How Medicaid Eligibility Is Determined: Income, Assets, and Expansion Rules

The Coverage Gap That Leaves Millions Without Insurance

In the twelve states that have not adopted Medicaid expansion as of 2024—including Texas, Florida, Georgia, and Alabama—adults without dependent children can earn too much for traditional Medicaid but too little for marketplace subsidies. The Affordable Care Act's marketplace subsidies start at 100% of the federal poverty level (FPL), which was $15,060 for a single person in 2024. But in non-expansion states, Medicaid for childless adults often has income limits near zero. The result: an estimated 1.9 million low-income adults fall into this coverage gap, qualifying for neither program. Understanding where the income thresholds actually sit is the first step to knowing whether you or someone you know might qualify for Medicaid.

Income Limits: Expansion vs. Non-Expansion States

The Affordable Care Act allowed states to expand Medicaid eligibility to all adults under 138% of the FPL. Forty states and the District of Columbia have done so. The other twelve states set their own, often much lower, thresholds—and frequently restrict eligibility to specific categories: pregnant women, children, parents with minor children, people with disabilities, and seniors.

The 138% figure reflects a 5% income disregard built into the ACA's MAGI methodology, so the statutory cap is technically 133% FPL, but the practical threshold after the disregard is 138%.

MAGI Methodology: What Income Counts

For most Medicaid beneficiaries, eligibility is determined using Modified Adjusted Gross Income (MAGI), the same measure used for ACA marketplace plans. MAGI-based Medicaid became the standard under the ACA, replacing older income counting rules that varied wildly by state.

• MAGI includes wages, salaries, tips, self-employment income, unemployment benefits, Social Security benefits (if taxable), and alimony received (pre-2019 divorce agreements)
• MAGI excludes child support received, gifts, veterans' benefits, workers' compensation, and Supplemental Security Income (SSI)
• Lump-sum lottery winnings count in the month received but not in subsequent months
• For most MAGI-based categories, there is no asset test—having a car, savings account, or investment account does not disqualify you

The shift to MAGI simplified eligibility determination considerably. Prior to the ACA, caseworkers counted different income types using categorical rules that varied by state and coverage group, creating significant barriers to enrollment.

Groups with Non-MAGI Rules

MAGI does not apply to all Medicaid groups. Seniors and people with disabilities covered under Supplemental Security Income (SSI)-related Medicaid categories use older income counting methodologies and remain subject to asset tests.

• SSI-related Medicaid: asset limit of $2,000 for individuals, $3,000 for couples in most states (some states are more generous)
• Exempt assets typically include the primary home, one vehicle, burial funds up to $1,500, and retirement accounts in some states
• Medicaid Buy-In programs for workers with disabilities use different income and asset rules
• Children's eligibility categories (CHIP) use slightly higher income thresholds than adult Medicaid

Long-Term Care Medicaid: A Separate System

Nursing home care and home- and community-based waiver services operate under Medicaid's long-term care rules—the most complex, and most consequential, part of the program. Unlike acute care Medicaid, long-term care Medicaid has strict asset tests even in expansion states.

The five-year look-back rule is particularly significant for estate planning. Medicaid reviews all asset transfers made within 60 months of application. Gifts to children, transfers to trusts, or property conveyances made in that window can trigger a penalty period during which Medicaid will not pay for nursing home care. The penalty period equals the value of transferred assets divided by the average monthly nursing home cost in the state.

The Application Process and Retroactive Coverage

Medicaid applications can be submitted online through healthcare.gov (which forwards to state agencies), directly to state Medicaid agencies, or through hospitals and community health centers that employ enrollment assisters. Eligibility determinations must be completed within 45 days for most applications, or 90 days for disability-based applications.

Retroactive coverage is a critical feature: Medicaid can cover medical bills from the three calendar months prior to the application month, provided the applicant met eligibility criteria during those months. For uninsured patients who incur large hospital bills and then apply for Medicaid, this retroactive window can eliminate tens of thousands of dollars in medical debt.

• Medicaid renewal (redetermination) happens annually; during the COVID-19 continuous enrollment period, renewals were paused—a process called "unwinding" began in April 2023
• States must make Medicaid eligibility decisions within 90 days and cannot terminate coverage without notice
• Federally Qualified Health Centers serve patients regardless of ability to pay and assist with Medicaid applications

This article is for informational purposes only. Medicaid rules vary significantly by state and change frequently. Consult a qualified professional or your state Medicaid agency for guidance specific to your situation.