Can You Have a Credit Card While on Medicaid?

Medicaid is a public health insurance program for individuals and families with limited income and resources. Jointly funded by federal and state governments, each state administers its own guidelines. Eligibility is primarily determined by financial criteria, including income and asset limits, leading to questions about how credit cards interact with these rules. Understanding these nuances is important for maintaining eligibility.

Credit Cards and Medicaid Eligibility

Simply possessing a credit card does not impact Medicaid eligibility. Medicaid focuses on an applicant’s actual income and countable assets, not on available lines of credit. A credit card represents a line of credit or potential debt, not an existing financial asset. Therefore, the credit limit is not a countable resource.

Medicaid eligibility is based on what an individual owns and the income they receive. The ability to borrow money via a credit card does not equate to having cash or an investment readily converted to cash. The focus remains on tangible financial resources for healthcare expenses, which a credit card balance does not represent.

How Medicaid Evaluates Financial Resources

Medicaid eligibility is determined by evaluating an applicant’s financial resources, categorized into income and countable assets. Federal law specifies individuals can qualify if their household income falls below a certain percentage of the federal poverty level, often around 138% for most adults in states that expanded Medicaid. This income is typically calculated using Modified Adjusted Gross Income (MAGI) for many groups, considering taxable income and tax filing relationships.

Countable assets include liquid resources and properties convertible to cash for care. Common examples include cash, funds in checking and savings accounts, certificates of deposit, stocks, bonds, and certain investment accounts. Non-exempt real estate, beyond a primary residence, and vehicles in excess of one exempt vehicle are also counted.

Conversely, certain assets are exempt and do not count towards Medicaid’s asset limits. These include the primary residence (up to a certain equity limit), one vehicle, household goods, personal effects like clothing and jewelry, and some prepaid funeral and burial arrangements. The asset limit for an individual is commonly around $2,000, though this varies by state, with some allowing higher amounts and California having no asset limit as of 2024.

Managing Credit Card Use with Medicaid Rules

While owning a credit card does not affect Medicaid eligibility, specific actions involving credit cards can impact an individual’s financial standing and eligibility. Medicaid scrutinizes financial transactions during a look-back period, typically 60 months (five years), to identify asset transfers or undisclosed resources. This review ensures applicants have not improperly reduced assets to qualify for benefits.

Taking a cash advance from a credit card could become a countable asset if funds are withdrawn and held, rather than immediately spent on allowable expenses. If a large cash advance remains in a bank account, it could push an individual over the asset limit, jeopardizing Medicaid eligibility. Medicaid views cash as a countable asset, so any significant cash influx must be managed carefully.

Credit card rewards, such as cash back or gift cards, might be considered income or an asset depending on their nature and amount. If rewards are received as direct cash payments or accumulate to a substantial value, they could count towards income or asset limits. Smaller, non-cash rewards typically do not pose an issue.

Using a credit card to purchase a large, non-exempt asset, such as a second vehicle or certain investments, could affect eligibility. The concern is not the credit card transaction itself, but acquiring a countable asset that could exceed Medicaid’s resource limits. For instance, buying a second car with a credit card results in owning an additional vehicle, often a countable asset.

Medicaid agencies may examine spending patterns, especially if they suggest undisclosed income or asset transfers. Paying off legitimate debts, including credit card balances, is generally permissible and can be a strategy for spending down excess assets; however, unusual or high spending could trigger scrutiny. Maintaining clear records of all credit card transactions, particularly for significant purchases or cash advances, can help demonstrate funds were used for the Medicaid recipient’s benefit and align with program rules.