When Your VA Award Letter Costs You Medicaid: A New Jersey Case Study
The New Jersey Appellate Division decision, A.D. v. Essex County Department of Family Services, A-2316-23 (decided May 5, 2025), illustrates how a Medicaid application for long-term care can unravel not because the applicant was ineligible, but because of confusion over income rules and missing paperwork. The case involved a resident of an assisted living facility in West Orange whose application was denied twice by the agency and twice appealed — with the Administrative Law Judge ruling in the applicant's favor both times — before DMAHS rejected those decisions and the Appellate Division affirmed the denial. The court's reasoning touches on several issues that arise regularly in NJ Medicaid applications for long-term care: what counts as income, when a Qualified Income Trust is required, and what happens when you cannot produce exactly the documentation the agency demands.
The Income Limit and the QIT Requirement
To qualify for Managed Long Term Services and Supports (MLTSS), the NJ Medicaid program that covers long-term care benefits an applicant must meet both a resource limit and an income limit. The resource limit is $2,000 in countable assets. The income limit is a gross monthly income cap, which currently stands at $2,982 per month (for year 2026). If your income exceeds that cap, Medicaid will not approve your application unless you establish and fund a Qualified Income Trust, also called a Miller Trust or QIT.
A QIT is a legal arrangement in which the applicant's total source of income above the cap is deposited into a dedicated trust account each month before being used to pay for care. The trust does not eliminate the excess income — it channels it in a way the Medicaid rules permit. If the income is over the cap and no QIT exists, the application will be denied. For more on how this works, see my post on Qualified Income Trusts in New Jersey.
In A.D., the agency determined the applicant's income exceeded the limit and required a QIT. The applicant's representative pushed back, arguing that the VA Aid and Attendance benefit included in the applicant's income is not countable for Medicaid purposes and therefore no QIT was needed. The court rejected this argument — not on the merits of whether Aid and Attendance is countable income, but because the applicant never provided the documentation the agency needed to make that determination in the first place.
The VA Award Letter Problem
This is where the case turns practical. VA pension awards can include several distinct components: a base improved pension, an Aid and Attendance supplement, a Housebound allowance, a surviving spouse award, and others. For Medicaid purposes, different components are treated differently — some are countable income, some are not. The agency cannot make that determination from a letter that shows only a total monthly benefit amount.
New Jersey has addressed this directly in Medicaid Communications 12-09 and 15-08. Under those directives, an applicant receiving VA benefits must provide either a letter that specifically identifies the dollar amount allocated to Aid and Attendance, or documentation showing that the VA has determined the applicant's unreimbursed medical expenses reduce their countable income to zero. A letter showing only a lump-sum benefit amount is not sufficient.
In A.D., the applicant provided a VA award letter that showed a surviving spouse benefit with Aid and Attendance listed, but did not break out what portion of the total was attributable to each category. The agency sent a sample letter showing the format it needed and asked for a compliant document. The applicant's representative responded that the VA does not provide a separate breakdown — and directed the agency back to the letter already on file. The agency denied the application. The court agreed: without the itemized breakdown, the application was incomplete, and the denial was not arbitrary or unreasonable.
The Resource Limit and the Timing Problem
The applicant also sought Medicaid eligibility retroactive to November 1, 2022, arguing that her bank balance on that date was below the $2,000 resource limit because a check written to the nursing facility had cleared and reduced the balance to $335.80. The agency looked at the bank statement for the following month, which showed a balance of $2,696.71. The applicant argued a second check, written in early November, had also cleared by month's end and would have brought the balance below $2,000. The bank statement did not confirm that the check cleared when claimed, and the court found no basis to disturb the agency's finding that the resource limit was not met.
The clinical eligibility piece followed the same pattern. The applicant argued that a Pre-Admission Screening request made in December 2021 should establish her clinical eligibility date, but the regulation is explicit: clinical eligibility begins on the date the screening is completed, not the date it is requested. The record showed the screening was not requested until December 29, 2022 and completed January 9, 2023. The court found no evidence to support an earlier request date.
What This Means If You Are Applying
The A.D. case is a reminder that a Medicaid application for long-term care is a documentation-intensive process with little margin for error. Several things are worth taking from it.
First, if you or a family member receives a VA pension of any kind, obtain the most detailed award letter the VA will provide before filing a Medicaid application. If the letter does not itemize the dollar amount for each benefit category — Aid and Attendance, surviving spouse benefit, Housebound allowance, and any others — request an updated letter from the VA or contact a veterans service organization for help. The agency handling the Medicaid application needs that breakdown. A general award letter will not be enough.
Second, if your gross monthly income exceeds the Medicaid income cap, a QIT must be established and funded before the application is filed. It cannot be set up after a denial and applied retroactively. The income cap and the QIT requirement are not technicalities — they are threshold eligibility conditions.
Third, if you receive a request for information from the County Social Service Agency, respond fully and on time. The agency must give you an opportunity to provide missing documents, but if you cannot supply what is requested ask for more time or provide documentary proof establishing your good faith effort to respond. For more on how to challenge a denial you believe was issued in error, see my post on contesting an arbitrary Medicaid denial in New Jersey.
Finally, be precise about timing. Resource eligibility is determined month by month based on countable assets at the beginning of each month. Pending checks, deposits, and transfers need to be documented with bank statements that actually show what cleared and when. And remember that both financial eligibility and clinical eligibility must be satisfied at the same time — meeting one without the other is not enough.
Medicaid planning for long-term care is not something to approach without preparation. The rules governing income, resources, and documentation are detailed, and mistakes are difficult to correct after the fact. If you are in the five-year lookback period and considering a Medicaid application, see my overview of the five-year lookback rule in New Jersey for background on how prior transfers can affect eligibility.