Stimulus Checks and Medicaid: A Comprehensive Guide to Counting (or Not Counting) Your Relief

The COVID-19 pandemic brought unprecedented financial challenges to millions, prompting the U.S. government to issue several rounds of Economic Impact Payments (EIPs), commonly known as stimulus checks. For individuals and families relying on vital social safety nets like Medicaid, these lump-sum payments raised a critical question: Are stimulus checks considered income for Medicaid eligibility, and could receiving one jeopardize essential healthcare coverage?

This article delves deep into this complex yet crucial issue, providing clarity on how stimulus checks were treated by Medicaid programs, distinguishing between income and resources, and offering practical advice for beneficiaries.

The Short Answer: Generally, No, But There’s a Nuance

Let’s cut straight to the chase: For the vast majority of Medicaid recipients, stimulus checks were NOT considered countable income for eligibility purposes. This was a deliberate decision by federal authorities to ensure that these much-needed financial lifelines did not inadvertently disqualify people from essential healthcare.

However, the nuance lies in the distinction between "income" and "resources" (or assets), and how long you held onto the funds. While the check itself wasn’t treated as income, if you saved the money, it could potentially become a countable resource after a certain period, depending on your specific Medicaid program and state rules.

Understanding Stimulus Checks: More Than Just "Income"

To grasp why stimulus checks weren’t counted as income, it’s essential to understand their nature. The Economic Impact Payments issued under the CARES Act (2020), the Consolidated Appropriations Act (2021), and the American Rescue Plan Act (2021) were technically advance refundable tax credits.

This distinction is key:

• Not Earned Income: They weren’t wages, salaries, self-employment income, or any form of earned income.
• Not Unearned Income: They weren’t regular benefits like Social Security, pensions, or unemployment benefits.
• Tax Credit Nature: Because they were advance tax credits, the IRS did not consider them taxable income, and by extension, they were generally excluded from various federal and state benefit calculations.

The intent behind these payments was to provide immediate financial relief to individuals and families during a national emergency, not to serve as a form of regular income. Counting them as such would have directly contradicted this purpose by creating a barrier to other essential assistance.

Medicaid Fundamentals: Income vs. Resources

Before we dive deeper into the stimulus check specifics, let’s briefly review how Medicaid typically assesses eligibility. Medicaid programs vary significantly by state, but they generally look at two primary financial components:

1. Income: This refers to money received on a regular or recurring basis. It includes wages, salaries, Social Security benefits, pensions, unemployment, and other forms of regular payments. Medicaid has income limits that recipients must fall below to qualify.
2. Resources (Assets): This refers to things you own that have monetary value and could be converted to cash. Examples include money in bank accounts, investments, real estate (other than your primary home), and vehicles (above a certain value). Some Medicaid programs (particularly those for the aged, blind, and disabled) also have asset limits.

The Federal Guidance: Why Stimulus Checks Were Excluded

Recognizing the potential for confusion and negative impact, federal agencies quickly issued guidance to clarify the treatment of stimulus checks.

• IRS Guidance: The Internal Revenue Service (IRS) explicitly stated that Economic Impact Payments were not considered taxable income.
• Social Security Administration (SSA) Guidance: The SSA, which administers programs like Supplemental Security Income (SSI) – often a gateway to Medicaid for low-income seniors and people with disabilities – clarified that stimulus payments were excluded from income for SSI purposes. Importantly, the SSA also stipulated that these payments would not be counted as a resource for 12 months after receipt.
• Centers for Medicare & Medicaid Services (CMS) Guidance: CMS, the federal agency overseeing Medicaid, largely mirrored the SSA’s approach. This meant that for most Medicaid programs, stimulus checks were not treated as income.

This consistent federal stance provided a strong foundation for state Medicaid agencies to follow, preventing widespread disqualifications.

Stimulus Checks and Different Medicaid Programs

The application of the "income vs. resource" rule can vary slightly depending on the specific type of Medicaid program an individual is enrolled in:

1. MAGI-Based Medicaid (Modified Adjusted Gross Income)

• Who it covers: This is the most common type of Medicaid, expanded under the Affordable Care Act (ACA). It primarily covers low-income adults, pregnant women, and children.
• Income Test: Eligibility is based on Modified Adjusted Gross Income (MAGI), which relies heavily on federal tax definitions of income.

• Resource Test: Crucially, MAGI-based Medicaid programs generally do NOT have an asset (resource) test. This means that for the vast majority of people enrolled in this type of Medicaid, saving their stimulus check, even for an extended period, would typically not affect their eligibility.

  Conclusion for MAGI-based Medicaid: Stimulus checks were not counted as income, and because there’s no asset test, saving them also did not impact eligibility. This covered the largest segment of Medicaid beneficiaries.

2. Non-MAGI Medicaid (Aged, Blind, and Disabled – ABD Medicaid)

• Who it covers: This category includes Medicaid for seniors (age 65+), individuals who are blind, and individuals with disabilities. Eligibility for ABD Medicaid is often tied to eligibility for Supplemental Security Income (SSI), or follows similar rules.
• Income Test: These programs have specific income limits, often lower than MAGI limits.

• Resource Test: Unlike MAGI Medicaid, Non-MAGI (ABD) Medicaid programs typically do have asset (resource) limits. This is where the nuance regarding stimulus checks becomes important.

  Conclusion for Non-MAGI Medicaid:

  • Income: Stimulus checks were not counted as income for ABD Medicaid, mirroring the SSI exclusion.

  • Resources: This is where the 12-month exclusion period comes into play. The money received from a stimulus check was disregarded as a countable resource for 12 months from the date of receipt. This meant that beneficiaries had a full year to spend the funds without it impacting their asset limit.

    • After 12 Months: If any portion of the stimulus check remained unspent after 12 months, it could then be counted as a regular resource. If, at that point, the unspent funds, combined with other countable assets, pushed the individual over their state’s resource limit (e.g., typically $2,000 for an individual, $3,000 for a couple for SSI-related programs), it could potentially affect their Medicaid eligibility.

    Example: If an individual on ABD Medicaid received a $1,400 stimulus check and deposited it into their bank account, that $1,400 would not count against their asset limit for 12 months. If, after 12 months, they still had $1,000 of that money in their account, that $1,000 would then become a countable asset. If their total countable assets then exceeded their state’s limit, they could temporarily lose eligibility until their assets were below the threshold.

Why This Distinction Matters

The federal exclusion of stimulus checks from income and the temporary exclusion from resources was crucial for several reasons:

• Preventing "Clawbacks": It prevented a scenario where desperately needed relief money would immediately disqualify individuals from other essential benefits, creating a "clawback" effect.
• Maintaining Healthcare Access: For many, Medicaid is their only access to affordable healthcare. Disqualifying them over a one-time payment would have been counterproductive during a public health crisis.
• Supporting Economic Recovery: Allowing people to use the funds for immediate needs (food, rent, utilities) without fear of losing benefits helped stabilize households and stimulate local economies.

What About Other Benefits?

It’s worth noting that the favorable treatment of stimulus checks often extended to other federal and state benefit programs as well:

• Supplemental Nutrition Assistance Program (SNAP/Food Stamps): Generally, stimulus checks were not counted as income or resources for SNAP eligibility.
• Temporary Assistance for Needy Families (TANF): Most states also excluded stimulus checks from income and resource calculations for TANF.
• Housing Assistance (e.g., Section 8): The treatment varied slightly by program and administering agency, but many housing authorities also disregarded the payments.

The overarching principle was to ensure that the relief payments served their intended purpose without creating unintended negative consequences for vulnerable populations.

Practical Advice for Medicaid Beneficiaries

Even with the clear federal guidance, understanding your specific state’s rules and keeping good records is always advisable:

1. Understand Your Medicaid Program: If you’re unsure whether you’re on MAGI-based or Non-MAGI (ABD) Medicaid, contact your state’s Medicaid agency or a local benefits counselor. This will clarify whether asset limits apply to you.
2. Keep Good Records: Maintain bank statements or other documentation showing when you received the stimulus check and how it was spent. This is especially important if you are on ABD Medicaid and need to track the 12-month exclusion period for resources.
3. Spend Down If Necessary (for ABD Medicaid after 12 months): If you are on ABD Medicaid and find yourself approaching or exceeding the 12-month mark with a significant portion of your stimulus check unspent, consider using the funds for exempt assets or permissible "spend-down" activities that won’t jeopardize your eligibility. Examples include paying off debt, making home repairs, or purchasing necessary medical equipment. Consult with a benefits counselor for personalized advice.
4. Do Not Misrepresent Information: Always be truthful with your Medicaid agency about all income and resources. While stimulus checks were generally excluded, attempting to hide funds can lead to serious penalties.
5. Contact Your Caseworker: If you have any doubts or questions specific to your situation, the best course of action is to contact your state Medicaid agency or your assigned caseworker. They can provide the most accurate and up-to-date information for your circumstances.
6. Seek Legal Aid or Benefits Counseling: Organizations specializing in elder law, disability rights, or public benefits can offer invaluable assistance in navigating complex Medicaid rules.

Conclusion

The question of whether stimulus checks counted as income for Medicaid was a major concern for millions during the pandemic. Fortunately, through clear federal guidance and the nature of the payments as advance tax credits, these vital financial lifelines were overwhelmingly excluded from income calculations for Medicaid eligibility.

While beneficiaries of MAGI-based Medicaid generally had no concerns about asset limits, those on Non-MAGI (Aged, Blind, Disabled) Medicaid needed to be mindful of the 12-month resource exclusion period. By understanding these distinctions and staying informed about their specific state’s rules, Medicaid recipients could utilize their stimulus checks for their intended purpose – providing crucial financial relief – without fear of losing their essential healthcare coverage.