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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 one’s 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 one’s financial affairs and have a major impact on a well spouse (also known as the community spouse). In nearly every case, speaking to our Arkansas estate planning law 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 2023 is $8,334 per month. Applicants for Medicaid and their spouses may protect their savings by spending them on non-countable assets.

Medicaid Spend Down Case Example

Example: Jane Smith of Bald Knob, Arkansas, transferred $50,000 to her son, who lives in Sherwood, AR, in 2023. Ms. Smith will be ineligible for Medicaid for 6 months ($50,000 / $8,334). Her private pay rate of $7,000 per month for 6 months will be $42,000.00

A Medicaid applicant can spend down money on anything that would benefit the applicant. The 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 debt. You can pay off the debt fully or make a 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. This may 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 spending down. Before making any spend-down plans, consult with our Arkansas estate planning attorneys at McClelland Law Firm, P.A. If you live in Searcy, Sherwood, Little Rock, Benton, AR, or surrounding areas, we can help you qualify for Medicaid.

McClelland Law Firm, P.A. is here to help you and your loved ones understand probate and trust administration, estate planning, Medicaid planning, crisis planning, guardianship, and elder law. Our Benton, Sherwood, and Searcy law offices welcome you to contact us and learn how we can help meet your elder law legal matters in White County, Pulaski County, Saline County, and throughout Arkansas.

At McClelland Law Firm, we believe that limiting our practice areas provides the greatest value to our clients. To us, value means providing exceptional service and efficient processes for each of our practice areas.

We are committed to compassionate representations, especially as it relates to elder law. No one should feel pressured, controlled, or “talked down” to in any meeting. Every client deserves to be heard and understood.

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Sherwood Office:

135 Shadow Oaks Drive
Sherwood, Arkansas 72120

Searcy Office:

202 N. Locust Street
Searcy, Arkansas 72143

Benton Office:

17328 I-30 Suite 5
Benton, Arkansas 72019

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