Medicaid is a lifeline for millions of Americans — covering nursing home care, in-home health services, and other long-term care costs that can otherwise wipe out a family's savings. But getting approved isn't automatic, and a surprising number of people are denied coverage for reasons they didn't expect.
If you or a parent is approaching the point of needing long-term care, knowing what can get you disqualified from Medicaid is just as important as knowing the rules for qualifying. Here's a plain-English breakdown of the most common reasons people are denied Medicaid — and what you can do to protect your family.
Your income is too high
Medicaid is income-based, and the limits are strict. For most standard Medicaid programs, adults must earn no more than 138% of the Federal Poverty Level — roughly $20,783 per year for a single individual in 2025. For long-term care Medicaid (like nursing home coverage), the rules differ by state and program.
In New York, for example, the monthly income limit for a single Medicaid applicant in 2026 is $1,836, according to updated figures from the New York State Department of Health. If your income exceeds that, you may have to "spend down" the excess on medical expenses to reach the threshold — which is its own planning challenge.
Nearly all income sources count: wages, Social Security, pensions, annuity payments, and even IRA distributions. Don't assume a modest pension puts you safely under the limit.
You have too many countable assets
For long-term care Medicaid, New York limits a single applicant to $32,532 in countable resources as of 2026. In many other states, the limit is as low as $2,000. These are strict caps, and exceeding them — even by a small amount — will get an application denied.
Not everything counts, though. Your primary home (if you intend to return to it and the equity is within state limits), one vehicle, personal belongings, and prepaid burial arrangements are generally exempt. But savings accounts, stocks, bonds, and second properties? Those count.
Planning around these limits — legally and strategically — is exactly what Medicaid planning attorneys help families do before a crisis hits.
The 5-year look-back rule: gifting assets doesn't help
This one catches a lot of families off guard. You might think that giving money or property to your children before applying for Medicaid will help you qualify faster. It won't. Medicaid looks back 60 months (five years) at every financial transaction you've made.
If the state finds that you transferred assets for less than fair market value during that window — whether it was a cash gift to a grandchild, selling a car to a family member below value, or adding a child's name to a deed — it will impose a penalty period. That's a stretch of time during which Medicaid won't pay for your care, calculated by dividing the value of the improper transfer by the average monthly cost of nursing home care in your state.
The penalty doesn't start on the date of the transfer. It starts when you apply and would otherwise be eligible — meaning you're on the hook for care costs with no coverage, right when you need it most.
The good news: there are strategies that can protect assets outside the look-back window. A Medicaid Asset Protection Trust (MAPT), for instance, removes assets from your countable estate — but only if it's established at least five years before you apply. Working with an experienced Medicaid planning attorney is the most reliable way to navigate this without triggering penalties.
Citizenship and residency requirements
Medicaid is available to U.S. citizens and certain "qualified non-citizens," such as lawful permanent residents — but even green card holders typically must wait five years after obtaining qualified status before they can enroll. Refugees, asylees, and veterans are generally exempt from this waiting period.
Undocumented immigrants are not eligible for full Medicaid coverage. They can receive Emergency Medicaid for acute conditions, but that's a narrow exception.
You also have to be a resident of the state where you're applying. You can't apply for Medicaid in New York while living in Florida. And according to an August 2025 initiative by the Centers for Medicare & Medicaid Services (CMS), states are now actively re-verifying citizenship and immigration status for current enrollees — so this requirement is being enforced more aggressively than before.
Failing to report changes or provide documentation
Medicaid isn't a one-time approval. You're required to report changes in income, household size, and resources — usually within 10 days. Failing to do so can trigger a termination of benefits or an overpayment recovery.
Applications can also be denied simply for incomplete paperwork: missing bank statements, no proof of income, or failure to provide documentation of a prior asset transfer. Since Medicaid programs have access to IRS records and Social Security data, undisclosed income — an inheritance, a lump sum, a new account — will come to light and can result in an investigation.
This is one reason detailed record keeping matters so much, particularly for families managing a loved one's finances.
New work requirements starting in 2027
This one is on the horizon, but worth knowing about now. Under a federal law passed in 2025 (the "One Big Beautiful Bill Act"), most non-disabled Medicaid enrollees between ages 19 and 64 will be required to meet community engagement requirements — at least 80 hours per month of work, volunteering, job training, or similar activities — beginning January 1, 2027, according to reporting by GoodRx and confirmed by ElderLawAnswers. Failure to meet those requirements will result in loss of coverage.
Exemptions exist for those with disabilities, caregivers, and others in certain circumstances. But if you or a family member currently receives Medicaid based on income alone, it's worth understanding how this change could affect your coverage.
Planning ahead matters more than you think
Medicaid's rules are layered and, frankly, punishing if you walk in unprepared. The biggest mistakes families make — giving assets to children, waiting too long to plan, assuming a home sale won't count — often happen years before anyone applies. By then, the look-back window is already open.
The families who come out of this process with their assets intact and their coverage secured are usually the ones who planned five or more years in advance, often with professional guidance. At Alatsas Law Firm, attorney Ted Alatsas has spent nearly 30 years helping Brooklyn, Queens, and Staten Island families structure their finances so Medicaid works for them — not against them.
If you're starting to think about long-term care for a parent or for yourself, the best time to look into this is now — before a disqualifying event makes your options much narrower. A consultation can help you understand exactly where you stand and what steps, if any, need to be taken to protect your family's future.
