How VA Benefits Count for Medicaid

Veterans and surviving spouses who apply for Long-Term Care Medicaid often already receive VA benefits: disability compensation, a VA pension, Aid and Attendance, or payments for unusual medical expenses. Each is treated differently by Medicaid. Some count fully as income, some are excluded, and one special rule reduces the pension of certain nursing home residents to $90 a month. Getting this right affects both eligibility and the amount the person pays toward care each month. This guide explains the rules in plain language.

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

Two different questions

When Medicaid looks at VA benefits, it asks two separate questions:

Eligibility: does the benefit count as income when deciding whether the person qualifies (for example, against an income cap)?
Post-eligibility (the patient liability): once the person qualifies, does the benefit count toward the monthly amount they must pay the nursing home or toward waiver services?

The answers can be different, and states have some room in how they apply the post-eligibility rules.

Type of VA benefit and how Medicaid generally treats it

VA benefit	Eligibility (income test)	Patient liability
VA disability compensation (service-connected)	Generally counted as unearned income	Generally counted
Basic VA pension	Generally counted as unearned income	Generally counted, except as noted for the $90 pension
Aid and Attendance or Housebound allowance	Generally excluded	Treatment varies; often excluded, but some states count it
Payments based on unusual (unreimbursed) medical expenses	Generally excluded	Treatment varies
$90 reduced pension for nursing home residents with no dependents	Excluded	Protected; cannot be used to reduce Medicaid’s payment
Dependency and Indemnity Compensation (DIC) for survivors	Generally counted	Generally counted
VA caregiver stipend paid to a family caregiver	Not the veteran’s income	Not the veteran’s income
VA payments for a child (augmented benefits)	Generally counted as the dependent’s income, not the veteran’s	Varies

These general rules come from the federal SSI income rules most states use for older and disabled applicants. Your state guide may describe local differences.

The $90 pension rule

Under federal law, when a veteran or surviving spouse who receives a VA pension has no spouse or dependent child and is in a nursing home where Medicaid is paying for care, the VA reduces the pension to $90 a month. The reduction generally applies from the month after Medicaid starts covering the care, and it applies to the pension (including any Aid and Attendance amount), not to disability compensation.

That $90 is protected by law. It does not count as income for Medicaid and cannot be taken for the nursing home bill. It is in addition to the regular Medicaid personal needs allowance, so a veteran in this situation may keep both.

What families should do:

Tell the VA when Medicaid begins paying for nursing home care. If the VA keeps paying the full pension, it will later recover the overpayment.
Keep the $90 separate, or track it, so it is not mistakenly counted toward the asset limit or the patient liability.

Veterans with a spouse or dependent child are not subject to the $90 reduction. Their pension continues, and how much of it counts toward the patient liability depends on the type of payment and the state’s rules.

Disability compensation

VA disability compensation is paid for service-connected conditions regardless of income. For Medicaid, it is generally counted as unearned income for both eligibility and the patient liability. In income-cap states, it can push a veteran over the cap, making a Miller trust necessary. There is no $90 reduction for compensation.

Aid and Attendance and unusual medical expenses

For Medicaid eligibility, the Aid and Attendance and Housebound amounts are generally excluded, as are VA payments that are based on unusual medical expenses, under the federal income rules. This matters most in income-cap states: a veteran whose basic pension plus Social Security is under the cap may stay under it even though the total VA payment, including Aid and Attendance, is higher.

For the patient liability, treatment is less uniform. Some states exclude these amounts entirely; others count part or all of them. Because the amounts can be several hundred dollars a month, it is worth checking how your state treats them and reviewing the patient liability notice carefully.

Married veterans

When a veteran in a nursing home has a spouse at home:

the pension is not reduced to $90;
Medicaid’s spousal impoverishment rules apply, including the spousal income allowance;
part of the veteran’s income, possibly including VA benefits, may be allocated to the spouse at home;
VA benefits paid in the spouse’s own name are the spouse’s income.

VA benefits and the asset limit

VA payments are income in the month received. Money left over at the start of the next month generally becomes an asset and counts toward Medicaid’s asset limit. A large VA back payment (for example, after a claim is approved retroactively) is generally income in the month received and an asset after that, although some retroactive benefit payments are excluded as assets for a limited period. Plan how to use back payments so they do not push the person over the limit. See One-time income.

Do I have to apply for VA benefits?

Medicaid generally requires applicants to apply for other benefits they may be entitled to, such as pensions and annuities. Some states specifically ask whether an applicant has applied for VA benefits. See Do I have to apply for VA benefits before Medicaid?.

Example: a single veteran

Harold, 85, is a widowed Korean War veteran. He receives $1,900 a month in Social Security and a VA pension with Aid and Attendance. He enters a nursing home and applies for Medicaid. For eligibility, his Aid and Attendance amount is excluded. Once Medicaid approves him, the VA reduces his pension to $90 a month, which he keeps. His patient liability is based on his Social Security minus the personal needs allowance and his health insurance premiums.

Example: a married veteran

Frank, 80, has a 50 percent service-connected disability rating and receives compensation. His wife lives at home. He enters a nursing home. His compensation counts as income for Medicaid. His wife’s own income is low, so part of Frank’s income, including part of his compensation, goes to her as a spousal income allowance. The rest, minus his personal needs allowance and insurance premiums, is his patient liability.

Common mistakes

Not reporting the start of Medicaid to the VA, leading to a large VA overpayment later.
Counting Aid and Attendance as income for eligibility, causing a wrongful denial in an income-cap state.
Letting the $90 build up in an account so it pushes the person over the asset limit.
Overlooking a VA back payment that arrives during the Medicaid application.
Assuming compensation is excluded; it generally is not.

Paperwork to gather

When applying for Medicaid, provide the VA’s most recent award letter showing each part of the benefit separately: basic pension, Aid and Attendance or Housebound amount, any medical expense adjustment, compensation and dependency amounts. If the letter does not break out the amounts, ask the VA for one that does. The caseworker needs these figures to apply the exclusions correctly. Also provide:

the VA’s notice reducing the pension to $90, once it arrives;
any notice of back pay, with the dates it covers;
proof of who the VA considers dependents, if any.

Getting experienced help

VA benefits interact with Medicaid in ways that are easy to get wrong, and errors affect both eligibility and the monthly patient liability. A Certified Medicaid Planner can check how the state will count each payment and review the patient liability calculation. VA claims should be handled by an accredited representative; veterans service officers help at no cost. As a rough guide, hourly help ranges from about $150 to $600, and help with a Medicaid application from about $500 to $6,000.

Key terms

Unearned income: income not from work, such as Social Security, pensions and VA benefits.
Post-eligibility treatment of income: the calculation of how much a Medicaid recipient pays toward care after they qualify.
Unusual medical expenses (UME): the VA’s term for the unreimbursed medical costs that increase a pension; VA payments based on them are generally excluded for Medicaid eligibility.
Augmented benefit: the extra VA amount paid because of a dependent.
$90 pension: the reduced pension for a Medicaid nursing home resident with no spouse or dependent child.

Frequently asked questions

Does an Aid and Attendance pension count as income for Medicaid? For eligibility, generally not. For the patient liability, it depends on the state. See Does an Aid and Attendance pension count as income for Medicaid?.

Can the nursing home take my $90? No. It is protected.

Does disability compensation get reduced in a nursing home? No, the $90 rule applies to the pension, not compensation.

What if I receive both compensation and a pension? The VA generally pays whichever is greater. The type of benefit you receive determines how Medicaid treats it.

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