Is a Veterans Affairs Survivor Pension Medicaid-Exempt?

Great question, and it's one that trips up a lot of families. Indiana Medicaid ignores only the Aid and Attendance portion of the Veterans Affair’s (VA) pension, not the entire amount.

How Does Indiana Medicaid Treat VA Aid and Attendance?

Indiana's Medicaid policy manual says that Aid and Attendance and Housebound allowances should not be counted as income when deciding whether someone is initially eligible. The reason is that this extra money is meant to help cover medical and care costs. The basic Survivors Pension is a separate part of the benefit, and Indiana generally counts it as income when it looks at your application.

Does the Surviving Spouse Need to Show Which Part Is Aid and Attendance?

Yes, they do. Indiana asks applicants to give a current breakdown of how much of the VA benefit is Aid and Attendance, and only that amount is left out of the income budget. If the VA sends one lump-sum payment each month, Medicaid caseworkers can't tell how much is which. Ask the VA for an award letter that lists the basic pension and the Aid and Attendance amount separately, and include it with the application.

What Happens If the Surviving Spouse Moves Into a Nursing Home on Medicaid?

Once Medicaid begins paying for nursing home care, a different federal rule applies. A surviving spouse without a child who receives Medicaid-covered nursing home care can keep no more than $90 a month of the VA pension, including any Aid and Attendance increase, for the months after Medicaid payments begin. This $90 is a small personal allowance for things like clothing and toiletries, and is kept in addition to the Medicaid personal needs allowance.

Why Does the Aid and Attendance Amount Matter So Much?

In 2026, a qualifying surviving spouse can receive up to about $1,558 a month in Survivors Pension with Aid and Attendance. That is a significant amount of money, and it could push your income over Medicaid's limit if the whole thing were counted. Because Indiana excludes the Aid and Attendance part, many surviving spouses can receive both benefits.

What Steps Should be Taken?

Here are the steps that make the process smoother:

1. Request a VA award letter and check that it shows the Aid and Attendance amount on its own line.

2. Include that letter with the Indiana Medicaid application.

3. Keep copies of any medical bills, since unreimbursed care costs can affect how much the VA pays.

4. Report any big change in care costs to the VA, because a material change in qualifying medical expenses can affect your pension payment.

5. Consider talking with an elder law attorney or a VA-accredited representative. They can check the numbers for your situation, and many offer a free first conversation.

Medicaid and VA rules change from time to time, so it's always a good idea to confirm the current details with your local Indiana Family and Social Services Administration (FSSA) office.