How do different states count VA pension toward Medicaid eligibility and how might that change with the 2026 COLA?
Executive summary
Most states treat the Basic or Survivors portion of a VA pension as countable income for Medicaid eligibility, while the Aid & Attendance and Housebound supplements are frequently excluded—creating state-by-state patchworks that can flip eligibility for veterans and surviving spouses when VA pension amounts rise; the 2026 COLA of roughly 2.8% will increase VA pension payments (and thus the portion some states count), which may push some veterans over Medicaid income thresholds depending on the state’s rules and benefit thresholds [1] [2] [3] [4].
1. How states generally treat VA pensions for Medicaid: the headline
Federal rules allow veterans to receive both VA pension and Medicaid, but “most states count the Basic portion of a VA Pension toward Medicaid’s income limit,” which means that the core pension payment can make an otherwise-eligible person ineligible for Medicaid long-term care in many jurisdictions [1]. Multiple counseling resources note that while the Basic/Survivors Pension may be counted, the extra Aid & Attendance and Housebound allowances are often treated differently and in many states are not counted toward Medicaid income limits [2] [5].
2. State variations and policy levers that change the math
States have a variety of policy tools—Optional State Supplementation (OSS), family supplementation rules, and differing spousal income/asset allowances—that materially affect whether a veteran’s VA pension counts and how much it matters for eligibility: some states provide OSS to help pay assisted living costs, some allow family supplementation without counting it as the beneficiary’s income, and spousal rules such as the Community Spouse Resource Allowance alter asset counting for institutional Medicaid applicants [1]. These mechanisms create a checkerboard of outcomes: two veterans with identical VA pension checks could face opposite Medicaid eligibility outcomes depending on where they live [1] [5].
3. The 2026 COLA: what it does to VA payments and why that matters for Medicaid
The 2026 COLA was announced at approximately 2.8%, raising VA compensation and pension amounts effective in the COLA cycle—meaning pension checks and related benefits are modestly larger starting with the 2026 rate [3] [4] [6]. Because states that count the Basic pension use actual income in Medicaid means tests, even a modest COLA can tip marginal cases: a veteran whose Basic pension after the COLA nudges past a state’s income limit could lose Medicaid eligibility for nursing-home or waiver services in states that count that portion [1] [2]. Public guidance confirms the COLA applies across compensation, pension, and related VA payments and thus will increase amounts that feed into state income calculations where those portions are counted [4] [7].
4. What this means in practice — concrete dynamics and trade-offs
Practically, veterans and planners face recurring trade-offs: VA pension (often better for in-home or assisted living costs) versus Medicaid (generally preferable for the high cost of nursing home care), and the COLA shifts the arithmetic without changing eligibility rules themselves [2]. Asset protections like the CSRA still govern spousal resource allowances for institutional Medicaid applicants, but those protections do not apply to ABD Medicaid, where both spouses’ incomes and assets may be counted—so an across-the-board pension increase interacts with these separate shields differently in each program [1].
5. Limits of available reporting and where uncertainty remains
Reporting documents the broad pattern—most states count Basic pension, A&A/Housebound often excluded, and a 2.8% COLA increases VA payments—but the sources do not enumerate a state-by-state statutory table showing precisely which states exclude A&A or how each state’s income thresholds will align with the new 2026 pension amounts; therefore it is not possible from the provided material to say which exact states will see the most Medicaid eligibility churn after the COLA without consulting individual state Medicaid policies and the finalized 2026 MAPR tables [1] [2] [8].
6. Practical next steps implied by the facts
Given the modest but concrete 2026 increase to VA pensions, the prudent policy implication is that veterans, surviving spouses, and planners should re-run Medicaid eligibility projections under the 2026 pension MAPR in the context of their specific state’s rules—because the COLA changes the income input used by many states and could flip eligibility for expensive long-term care coverage, the decision to use VA pension income versus seeking Medicaid merits immediate, state-specific review [3] [8] [2].