What Are the Medicaid Spend Down Rules?


Medicaid has strict asset rules that compel many applicants to “spend down” their assets before they can qualify for coverage. It is important to know what you can spend your money on without endangering Medicaid eligibility. 

A Warning Concerning Spend Down Rules

CAUTION:  Many nursing homes will advise you to spend down your loved ones assets to $2,000 before applying for Medicaid. This ensures that they are paid the private rate, which is often higher than the Medicaid reimbursement rate. This can devastate your loved ones financial affairs and have a major impact on a well spouse (also known as the community spouse). In nearly every case, speaking to our firm can protect these assets and offer you legal options the nursing home is unable to provide. 

Medicaid Eligibility and Spend Down Goals

In order to be eligible for Medicaid, applicants must have no more than $2,000 in “countable” assets (the dollar figure may be slightly more, depending on the state). In addition, Medicaid also has strict asset transfer rules. If an applicant transfers assets for less than market value, the applicant will be ineligible for Medicaid for a period of time. The current divestment penalty divisor for 2020 is $5,871.00. Applicants for Medicaid and their spouses may protect savings by spending them on non-countable assets.

Medicaid Spend Down Case Example

Example:  Jane Smith of Bald Knob, Arkansas, transfers $50,000 to her son, who lives in Sherwood, Arkansas in 2018. Ms. Smith will be ineligible for Medicaid for 8.5 months ($50,000 / $5,871). Her private pay rate of $7,000 per month for 9 months (rounding up) will be $63,000.00

A Medicaid applicant can spend down money on anything that would benefit the applicant. Following are examples of what a Medicaid applicant may be able to spend money on:

  • Prepay funeral expenses. A prepaid or pre-need funeral contract allows you to purchase funeral goods and services before you die.
  • Pay off a mortgage, car loan, or credit card debts. You can pay off the debt fully or make partial payment.
  • Make repairs to a home. Fix the roof, make the house handicapped accessible, buy new carpet, etc.
  • Replace an old automobile. This can be useful for the healthy spouse.
  • Update your personal effects. Buy household goods or personal comfort objects. Buy a new wardrobe, electronics, or furniture.
  • Medical care and equipment. Purchase items that aren’t covered by Medicare or Medicaid. See a dentist or get your eyes checked if those items aren’t covered by your insurance.
  • Pay for more care at home. Make sure you get any caregiving agreements in writing, especially if family members are providing the care.
  • Buy a new home. A home can be an exempt asset, so it may be possible to purchase a new home.

Married Couples Have Special Spend Down Rules.

In the case of married couples, it is often important that any spend-down steps be taken only after the unhealthy spouse moves to a nursing home if this would affect the amount of money the community spouse would get to keep, called the community spouse’s resource allowance.

Each state has different requirements for spend down. Before making any spend down plans, consult with our team.

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