The Procedure behind a Medicaid Spending Reduction

Jun 09, 2023 By Susan Kelly

When a person's earnings are too high to qualify for Medicaid, the Medicaid spend down is a financial approach that can be utilized to reduce the individual's Medicaid spending. Spending down a portion of an individual's income to meet the Medicaid eligibility requirements and become a participant in the program requires that the individual spend down a certain amount of that individual's income. You can submit a Medicaid application to the agency that handles Medicaid applications for your state, or you can submit a Medicaid application via the Health Insurance Marketplace. Please visit if you would like any further information.

However, bear in mind that each state regulates Medicaid spend-down eligibility differently, and the procedure may be complicated and stressful. This is because Medicaid won't pay for medical and nursing care until you've filed the medical bills to make up the spending down amount.

Suppose you have reason to believe that your parent or another loved one may be required to fulfill spend-down requirements at some point in the future. In that case, the first step is to familiarize yourself with the eligibility standards and limits.

What Are the Rules, Exceptions, and Restrictions Regarding a Medicaid Spend Down?

To qualify for Medicaid, individuals must either exhaust their income or spend down their assets. This indicates that a portion of the person's earnings or assets must be spent, typically on medical expenses and other costs associated with health care. On the other hand, you might spend the money on accruing debt, like a mortgage, a vehicle, or the amounts on your credit cards.

The following are some types of expenditures related to medical treatment that may be counted toward a Medicaid spend down:

  • All medical bills, both from the past and the present.
  • Services for getting you to and from medical appointments.
  • Alterations to the house, such as installing a chair lift, which facilitates medical care.
  • Expenses related to health, such as contact lenses or a hearing aid.

An income spend down is not the same as an asset spend down; here are the fundamental distinctions between the two and some recommendations for spending down effectively.

The way an Income Spend Down functions

For example, imagine your mom's state's Medicaid income cap is $600 monthly, yet she takes in $800 from her Social Security check. Before Medicaid will cover the rest of the nursing expenses, you'll need to spend down to $200. Depending on the costs of caring for your mother, that might be challenging or straightforward. Spend down may include your mother paying the hospital $200 every month until the debt is gone if she owes thousands of dollars you believed would never be paid off. Another option is to spend her medical expenses on her normal medical treatment, such as her monthly prescriptions and frequent doctor appointments.

How an Asset Spend Down Works

Medicaid eligibility requirements for one to qualify for benefits vary from state to state. The person's assets would have to be spent down to the state-mandated minimum before they could start receiving benefits. Fortunately, this does not necessitate anyone to sell their home or vehicle. Those are often not considered countable assets. However, home equity may need to be included in a Medicaid spend down if the residence is extremely valuable (say, above $1 million). In addition, the value of a person's private property is not deducted from their Medicaid allowance. These are also not included in the valuation.

So, what exactly would qualify as a measurable asset? A person's savings account balance is considered an asset if the balance is more than zero. A second property that the individual owns and has been renting out would be considered an asset and would need to be sold so that the proceeds could be applied to medical bills. Unless they actively payout, IRAs and 401(k)s are usually considered taxable assets. Mutual funds, stocks, bonds, and other investment vehicles are all examples of tradable assets.

Spend Down Amount: How to Determine It

Using a professional Medicaid planner is the best approach to determining eligibility because everyone's financial situation is unique. As to the American Council on Aging, some are free, while others cost money (usually between $300 and $600 per hour). State health insurance assistance program counselors and insurance representatives provide free financial planning services. To locate a qualified professional Medicaid planner, visit the American Council on Aging website.

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