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By Gail Glockhoff-Long
GolderCare Solutions

Myths of Medicaid

The amount of misinformation surrounding Medicaid is amazing. Everyone has heard a story — the state taking Aunt Mary’s house when her husband went to the nursing home, or Harry spending the couple down to $2,000 before his wife could qualify for Nursing Home Medicaid.

Problem one: most of these stories aren’t completely accurate.

Problem two: Medicaid has a massive rulebook — and the agencies paid by the state aren’t allowed to tell you all
the options.

Let’s separate Myths from Medicaid Reality.

Myth #1: “The state will take my house if we apply for Medicaid.”

Reality:

• No — the state will not kick Mary out of her house. If the home is owned jointly by Roy and Mary, and Roy applies for Medicaid, the state may place a lien for the amount it pays toward his care. That lien simply sits there until the house is sold. When it sells, the state collects its share from the proceeds, and Mary keeps the rest.
• No — you do not have to sell the house to pay for care. The home is an exempt asset while a spouse lives there.
• Rules differ for couples and singles.

Options:

• If a son or daughter moved in to care for Roy before nursing-home placement, you may be able to gift the home to that caregiver child.
• Transfer ownership into Mary’s name alone so Roy no longer has an ownership interest.

Myth #2: “I was told to cash out all my life insurance before applying for Medicaid.”

Reality:

It depends. The right approach varies depending on the policy type and its cash value. With the right strategy, it may be possible to preserve some or all of the death benefit.

Options:

• Term insurance has no cash value and doesn’t count against you.
• A family member may be able to buy the policy for its surrender value.
• You may be able to take a loan against the policy to reduce its cash value while keeping part of the death benefit. Those loan proceeds can then be used strategically.
• Review your beneficiaries. Leaving proceeds directly to someone on public benefits can disqualify them from those programs.

Myth #3: “I have to leave everything to my spouse in my Will.”

Reality:

No. If your spouse is, or may become, a Medicaid recipient, leaving assets directly to them can disqualify them and force another spend-down and re-application. The same problem applies to inheritances left directly to children or grandchildren who receive public benefits.

Option:

Leave funds to a properly drafted Special Needs Trust instead. This allows money to be used for “extras” not covered by Medicaid while keeping the person eligible for benefits.

Myth #4: “My Revocable Living Trust will protect me from Medicaid.”

Reality:

No. A Revocable Living Trust (RLT) avoids probate but offers no Medicaid protection. Everything in an RLT remains countable because it’s still in your name.

Option:

A properly drafted, aged, and managed Income-Only Trust can help protect assets when structured in advance under current rules.

Myth #5: “Medicaid pays for assisted living or memory care.”

Reality:

No Medicaid pays for custodial nursing-home care, not assisted living. Most memory-care communities in the Quad Cities are licensed as assisted living and don’t accept Medicaid. Both Iowa and Illinois have limited Medicaid-supported  assisted-living programs, but options are scarce in this area.

Myth #6: “My neighbor had to spend their life savings and income before her husband could qualify.”

Reality:

Each state allows the “community spouse” — the one still living at home — to keep certain assets and income.

• Asset Allowance: For 2025, up to $157,920 in Iowa and $135,648 in Illinois.
• Income Contribution: The nursing-home spouse generally pays their income (minus a small personal-needs allowance) toward their care.
• Monthly Maintenance Needs Allowance (MMMNA): For 2025, both states allow the community spouse to keep income up to $3,948 per month.

If the community spouse income is lower, part of the nursing-home spouse’s income can be diverted to bring them up to that level.

Myth #7: “You can do this on your own.”

Reality:

Technically, yes — a person can apply for nursing-home-level Medicaid on their own. But that “do-it-yourself” approach has quietly become one of the newest and most dangerous myths.

In both Illinois and Iowa, there are no longer local Medicaid offices where you can sit down with someone for help. Everything is handled online or through call centers. The rules have become stricter, the interpretations tighter, and the overall tone of the system more adversarial than ever before.

Today’s reality:

• The published rules don’t tell the whole story.
• Key interpretations aren’t publicly available.
• A single misstep can cost months of private-pay expenses before coverage begins.
• Unless you work in this field every day, you simply can’t see all the traps. What was once a do-it-yourself possibility has become a do-it-yourself risk.

The Bottom Line

Medicaid is a complex and constantly shifting system. Rules — and the way each state interprets and enforces them — change regularly. Both Illinois and Iowa continue to tighten oversight in response to federal funding cuts. Add to that the misinformation often shared by professionals who should know better, and it’s easy to see why families get lost.
If you’re facing long-term-care decisions for a loved one, don’t do it alone.

Now more than ever, it’s essential to seek complete and accurate guidance from an independent Medicaid expert who works with these rules every day.

GolderCare Solutions Unlimited, LLC
Independent care advocacy for seniors, the disabled, and their families.
📞 (309) 764-2273  🌐 www.goldercare.com

Gail is a Benefits and Insurance Specialist with GolderCare Solutions, helping families navigate the complexities of aging, care, insurance, placement, and public benefits.