Medicaid “spend down” is when someone spends his or her assets or income to qualify for Medicaid. If a person’s income or assets exceed the law’s limit, Medicaid won’t help that person pay for things such as long-term care in a nursing home. However, Medicaid does permit a person who has income or assets above the limits to make purchases AND be eligible to qualify for Medicaid Long-Term Care as long as: (1) those purchases are enough to put them under the law’s income and asset limits; and (2) are permissible purchases under the law’s guidelines. In the following post, we discuss the items that you can spend money on without Medicaid penalizing you.

If you would like to refresh yourself with the differences between Medicaid, Medicaid Long-Term Care, and the Medicaid Waiver Program, please do so by reading the following article, which will also discuss the qualifications for each of these programs.

It may also be helpful to review the difference between countable and non-countable assets here.

State Medicaid programs have their own asset limits; however, most asset limits are approximately $2,000 in countable assets. A person with more than $2,000 in countable assets will not receive help from Medicaid Long-Term Care 1. As a result, many applicants will enter “spend down” mode. During “spend down” mode, applicants are only allowed to make certain purchases and transfers. During the application process, a Medicaid case worker will review the applicant’s buying and selling activity for the previous five years. If the case worker finds unauthorized transfers or purchases, the applicant will likely be penalized. That penalty is usually in the form of a delay of aid to the applicant in proportion to the amount of the unauthorized transaction vis-á-vis the average cost of a nursing home in the state. As a result, it’s important for an applicant to spend money on permissible purchases before applying to Medicaid Long-Term Care.

Below is a list of permissible purchases to reduce one’s countable assets 2; however, please consult an elder law attorney before entering “spend down” mode—the law constantly changes, the limit varies by state, the strategy differs based on marital status, and there are nuances to the list below:

  • Home improvements – yes, you may be able to invest in your home; however, some states set an equity limit to one’s home value. Homeowners whose equity exceeds the state’s limit may not qualify for Medicaid under the state’s asset restriction.
  • Vehicle repairs or purchases – only one vehicle is exempt; it’s also likely a vehicle’s value can’t exceed a certain amount so check with an elder law attorney in your state for what you’re permitted to own.
  • Uncovered medical devices – can only deduct medical expenses that you are responsible for paying. Each state has a list of medical expenses that it approves. The following list includes items that are common among states, however, it is best to check with an elder law attorney in your state to identify which purchases it authorizes:
    • Nursing home services
    • Prescriptions and medically necessary over-the-counter drugs
    • Eyeglasses
    • Dental services
    • Personal care
    • Transportation to and from medical expenses
  • Paying off debt
  • Hire a family member to provide care – in some states you may hire a family member as the caregiver. The rate that the family member charges must be reasonable.
  • Funeral arrangements via an irrevocable funeral trust – commonly, states permit people to spend up to $15,000 per spouse on funeral arrangements.
  • Annuities
  • Life insurance policies with a cash value of less than $1,500

The above list highlights some general items that one may spend his or her countable assets on to qualify for Medicaid Long-Term Care. When applying for Medicaid Long-Term Care, a case worker will review the applicant’s income, medical needs, and expenses. While an applicant may earn income above the law’s limit, he or she may be able to qualify for Medicaid Long-Term Care by deducting permissible purchases from his or her income and qualify for Medicaid Long-Term Care. For instance, let’s say an applicant has no assets and is paying for nursing home services and other medical needs with her social security. If a case worker determines that the applicant’s permitted expenses exceed her income and she has a medical need for nursing home care, then she will likely qualify for Medicaid Long-Term Care.

If all of this sounds confusing, then contact us and we will put you in touch with a local elder law attorney who will review your case.

This article is not intended to give any legal advice; we hope that you can use it to gain a general understanding of how the system works. Please, consult an attorney if you are looking for counsel.  


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