Supplemental Health Insurance & Medicaid Planning in Pennsylvania

Published on May 27, 2020. Last Updated on December 9, 2025.

 

When families begin the Medicaid planning process, especially in the context of nursing home care, one of the most overlooked—but critically important—issues is supplemental health insurance. As a Pennsylvania elder law attorney, I frequently encounter confusion regarding whether Medicaid applicants can retain their Medicare supplements, Medicare Advantage plans, or other health insurance once Medicaid benefits commence.

 

The short answer is yes—but the rules matter.

 

Understanding how supplemental health insurance works within Pennsylvania Medicaid regulations can help protect coverage, reduce out-of-pocket medical expenses, and prevent costly mistakes during the application process.

 

This article explains how supplemental health insurance is treated under Pennsylvania Medicaid rules, the reasons behind the state’s allowance, and how these rules apply to both single applicants and married couples.

 

Understanding Supplemental Health Insurance in the Medicaid Context

 

Supplemental health insurance refers to insurance policies that pay after Medicare, such as:

 

 

For individuals entering a nursing home, these policies often cover services that Medicare or Medicaid alone may not fully pay for, such as copayments, deductibles, or specialized care.

 

When someone applies for Medicaid in Pennsylvania, the question naturally arises:

Will Medicaid force me to cancel my supplemental health insurance?

The answer is no—and that is intentional.

 

Why Pennsylvania Medicaid Allows Supplemental Health Insurance

 

Pennsylvania, like all states, operates Medicaid as a payer of last resort. This means Medicaid only pays after all other available insurance coverage has been used.

 

From the state’s perspective, allowing Medicaid applicants to maintain their supplemental health insurance benefits everyone:

 

  • The applicant continues to receive broader healthcare coverage
  • Private insurance pays first
  • Medicaid costs are reduced

 

Because of this, Pennsylvania Medicaid regulations allow applicants to retain enough monthly income to pay their own health insurance premiums, even after Medicaid eligibility is approved.

 

Income Rules for Medicaid Applicants in Pennsylvania

 

When an individual applies for Medicaid for long-term care, most of their monthly income must be contributed toward the cost of care. This is commonly referred to as the patient pay amount or share of cost.

 

However, Pennsylvania Medicaid allows certain deductions from income before determining how much must be paid to the nursing home. One of the most important deductions is the health insurance premiums for the Medicaid applicant

 

This means the applicant may keep sufficient income to pay for:

 

  • Medicare Part B premiums
  • Medicare Part D premiums
  • Medigap or Medicare Advantage premiums
  • Other approved health insurance premiums

 

These deductions occur before income is applied toward nursing home costs.

 

Supplemental Health Insurance for Nursing Home Residents

 

For individuals residing in a Pennsylvania nursing home, continuing supplemental health insurance is often essential. While Medicaid covers a broad range of services, it does not necessarily replace all aspects of Medicare or supplemental insurance.

 

Maintaining coverage can help pay for:

 

  • Hospitalizations
  • Physician services
  • Prescription medications
  • Certain therapies and medical equipment

 

Pennsylvania Medicaid specifically permits the institutionalized individual to continue paying for their own health insurance premiums from their income. This ensures continuity of care and reduces disruptions in medical services.

 

Medicaid and Supplemental Health Insurance for Married Couples

 

Medicaid planning becomes more complex when the applicant is married. Pennsylvania Medicaid distinguishes between two spouses:

 

  • Institutionalized Spouse – the spouse receiving nursing home care
  • Community Spouse – the spouse remaining at home

 

Each spouse’s income and expenses are treated differently under Medicaid rules.

 

Paying for the Institutionalized Spouse’s Health Insurance

 

Pennsylvania Medicaid allows the institutionalized spouse to use their income to pay for their own health insurance premiums. This includes all qualifying supplemental health insurance policies in that spouse’s name.

 

This rule applies even after Medicaid eligibility is approved and remains in effect for as long as the institutionalized spouse remains eligible.

 

Important Limitation: Community Spouse Insurance

 

One critical point often misunderstood is this:

The institutionalized spouse’s income cannot be used to pay for the community spouse’s health insurance premiums.

 

Even though the couple is married, Medicaid treats each spouse’s insurance obligations separately. If the community spouse needs help paying health insurance premiums, that must generally come from the community spouse’s own income or protected resources.

 

Failing to follow this rule can lead to Medicaid eligibility issues or overpayment claims, which is why professional guidance is so important.

 

Why Canceling Supplemental Insurance Is Often a Mistake

 

Some families assume that once Medicaid is approved, supplemental insurance is unnecessary. In many cases, canceling coverage too early can be a costly error.

 

Potential consequences include:

 

  • Increased out-of-pocket medical costs
  • Loss of access to certain providers
  • Gaps in prescription drug coverage
  • Difficulty re-enrolling in insurance later

 

Pennsylvania Medicaid rules are designed to encourage continuity of coverage, not eliminate it. In most situations, maintaining supplemental health insurance provides long-term financial and medical benefits.

 

Timing Matters: Medicaid Applications and Insurance Premiums

 

Timing plays a critical role during the Medicaid application process. One of the most common challenges applicants face is maintaining health insurance coverage while their application is under review.

 

Medicaid applications can take several weeks—or even months—to process. During this waiting period:

 

  • Health insurance premiums must continue to be paid
  • Coverage must remain active without interruption
  • Missed payments may result in policy cancellation

 

In Pennsylvania, Medicaid applicants are permitted to continue paying their insurance premiums while their application is pending. Once Medicaid eligibility is approved, these premiums are generally treated as allowable deductions, helping to preserve eligibility and financial compliance.

 

This is particularly important when retroactive Medicaid coverage applies. Pennsylvania Medicaid may provide coverage for up to three months prior to the application date, provided all eligibility requirements are met. Maintaining active insurance and consistent premium payments during this period can prevent costly coverage gaps and complications.

 

How Supplemental Health Insurance Fits Into a Comprehensive Medicaid Plan

 

Medicaid planning is not just about qualifying—it is about protecting the family, preserving dignity, and ensuring access to care.

 

A well-designed Medicaid plan considers:

 

 

Supplemental health insurance is one piece of a much larger planning puzzle. Ignoring it can undermine an otherwise solid Medicaid strategy.

 

Looking Ahead: Making Informed Medicaid Decisions

 

The decisions made during Medicaid planning often have lasting consequences well beyond the initial approval. Choices about health insurance coverage, income use, and spousal protections can directly affect financial security and overall quality of life during long-term care.

 

Supplemental health insurance is one of those decisions that requires careful attention. When coordinated properly within Pennsylvania Medicaid rules, it can help prevent avoidable expenses and ensure continuity in medical treatment. When overlooked or handled incorrectly, it can create unnecessary complications at an already stressful time.

 

If you or a loved one is dealing with Medicaid planning or nursing home care in Pennsylvania, contact Bellomo & Associates today. Our experienced elder law attorneys can help you build a strategy that protects your care, your assets, and your peace of mind.