How Medicaid really works for long-term care, and how families in New Jersey and Pennsylvania can plan smart, avoid common mistakes, and get the support their loved ones need.
When someone you love begins needing help with daily activities or requires memory care, the emotional strain is often compounded by one tough reality, long-term care is expensive. For many families, especially in New Jersey and Pennsylvania, Medicaid is the only way to afford the type of care their loved one needs without draining everything they’ve worked for.
But Medicaid is complex. The rules vary by state, the application process is demanding, and misinformation is everywhere. This guide breaks it all down so you can understand how Medicaid really works for senior care, who qualifies, what it covers, and how to protect your family’s assets along the way.
What Is Medicaid, and How Is It Different from Medicare?
First, let’s clear up the confusion. Medicare is a federal health insurance program for people 65+ and individuals with certain disabilities. It covers hospital visits, doctor appointments, and short-term rehabilitation, but it does not cover long-term custodial care in a nursing home, memory care unit, or assisted living.
Medicaid is different. It’s a joint federal and state program that provides health coverage for people with low income, and it’s the only public program that covers long-term care, including nursing homes, in-home care, and in some states, assisted living and memory care.
In short, when families can’t afford long-term care out of pocket and Medicare falls short, Medicaid steps in, if you qualify.
Who Qualifies for Medicaid for Senior Care?
Medicaid eligibility is based on two things: income and assets. These limits vary by state, but they’re strict, and the details matter.
In New Jersey, adults aged 19 to 64 may qualify for general Medicaid with an income up to 138% of the federal poverty level. For long-term care coverage specifically, income and asset limits are lower. In 2021, an individual could not exceed $2,382 in monthly income, and only $2,000 in countable assets.
In Pennsylvania, the income limit for long-term care Medicaid is based on 300% of the Federal Benefit Rate, or about $2,901/month in 2025. Asset limits are usually $2,000 for an individual, though Pennsylvania allows a $6,000 resource disregard in some cases.
For both states, Medicaid will also look back five years to check for asset transfers. If they find you gave away money or property to qualify, they can impose a penalty period where you’re ineligible, even if you meet all other criteria.
What Care Does Medicaid Actually Cover?
The answer depends on where you live. In New Jersey, Medicaid may cover assisted living and memory care under special programs called Home and Community-Based Services (HCBS) waivers. These allow eligible seniors to receive care outside of nursing homes, but availability is limited, and there’s often a waitlist.
In Pennsylvania, Medicaid long-term care only covers skilled nursing facilities. Assisted living and memory care communities are not eligible for reimbursement. However, in-home care, adult day programs, and some non-institutional services may be covered through waiver programs.
Across both states, Medicaid typically covers:
- Nursing homes
- Home care services
- Medical equipment
- Therapy (physical, speech, occupational)
- Transportation to medical appointments
- Adult day care
- Case management
Families caring for a loved one with Alzheimer’s or another type of dementia should know that Medicaid can, and often does, help pay for care. But it may take planning and persistence to get there.
What Are Medicaid Waivers?
Waivers are special Medicaid programs that allow states to use Medicaid funds for care in settings like your home or an assisted living community, rather than requiring a move to a nursing facility. These programs are a lifeline for families trying to keep a loved one with dementia out of institutional care for as long as possible.
Services covered under waivers may include:
- Help with activities of daily living (like bathing, dressing, toileting)
- Respite care
- Home modifications
- Meals and transportation
- Support for family caregivers
Each state has its own waiver programs. In Pennsylvania, the Community HealthChoices waiver is one of the largest. In New Jersey, NJ FamilyCare oversees multiple waiver programs. But again, slots are limited. Planning early helps avoid delays.
Income, Asset Limits, and the Look-Back Period
To qualify for Medicaid, most individuals must have less than $2,000 in countable assets. That includes checking and savings accounts, investment accounts, and real estate that’s not your primary home. However, some assets are considered exempt, your home (if you live in it), one vehicle, personal belongings, and irrevocable burial trusts.
If you’re over the limit, Medicaid expects you to “spend down” your assets on care until you meet the requirements. But there are smart, legal ways to protect your assets without spending everything.
Common planning tools include:
- Medicaid Asset Protection Trusts
- Life estate arrangements for your home
- Irrevocable annuities
- Strategic gifting (done more than five years before applying)
- The caregiver child exemption (if an adult child lived with you and provided care)
The five-year look-back period is critical. Any transfers or gifts made during this window can trigger a penalty period where you’re disqualified from receiving Medicaid, even if you otherwise qualify. This is where having professional help is essential.
How to Apply for Medicaid in NJ and PA
In New Jersey, applications go through NJFamilyCare. You can apply online, by phone, or through your County Welfare Agency.
In Pennsylvania, applications go through the COMPASS system or your County Assistance Office.
You’ll need to provide extensive documentation, including:
- Income verification (Social Security, pensions, etc.)
- Asset statements (bank accounts, retirement accounts)
- Proof of citizenship
- Property details
- Health insurance information
- Legal documents like power of attorney or living will
The review process typically takes 30 to 90 days. If your application is denied, you have 60 days to appeal.
Medicaid and Senior Living Facilities
Not all facilities accept Medicaid, and even those that do may limit the number of Medicaid residents they take. In Pennsylvania, where assisted living and memory care are not covered, families may need to consider a move to a Medicaid-approved nursing facility if funds run out. In New Jersey, assisted living options with Medicaid waivers exist, but competition is high.
Choosing a facility that accepts Medicaid and matches your loved one’s needs is complicated. You’ll need to think long-term, because Medicaid status can affect your ability to stay in a particular building if ownership or funding changes.
What About Spousal Protections?
If one spouse needs care and the other is healthy and living at home, Medicaid offers protections for the "community spouse." These rules are often misunderstood.
The healthy spouse may be allowed to keep up to $157,920 in assets and $2,555–$3,948 in monthly income in 2025, depending on the state. In many cases, couples are told they must spend down half their assets, which is not true. Proper planning with someone who understands spousal allowances is essential.
Final Thoughts: Get Help Before It’s Urgent
Medicaid can be a lifeline for families, especially those caring for a loved one with dementia. But it’s not easy to navigate. The rules are complicated. The paperwork is intense. And the cost of a misstep can be measured in tens of thousands of dollars.
At Care Connect, we help families understand how Medicaid fits into their bigger care plan. Whether you need help with the application process, want to explore asset protection strategies, or simply need to know what’s even possible in your state, we’re here to help you take the next step with clarity and confidence.
Want help making sense of Medicaid eligibility, asset planning, or long-term care options?
Let’s talk. No pressure. Just answers.