Does VA Disability Count as Income for Medi-Cal?

VA disability compensation does not count as income for most Medi-Cal applicants. If you qualify through the standard pathway used for adults under 65, children, parents, and pregnant applicants, your VA disability payments are invisible to the eligibility calculation. If you qualify through one of the programs for people 65 or older, blind, or disabled, the rules shift: regular monthly VA disability compensation generally does count as unearned income, though several specific VA payments are excluded or partially excluded.

Why It Doesn’t Count Under MAGI Medi-Cal

Most Californians are evaluated using Modified Adjusted Gross Income, a tax-based method that counts only income reported on a federal tax return. The IRS tells veterans directly: “Don’t include disability benefits you received from the VA in your gross income.”¹ That exclusion reaches disability compensation, disability pension payments, grants for wheelchair-accessible homes, grants for adapted vehicles, and combat-related special compensation.²

The Centers for Medicare and Medicaid Services has confirmed that the tax exclusion carries into Medicaid eligibility. CMS guidance states that “VA benefits are not part of the Modified Adjusted Gross Income (MAGI) calculation” and that “states should not count any veterans benefits paid under any law, regulation or administrative practice administered by the Department of Veterans Affairs in their income calculations.”³

So a veteran receiving $2,000 a month in VA disability compensation plus $1,500 a month in wages would have only the $1,500 counted. For a single adult in 2026, the MAGI Medi-Cal income limit is $1,836 per month, which is 138% of the federal poverty level.⁴

When VA Disability Does Count: Non-MAGI Medi-Cal

Veterans who are 65 or older, blind, or disabled under Supplemental Security Income standards may qualify through non-MAGI programs instead, such as the Aged and Disabled Federal Poverty Level program. These programs ignore the tax-based method and use their own income rules, which count most sources of unearned income before applying specific deductions.⁵

Under those rules, recurring monthly VA payments are generally treated as unearned income.⁶ Regular VA service-connected disability compensation and VA pension payments count toward the limit. The methodology does apply a $20 general unearned income deduction,⁷ and premiums paid for Medicare Part B and supplemental health insurance can reduce countable income further.⁸

The ABD-FPL income limit sits at the same 138% of federal poverty level as MAGI Medi-Cal — $1,836 per month for a single person in 2026 — but the counting method is what differs.⁴

Specific VA Payments With Their Own Rules

California’s Medi-Cal Eligibility Procedures Manual treats several categories of VA payments differently from standard disability compensation.

Aid and Attendance

Aid and Attendance is an enhanced VA benefit for veterans or surviving spouses who need help with daily activities. How Medi-Cal counts it turns on where the veteran lives.

Living at home: Aid and Attendance is not counted as income.⁹
In a nursing home or institution with a spouse or minor child still at home: Aid and Attendance is not counted for eligibility or share-of-cost. If the institutionalized veteran transfers those funds to the community spouse, the money becomes countable income for that spouse.⁹
In a nursing home or institution with no spouse or minor child: the first $90 is excluded, and anything above $90 counts and feeds into the share of cost for institutional care.⁹

Unusual Medical Expenses

VA payments designated for Unusual Medical Expenses are never counted as income for Medi-Cal, no matter where the veteran lives.⁹

GI Bill and Educational Benefits

Under non-MAGI rules, Post-9/11 GI Bill tuition and fees paid directly to the school are not counted, but monthly housing allowances are treated as unearned income.⁶ Under MAGI Medi-Cal, the CMS blanket exclusion for VA benefits applies to these payments as well.³

You No Longer Have to Apply for VA Benefits to Keep Medi-Cal

California used to require Medi-Cal applicants and beneficiaries to apply for and accept any benefits they were entitled to, including VA disability compensation and pensions. Refusal could cost someone coverage. That requirement was permanently eliminated effective June 1, 2025.¹⁰

The Department of Health Care Services first obtained a federal waiver in August 2023 to suspend the rule, extended it through June 30, 2025, and then made the change permanent. The Single Streamlined Application is being revised to remove language that tied eligibility to pursuing VA benefits. County workers can still tell veterans about benefits they may be entitled to, but choosing not to apply no longer puts Medi-Cal at risk.¹⁰

A Note on Assets, Not Just Income

Income is one test; assets are a separate one, and they only come up in non-MAGI programs. MAGI-based Medi-Cal has no asset test. For most non-MAGI programs, asset limits were reinstated effective January 1, 2026 at $130,000 for an individual, with $65,000 added for each additional household member, under AB 116.¹¹ If you are applying under a MAGI pathway, your savings and property are not part of the determination at all.

1
Internal Revenue Service. Veterans Tax Information and Services
2
Internal Revenue Service. Taxable and Nontaxable Income, Publication 525
3
Medicaid.gov. FAQ ID 92586
4
Covered California. FPL Chart
5
Health Reform Beyond the Basics. Non-MAGI Medicaid Eligibility
6
Santa Clara County Social Services Agency. Veterans Benefits
7
Disability Rights California. Determining Eligibility Under the Aged, Blind, Disabled Federal Poverty Level Program
8
Santa Clara County Social Services Agency. Aged and Disabled FPL Program
9
California DHCS. Medi-Cal Eligibility Procedures Manual, Article 10J
10
Santa Clara County Social Services Agency. Medi-Cal Update 2025
11
California DHCS. ACWDL 25-18