," meaning the community spouse is entitled to keep 50% of the couple's combined countable assets, up to the maximum of $162,660. If the couple has $300,000 in countable assets, the community spouse keeps $150,000. If they have $400,000, the community spouse keeps $162,660 (because 50% would exceed the cap). The nursing home spouse must spend down their share to $2,000 before Medicaid pays.
Florida, by contrast, is a "100% state." The community spouse can keep all of the couple's assets up to $162,660, not just 50%. For a couple with $200,000 in countable assets, a Kentucky community spouse keeps $100,000 while a Florida community spouse keeps $162,660. The distinction can be financially significant, particularly for couples with modest to moderate savings.
Beyond assets, there is also an income protection: the Minimum Monthly Maintenance Needs Allowance (MMMNA). If the community spouse's own monthly income falls short of the federal minimum (currently $2,643.75), they are entitled to receive a portion of the institutionalized spouse's income to make up the difference, up to a maximum of $4,066.50 per month.
What happens to the house?
The family home is generally an exempt asset for Medicaid eligibility purposes as long as the community spouse continues to live there (both Kentucky and Florida use a home equity limit of $752,000 in 2026). The community spouse does not need to sell the home to qualify their spouse for Medicaid. That is worth repeating: selling the family home is not a prerequisite for Medicaid eligibility. There are also specific rules around vehicles and other personal assets.
However, the exemption during eligibility is not the whole story. Both states have Medicaid Estate Recovery Programs (MERP), which allow the state to seek reimbursement for the cost of care from the estate after both spouses have died. In practice this usually means a lien on the home. The recovery typically cannot occur while the community spouse is still living, but families who hope to pass the home to their children should be aware of this risk and plan accordingly, often through trusts or other strategies developed with an elder law attorney.
Should you divorce to qualify for Medicaid?
Some families encounter the idea of a "Medicaid divorce": legally ending the marriage so the healthier spouse can retain more assets outside of Medicaid's reach. In most situations, it is unnecessary. The spousal impoverishment protections described above were designed precisely to prevent a community spouse from having to impoverish themselves, or dissolve their marriage, to access benefits. For couples with moderate assets, the protections are generally adequate. For higher-asset couples, better planning tools exist.
Divorce carries enormous legal, emotional, and estate-planning complexity and can create unintended consequences around Social Security survivor benefits, inheritance rights, and healthcare coverage for the divorcing spouse. It is rarely the right answer, and in most cases the question itself is a sign that proper Medicaid planning simply hasn't happened yet.
Is Medicaid planning ethical?
It can feel like you’re fishing for loopholes when making plans to specifically access federal or state assistance in situations like this, but planning to qualify for Medicaid is not the same as fraud. The rules around asset protection and spousal allowances exist because Congress intentionally created them; lawmakers recognized that without these protections, healthy spouses would be forced into poverty or institutional dependency of their own. Using legal planning tools to preserve assets for a community spouse, or to ensure that modest assets pass to children rather than being entirely consumed by nursing home costs, is consistent with how the program was designed.
That said, there is a meaningful difference between thoughtful planning and aggressive asset-stripping. Medicaid imposes a 60-month look-back period in both Kentucky and Florida. Asset transfers made within those five years that appear designed to circumvent the rules can result in a penalty period during which Medicaid will not pay, potentially leaving a family worse off than if no transfers had been made at all.
How to actually plan for Medicaid eligibility
The most important insight here is timing. Medicaid planning done years before a crisis is far more effective (and less stressful) than scrambling after a diagnosis. Strategies worth discussing with an elder law attorney and financial planner include long-term care insurance (ideally purchased in one's 50s or early 60s, before premiums become prohibitive or health conditions preclude coverage), Medicaid-compliant annuities, irrevocable trusts, and spend-down strategies that use excess assets on legitimate expenses like home modifications, vehicle replacement, or prepaid funeral arrangements.
Medicaid planning is not the centerpiece of a financial plan; it is a contingency within one. A well-constructed plan addresses retirement income, investment strategy, estate planning, and long-term care risk together. Clients who have worked with us to build a diversified, goal-based plan are generally far better positioned to navigate this kind of crisis without a roadmap. For general program information and current eligibility standards, medicaid.gov is the authoritative starting point.
If your financial plan doesn't yet address what happens when one spouse needs long-term care, now is the time to start that conversation. Contact us to explore how your current plan accounts for this risk.