August 28, 2026
4:18 am

What Is a Nursing Facility Level of Care Determination?

A nursing facility level of care determination is the state’s official finding that a person needs the kind and amount of care a nursing home provides — and without it, Medicaid will not pay for nursing facility care and will not open the door to a home and community based services waiver either. It is a clinical and functional finding, made by the state or its contractor, and it is entirely separate from the financial eligibility test.

To keep this concrete, the page follows one household from the first screening call through approval and the first monthly bill: Ruth, 84, widowed, living in her own home, recovering badly from a fall, with about $2,180 a month in Social Security, roughly $19,000 in savings, and a $250,000 universal life policy with about $9,000 of cash value that her late husband bought in 1994. Every figure below traces back to her file. The dollar amounts are illustrative national ranges as of 2026, not quotes, and every one of them must be confirmed with her own state.

There is no single national level of care standard. Each state writes its own criteria and uses its own instrument, which is why a person who qualifies in one state may not in another. Confirm with your state Medicaid agency or Area Agency on Aging. Pine Lake Legacy provides education and a free policy review only and does not determine eligibility or give legal advice.

In This Article

Step One: The Screening, and What It Measures
Step Two: What the Determination Unlocks, and the Two Prices
Step Three: The Financial Test That Runs in Parallel
Step Four: Approval, and the Bill That Arrives Anyway
Terms It Gets Confused With
What Ruth Should Do With the Policy, Honestly
Frequently Asked Questions

What Is a Nursing Facility Level of Care Determination?

Step One: The Screening, and What It Measures

Ruth’s daughter calls the state’s aging and disability intake line. A nurse assessor is scheduled and comes to the house with a state-specific instrument. Some states use a homegrown screening tool; others use an established assessment instrument from the interRAI family or a variant of the federal nursing home assessment.

Whatever the form, it measures three things. Functional dependence, meaning how much hands-on help she needs with activities of daily living: bathing, dressing, toileting, transferring, eating and continence. Skilled needs, meaning nursing or therapy services that require licensed staff. And cognitive and behavioral needs, meaning memory, judgment, wandering and safety.

Most states set the threshold at dependence in roughly two to three activities of daily living, with a separate qualifying pathway for significant cognitive impairment even when physical function is preserved. Ruth needs hands-on help with bathing, dressing and transferring, and she cannot safely manage her own medications. She qualifies on the functional pathway.

Two things her daughter does that matter. She writes down specific incidents with dates, because assessors record what they observe on one visit and a good day misrepresents a bad month. And she asks for the completed instrument and the written determination, both of which she is entitled to request.

Step Two: What the Determination Unlocks, and the Two Prices

Ruth’s approval opens two doors, and the arithmetic is what makes the choice real.

Door one: nursing facility care. National cost-of-care survey ranges as of 2026 put a semi-private room around $9,000 to $11,000 a month, so call it $10,000. On her own money, Ruth’s $19,000 in savings lasts under two months.

Door two: a home and community based services waiver, authorized under section 1915(c) of the Social Security Act, which pays for care at home for people who meet the institutional level of care. Home care aide time has commonly run around $30 to $35 an hour in recent surveys, so five hours a day, seven days a week, is roughly $4,500 to $5,300 a month — a little over half the facility cost, which is precisely the arithmetic that makes states willing to fund waivers.

The catch is capacity. Waivers are capped in most states and interest lists are common, sometimes running months or longer. The level of care determination gets Ruth eligible; it does not get her a slot. Ask two questions the day of approval: is there a waiting list for this waiver, and what is the current average wait? See how waiver programs work.

Step Three: The Financial Test That Runs in Parallel

Level of care is one half. The financial application is the other, and it is where Ruth’s file gets complicated.

The state must generally act on a Medicaid application within 45 days, or up to 90 days where a disability determination is required, under 42 CFR 435.912. Countable resources for a single applicant have commonly been limited to $2,000 in many states, with several states using materially higher figures; Ruth’s state’s current limit must be confirmed, because this is exactly the number that goes stale.

Ruth has about $19,000 in savings and a policy with about $9,000 of cash value. In most states, because the total face value of her life insurance exceeds the small face-value threshold, the policy’s cash surrender value counts as a resource. So her countable resources are roughly $28,000 against a limit likely near $2,000. That is the gap her elder law attorney has to close, lawfully, without creating a transfer penalty under the look-back rules.

What she does with the policy is one of the pieces on that board, and it is the attorney’s call, not a salesperson’s. See the face value rule and how the look-back interacts with selling a policy. Timing is everything and doing it in the wrong order can create a penalty period during which Medicaid pays nothing.

Ruth’s Situation	Figure	Source to Confirm
Monthly income	About $2,180 Social Security	Her benefit statement
Countable savings	About $19,000	Bank statements
Policy cash value	About $9,000 on a $250,000 death benefit	Carrier in-force illustration
Nursing facility, semi-private	About $9,000–$11,000 a month	Local cost-of-care survey
Waiver home care, 5 hours a day	About $4,500–$5,300 a month	State waiver rate schedule
Personal needs allowance after approval	Federal floor $30, many states higher	State Medicaid agency

Step Three: The Financial Test That Runs in Parallel

Step Four: Approval, and the Bill That Arrives Anyway

Say Ruth is approved and enters a facility. Families often expect the bill to stop. It does not; it changes shape.

Under Medicaid’s post-eligibility rules, most of her monthly income goes to the facility as her share of the cost, commonly called patient liability. She keeps a personal needs allowance, which under federal law must be at least $30 a month for nursing facility residents and which many states set higher, in a range up to a couple of hundred dollars. That $30 federal floor is genuinely old and has not kept pace with prices, which is why the state’s own figure matters so much. She may also be allowed to keep amounts for a health insurance premium and, if there were a spouse at home, a monthly maintenance needs allowance.

So Ruth’s $2,180 of Social Security largely goes to the facility, less her state’s personal needs allowance and her Medicare premium. Medicaid pays the remainder of the facility’s rate. See how patient liability is calculated.

One thing that follows immediately: if a life insurance policy is still in force after approval, the premium generally cannot be paid out of the personal needs allowance in any realistic way. That is a practical reason the policy question has to be resolved before approval rather than after.

Terms It Gets Confused With

Level of care determination vs. the MDS. The Minimum Data Set assessment is a clinical assessment performed by the facility after admission, on a federal schedule. The level of care determination is a state eligibility finding, usually made before admission. In some states the two share data; they are not the same document and appealing one is not appealing the other.

Level of care vs. PASRR. Preadmission Screening and Resident Review is a separate federally required screen for serious mental illness and intellectual disability. Passing PASRR is not a level of care determination.

Level of care vs. an assisted living care fee. An assisted living level of care fee is a private billing tier a community assigns to set your rate. It is a price, not a government finding, and it confers no eligibility for anything.

Level of care vs. Medicare’s three-day rule. Medicare’s skilled nursing coverage requires a qualifying inpatient hospital stay and is short-term. Medicaid’s level of care determination is about long-term care. See what a skilled nursing facility is for the distinction.

If the determination is denied, there is a fair hearing right. Request it in writing within the window stated on the notice, which commonly runs thirty to ninety days by state, and ask the agency for the instrument and scoring that produced the denial.

What Ruth Should Do With the Policy, Honestly

Back to the $250,000 policy with $9,000 of cash value, because this is where families get sold something instead of advised.

Four options exist and they are not equal. Keep it, in which case its cash value keeps her over the resource limit and blocks eligibility, so this only works if the resource problem is solved another way. Surrender it for the $9,000 cash value, which converts a countable resource into countable cash and does not by itself solve anything, though it can be part of a lawful spend-down plan. Let it lapse, which produces nothing at all and is the worst outcome on the list. Have it reviewed for secondary-market value, where a $250,000 death benefit on an 84-year-old with recent functional decline is exactly the profile that can produce an offer well above $9,000.

Three honest caveats that apply to Ruth and to most people reading this. Proceeds are countable when received, so the transaction has to be sequenced by her attorney against the application date and the look-back rules. The process commonly takes roughly 60 to 120 days, which does not fit a crisis timeline. And if her policy were term insurance with no cash value, or a small final expense policy inside her state’s burial exclusion, the answer would simply be to leave it alone — small policies do not attract offers, and a policy protecting a burial designation is often doing more good where it is.

Pine Lake Legacy does not purchase policies, is not licensed in every state, and cannot tell anyone whether they qualify for Medicaid. A free review produces one thing: a realistic number for the attorney to plan around. Send the policy cover page, or call (732) 978-9575, and bring the answer to the attorney and the caseworker.

Frequently Asked Questions

Who makes the level of care determination?

The state Medicaid agency or a contractor it designates, usually through a nurse assessor using a state-specific instrument. There is no single national standard, so criteria and scoring differ from state to state, and someone who qualifies in one state may not qualify in another. Confirm the process with your state Medicaid agency.

How many activities of daily living do I need help with to qualify?

Most states set the threshold at dependence in roughly two to three activities of daily living, and most also provide a separate qualifying pathway for significant cognitive impairment even where physical function is preserved. The exact standard is set by your state, so ask the agency for its written criteria before the assessment.

Does approval mean Medicaid starts paying right away?

No. Level of care is the clinical half only. The financial application runs in parallel and must be approved separately, generally within forty-five days or up to ninety where a disability determination is needed. Waiver approval also depends on an available slot, and many states maintain interest lists.

What happens to my mother’s income after approval?

Most of it goes to the facility as patient liability. She keeps a personal needs allowance, which federal law sets at a floor of thirty dollars a month for nursing facility residents with many states allowing more, plus amounts for certain health insurance premiums and a spousal allowance where applicable.

Can I appeal a denial?

Yes. A denied level of care determination carries a fair hearing right. Request it in writing within the window printed on the notice, commonly thirty to ninety days depending on the state, and ask the agency for a copy of the completed assessment instrument and the scoring that produced the decision.

Should the life insurance policy be sold before or after applying?

That sequencing belongs to an elder law attorney, not to any company reviewing the policy. Proceeds are countable when received and the transfer rules can create a penalty period if the order is wrong. Get the policy’s realistic value first, then let the attorney decide when and whether anything happens.

Find out what your policy is worth — free, confidential, no obligation.

A 15-minute educational review covers your eligibility, every alternative, and a realistic view of what each path would net you.

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