Pensions, Social Security and Annuity Payments

For most people applying for Long-Term Care Medicaid, Social Security and pensions are the main sources of income. They are counted at their gross amount, before deductions for Medicare premiums, taxes, health insurance or garnishments. They affect whether a person qualifies and, once approved, how much the person pays toward care each month. This guide explains how these payments are counted and what can be deducted.

Figures change periodically. Double-check current amounts before relying on them.

Gross income is the starting point

Medicaid generally counts the gross monthly amount of:

Social Security retirement, survivor and disability benefits;
private, union, government and military pensions;
railroad retirement;
VA benefits (with some exceptions);
annuity payments;
required minimum distributions and other regular payments from retirement accounts, in many states.

The gross amount is the amount before anything is taken out. For example, a Social Security statement may show $1,800, with $202.90 taken for Medicare Part B, leaving a deposit of $1,597.10. Medicaid counts $1,800.

How it counts

Social Security benefits count as unearned income. The 2026 cost-of-living adjustment raised benefits by 2.8%, which can push some people over an income cap they were under before.

Medicare premiums

Medicare Part B premiums ($202.90 a month in 2026 for most people) are often paid by Medicaid once a person is eligible, through a Medicare Savings Program. When that happens, the person’s Social Security deposit rises. The gross amount stays the same.

Survivor benefits

A widow or widower may receive a survivor benefit instead of their own retirement benefit. Only one is paid in full. The amount actually paid counts.

SSDI

Social Security Disability Insurance counts as unearned income, the same as retirement benefits.

Pensions

Gross amount

Pensions count at the gross amount, before federal and state tax withholding, union dues or health insurance premiums.

Survivor pensions

A survivor pension paid to a spouse at home belongs to that spouse, not to the applicant.

Lump-sum vs. monthly

A lump-sum pension payout counts as income in the month received and, if kept, as an asset the next month. A person who can choose between a lump sum and monthly payments should get advice before choosing.

Pensions as assets

A pension that pays a monthly benefit is income, not an asset, in most cases. Some pensions allow a lump-sum withdrawal, and states may count the withdrawable value as an asset. See Retirement accounts.

Annuity payments

Annuity payments count as income. A properly structured Medicaid-compliant annuity can convert assets into income, which is sometimes a planning strategy. Federal law has strict rules: the state must be named as a remainder beneficiary in most cases, and the annuity must be irrevocable, non-assignable, actuarially sound and pay in equal amounts. Annuities that do not meet these rules may be treated as transfers.

VA benefits

VA benefits are treated in different ways:

VA pension generally counts as income, but the part paid for Aid and Attendance or Housebound status, and the part paid for unreimbursed medical expenses, are excluded from income in most cases.
VA disability compensation generally counts as income.
For a veteran in a Medicaid-paid nursing home with no spouse or dependent child, VA pension is reduced to $90 a month, which is not counted toward the patient liability.

See VA pensions.

Garnishments and deductions

Even if part of a benefit is garnished, for example for a debt or child support, Medicaid usually counts the gross amount. Some court-ordered support payments may be deducted when figuring the patient liability. Ask about the state’s rules.

How these payments affect eligibility

States with an income cap

Many states compare gross monthly income with the $2,982 special income limit (2026). A person with $2,000 in Social Security and $1,100 in pension has $3,100 gross, which is over the cap. In those states, a Qualified Income Trust (Miller trust) is used. See Miller trusts.

Medically needy states

States with a medically needy pathway let people qualify by spending income on medical costs. See Income spend-down.

How these payments affect the patient liability

Once eligible, a nursing home resident’s income goes toward care, after deductions:

Personal needs allowance: at least $30 a month under federal law, more in most states.
Income allowance for the spouse at home, if any.
Family allowance for dependent family members.
Health insurance premiums the person pays, such as Medigap or Part D.
Some uncovered medical costs.

The rest is the patient liability. See Patient liability.

Married couples: whose income is it?

The “name on the check” rule applies: income paid only to one spouse belongs to that spouse. Income paid to both is split in half. If the spouse at home’s own pension and Social Security are below the MMMNA, the applicant can pay the spouse an allowance. See Raising the spousal allowances.

A worked example

George, 86, enters a nursing home in a state with a $2,982 income cap and a $50 personal needs allowance. His income:

Social Security: $2,100 gross ($1,897.10 after Part B);
union pension: $950 gross ($860 after tax withholding);
total gross: $3,050.

George is over the cap by $68. He sets up a Miller trust and deposits enough income into it each month. Once on Medicaid, Medicaid pays his Part B premium, so it is not deducted. His patient liability is about $3,050 – $50 = $3,000, minus any health insurance premiums he still pays.

Common questions

Does Medicaid take my Social Security? Medicaid does not take benefits, but a nursing home resident on Medicaid pays most of their income, including Social Security, to the nursing home each month.

What if my spouse needs my pension to live? The spouse at home may be entitled to part of it as an income allowance.

Do taxes withheld reduce my countable income? Usually not. Ask whether you can reduce withholding, since your taxable income may fall once your medical costs are counted.

Does my retirement account count as income or an asset? It depends on the state and whether payments have started. See Retirement accounts.

Getting advice

A Certified Medicaid Planner (CMP) can make sure every allowed deduction is claimed and that the spouse at home receives every dollar the law allows.

Retirement account distributions

Many people have IRAs or 401(k)s in addition to Social Security and pensions. How these are treated depends on the state:

Some states count the account balance as an asset, and distributions are simply moving money from one pocket to another.
Other states treat an account in payout status, meaning regular distributions such as required minimum distributions have begun, as income only, not as an asset.

In the second group of states, the regular payments count as income each month. Lump-sum withdrawals beyond the regular payments may be treated differently. See Retirement accounts.

Income that is not counted

Some payments are excluded from income in most states:

the VA Aid and Attendance and Housebound parts of a VA pension, and payments for unreimbursed medical expenses;
federal tax refunds;
loans that must be repaid;
reimbursements for expenses, such as an insurance payment for a medical bill;
certain payments under federal law, such as some reparations payments.

If a payment does not fit the usual categories, request the state’s full list of counted and excluded income.

Reporting changes

Each January, Social Security, pensions and many annuities change. Medicare premiums also change. The state usually updates the patient liability on its own for Social Security changes, but pension and annuity changes may need to be reported. A person who does not report an increase may face an overpayment claim later.

Checking the numbers

The person’s Social Security award letter, each pension’s annual statement and annuity contracts show the gross figures. Keep these with the Medicaid file, and check the patient liability notice each year against them. Mistakes happen, and a fair hearing can correct them.

Deposits into a joint account

Many couples have Social Security and pensions deposited into a joint checking account. That does not change whose income it is. A benefit paid in one spouse’s name remains that spouse’s income for Medicaid, even when it lands in a joint account. What does change is the asset picture: money that builds up in the account is countable for the applicant and, at the snapshot date, for the couple. Keep the account balance in mind each month.

When income is too high but not enough

The hardest position is a person whose income is over the state’s cap but too low to pay a nursing home privately. The Miller trust exists for exactly this. In states without one, the medically needy pathway plays the same role. A planner can show which applies.

Last updated for 2026. General information only, not legal or financial advice. Medicaid Answers is a free educational resource published by Medicaid Answers Foundation.