A nursing home does not take your pension or Social Security in the sense of seizing it. But if Medicaid is paying for your stay, federal rules require you to turn over most of your monthly income toward the cost of care each month. You keep a small personal allowance, your health insurance premiums come off the top, and if you have a spouse at home, a separate share of the income is protected for them. Under private pay, no specific income stream is claimed; you simply owe the bill you agreed to when you signed the admission contract.
The confusion usually comes from what happens after someone qualifies for Medicaid. That is where pension checks and Social Security deposits start flowing almost entirely to the facility, and where planning matters most.
How the Share of Cost Works Under Medicaid
Medicaid is the joint federal-state program that covers long-term nursing home care for people with limited income and assets. To qualify as an individual, you generally cannot have more than $2,000 in countable assets, though your home, one vehicle, and certain other property are typically exempt.
Once you’re on Medicaid, the program doesn’t just pay your entire bill. Federal regulations require “post-eligibility treatment of income,” meaning Medicaid calculates how much of your monthly income you must pay the facility before it covers the rest.1eCFR. 42 CFR 435.725 – Post-Eligibility Treatment of Income of Institutionalized Individuals in SSI States Depending on the state, this is called patient liability, share of cost, or applied income. It’s the reason families feel the nursing home is “taking” a resident’s pension and Social Security.
The math is straightforward. Take your total gross monthly income, subtract the deductions Medicaid allows, and the remainder goes to the facility. Medicaid pays the difference between your share and the facility’s Medicaid-approved rate. If a resident receives $2,200 a month in Social Security and pension combined, and their allowable deductions total $200, they owe $2,000 to the facility each month.
What You’re Allowed to Keep
The deductions applied before your share of cost is calculated are where the real protections live. They determine how much money you actually hold onto.
Personal Needs Allowance
Every Medicaid nursing home resident is entitled to a Personal Needs Allowance, a monthly amount reserved for things the facility doesn’t provide: clothing, toiletries, phone service, snacks, reading material. The federal floor is $30 per month.1eCFR. 42 CFR 435.725 – Post-Eligibility Treatment of Income of Institutionalized Individuals in SSI States Most states set their own amount higher, with the majority falling between $50 and $200. A few are more generous, but the allowance is never large. This is money that is unambiguously yours to spend however you choose.
Health Insurance Premiums
If you pay premiums for Medicare Part B, a Medicare supplement, Medicare Part D, or other health insurance, those amounts are deducted from your income before your share of cost is calculated. Medicare Part B premiums alone run over $180 per month for most enrollees, which directly reduces what you owe the facility.
Mandatory Tax Withholding
Taxes withheld from your pension or other income on a mandatory basis are generally deducted before the share-of-cost calculation. Voluntary withholding you elected typically does not count. If you’re having federal or state income tax withheld from a pension payment, check which category it falls into, because only mandatory withholding reduces your patient liability.
What a Spouse at Home Keeps
When one spouse enters a nursing home on Medicaid and the other stays in the community, federal spousal impoverishment rules prevent the at-home spouse from being left with nothing. The protections work on two fronts.
Income Protection
The community spouse is entitled to keep a minimum amount of the couple’s combined monthly income. For 2026, that Minimum Monthly Maintenance Needs Allowance is $2,643.75 in most states. The maximum, which applies when the community spouse has high shelter costs, is $4,066.50.2Centers for Medicare & Medicaid Services. 2026 SSI and Spousal Impoverishment Standards
If the community spouse’s own income falls short of the minimum, a portion of the institutionalized spouse’s pension or Social Security is diverted to close the gap. If the at-home spouse receives $1,200 in Social Security, they can receive up to $1,443.75 from the nursing home resident’s income to reach $2,643.75. That transfer directly reduces the share of cost, so less goes to the facility and more supports the household at home.
Asset Protection
On the asset side, the community spouse can keep a portion of the couple’s combined countable resources. For 2026, the minimum resource allowance is $32,532 and the maximum is $162,660.2Centers for Medicare & Medicaid Services. 2026 SSI and Spousal Impoverishment Standards The exact figure depends on total countable assets when the institutionalized spouse enters the facility. Amounts above the allowance must generally be spent down before Medicaid will cover the stay, but the community spouse’s protected share cannot be touched.
Income Cap States and Miller Trusts
About half of all states impose a hard income cap for Medicaid nursing home eligibility. In 2026, that cap is $2,982 per month, three times the federal SSI benefit rate of $994.3Social Security Administration. SSI Federal Payment Amounts for 2026 If your monthly income exceeds this by even a dollar, you are ineligible in these states unless you set up a Qualified Income Trust, commonly called a Miller Trust.
A Miller Trust is an irrevocable trust that receives the portion of your income above the cap. Because that excess flows into the trust rather than to you, it’s no longer counted for eligibility. The trust then pays the excess toward your nursing home costs. Setting one up usually requires an attorney familiar with Medicaid planning, and it must comply with state-specific requirements. In an income-cap state, this isn’t optional: without the trust, your application will be denied no matter how few assets you have.
When Someone Else Has to Handle the Money
Cognitive decline or other conditions can leave a resident unable to manage their own income. The legal mechanism matters, because different rules govern different money.
For Social Security benefits, the Social Security Administration appoints a representative payee, a person or organization authorized to receive and manage the benefits on the resident’s behalf. A family member, friend, or the facility can serve, but they must apply through SSA using Form SSA-11. Power of attorney or a joint bank account does not substitute; SSA treats these as entirely separate.4Social Security Administration. Frequently Asked Questions for Representative Payees The representative payee must use the benefits for the resident’s current needs, including paying the Medicaid share of cost and setting aside the personal needs allowance.
For pension income and other non-Social-Security funds, a court-appointed guardian or conservator, or an agent under a durable power of attorney signed before incapacity, typically handles the finances. Without advance planning, a family member may need to petition a court for guardianship, adding time and legal cost during an already stressful stretch.
What the Facility Cannot Do With Your Money
Federal law places clear limits on how a nursing home can handle a resident’s funds. These rules apply to every Medicaid-certified facility in the country.
A nursing home cannot require you to deposit personal funds with the facility. If you voluntarily authorize it to hold your money, it must maintain a separate, interest-bearing account for amounts over $50 and provide a full written accounting of every transaction.5Office of the Law Revision Counsel. 42 USC 1396r – Requirements for Nursing Facilities The facility must notify you when your account gets within $200 of the Medicaid asset limit, since exceeding that limit could jeopardize your eligibility. And it cannot charge your personal funds for any item or service Medicaid or Medicare already covers.
A facility also cannot require you to waive your right to Medicaid or Medicare benefits as a condition of admission.5Office of the Law Revision Counsel. 42 USC 1396r – Requirements for Nursing Facilities Contract provisions requiring a set period of private pay before the home will accept Medicaid have been banned under federal law since 1990.
If a payment dispute arises, the facility cannot simply evict you. Federal regulations require at least 30 days’ written notice before any transfer or discharge, and nonpayment is only a valid basis after the facility has given reasonable notice and you have failed to pay or to submit the paperwork needed for Medicaid or Medicare to cover the bill.6eCFR. 42 CFR 483.15 – Admission, Transfer, and Discharge Rights You have the right to appeal through your state’s hearing process before the discharge takes effect.