Medicaid Coverage and Credit Card Debt

In our Elder Law practice at Davidow, Davidow, Siegel & Stern, questions often arise about how government assistance programs such as Medicaid might interact with existing personal liabilities such as credit card debt. The short answer is that there is generally no interaction. Having significant credit card debt is not an impediment to obtaining Medicaid coverage.

First, here’s a little background on Medicaid and nursing home coverage. Medicaid is a joint federal and state program providing certain health care benefits to low-income individuals and families. Of particular interest to seniors, Medicaid pays for nursing home care in all 50 states and the District of Columbia for persons who require that level of care and meet the financial eligibility requirements. 

Eligibility criteria are developed by the states, and in states like New York, income limits to qualify are extremely low. For 2025, the income limit for a single person is $1,800 per month, and the asset limit is $32,396. For a married couple who are both applying for Medicaid, the income limit is $2,433 per month, and the asset limit is $43,781. For those who meet eligibility requirements, Medicaid will pay for nursing home care, including room and board, on an ongoing, long-term basis as long as the eligibility criteria continue to be met. In many cases, this is for the remainder of one’s life. 

Note that Medicaid also covers certain in-home services for people who are eligible. Eligibility for personal care or home attendant services is based on a number of factors, including the level of care that the person needs. People who are found to need a higher level of care are likely to be deemed ineligible for in-home services and instead directed to a nursing home. The income and asset limits for these in-home services are the same as for institutional nursing care. 

Be aware that Medicaid should not be confused with Medicare, which, in certain cases, will only cover skilled nursing home care, will only pay a portion of the cost, and limits the number of coverage days to a maximum of 100. 

While Medicaid will pay 100% of the cost of nursing home care (including room, meals, and medical supplies), a nursing home resident must contribute nearly all of their income towards these costs. This requirement can result in the depletion of all of the assets that you have spent years accumulating. But there are a number of legal strategies to become eligible for coverage if you have substantial assets. Your Long Island elder law attorney will help you navigate these legal options, such as Medicaid trusts, so that your assets are not drained if you take advantage of these programs.

Irrevocable Medicaid trusts are a helpful tool for Medicaid planning. As the name suggests, the trust is irrevocable and cannot be altered by the person who creates it or anyone else. The trust can be used to move ownership of large assets like a family home into the trust so that it does not count against you for Medicaid eligibility purposes. The trust can be structured to give you the right to live in the home for the rest of your life and the right to any and all income from the property while you are alive. 

Medicaid and Credit Card Debt 

To get back to the original question – how do your current credit card liabilities interrelate with Medicaid – they do not. Medicaid focuses solely on healthcare access and does not provide a mechanism for credit card debt forgiveness or reduction. Credit card debt is a contractual obligation between the borrower and the lender, separate from healthcare benefits. Therefore, becoming a Medicaid recipient does not lead to the elimination or reduction of credit card debt. 

Having credit card debt does not negatively impact an individual’s ability to qualify for Medicaid. Medicaid eligibility is primarily determined by income levels and the value of countable assets. Credit card debt is considered a liability, not an asset, meaning it does not count towards the asset limits for program qualification. Medicaid asset tests are not a net worth calculation, and focus on an applicant’s available resources, not their outstanding debts. For instance, if an individual has $50,000 in assets and $30,000 in credit card debt, Medicaid views their countable assets as $50,000. 

Debt collectors can still pursue outstanding balances even if an individual is enrolled in Medicaid. However, the practical ability of collectors to recover debt from Medicaid recipients is limited due to various legal protections, including garnishment limitations on government benefits like Social Security payments. Many individuals on Medicaid have very limited income and few significant assets, which can render them “judgment-proof.” This status means that while a creditor might obtain a court judgment, they may be unable to collect the debt because the individual lacks non-exempt income or assets. For those with significant credit card debt who will be using Medicaid benefits to pay for nursing home care, bankruptcy protection may be an option.

Contact Davidow, Davidow, Siegel & Stern, LLP

Medicaid law is extremely complex. If you’re applying for Medicaid benefits, there are a number of reasons why you would want a seasoned elder lawyer by your side throughout the process. The labyrinth of Medicaid eligibility standards is complicated and changes regularly. Medicaid also has significant overlap with a variety of other federal and state laws. Technical and administrative errors by agency personnel often result in the denial of applications that should be approved.  

Here at Davidow, Davidow, Siegel & Stern, we will help you develop a comprehensive plan to protect your assets and prepare for the future. Any decision to transfer assets to a Medicaid trust also has implications for other aspects of your estate plan, including your will and taxes. We have helped thousands of people with the financial and emotional burdens associated with aging, and we can help your family, too. Contact us today.