What is a Medicaid "spend down?"

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What is a Medicaid "spend down?"

Expert Answer

People use the term Medicaid "spend down" it two different ways. When Medicaid uses the term, they are referring to a Medicaid applicant regularly spending his or her own money on medical expenses, which might allow for the person's eligibility for Medicaid medical coverage. But people also use the term spend down to mean someone spending their assets in order to meet Medicaid asset eligibility levels either for Medicaid medical coverage or for Medicaid coverage for long-term nursing home care.

Eligibility for each type of Medicaid coverage -- medical care or long-term nursing care -- depends on having low income and few assets. The exact amount of income and assets differs for each type of coverage and from state to state. But if someone has too much income or assets to qualify, spending down might make the applicant eligible.

SPEND DOWN OF REGULAR MEDICAL EXPENSES. In some states, if someone has too high an income to qualify for Medicaid, the Medicaid program looks at the applicant's medical expenses, usually over a six-month period, that are not paid by Medicare or other insurance. These expenses can include the cost of medical care, equipment, and supplies, Medicare or other health insurance premiums and copayments, and prescription and over-the-counter medications. If the amount of these regular medical expenses, if paid by the applicant, would reduce the applicant's monthly income to the state's Medicaid income eligibility level, the applicant might become eligible for Medicaid medical coverage. (A spouse's income and medical expenses are also calculated regarding a spend down.) The expenses are calculated whether or not the applicant has actually paid them for any given month.

SPEND DOWN OF ASSETS FOR MEDICAL COVERAGE. People also frequently use the term spend down to mean spending assets in order to meet the asset eligibility level for Medicaid medical care or nursing home coverage. For Medicaid coverage of medical care, an applicant may have no more than $2,000 in assets ($3,000 for a couple), not counting the value of the applicant's home, car and most personal possessions. If someone has too much in assets to qualify for Medicaid medical coverage, he or she can qualify by spending his or her assets until the assets are reduced to the $2,000 eligibility level. The spending down of assets doesn't have to be related to medical care -- the assets can be spent on anything, or even given away, as long as they no longer belong to or are under the control of the applicant.

SPEND DOWN OF ASSETS FOR NURSING HOME COVERAGE. Spending down assets to qualify for Medicaid coverage of nursing home care is more complicated. That's because there is a Medicaid rule that limits transfers of assets during a five-year period immediately before applying for Medicaid nursing home coverage. Under this rule, during the five-year period an applicant actually has to spend assets for his or her own legitimate expenses or benefit (though they don't have to be medical expenses) in order for Medicaid not to count them when deciding eligibility. That is, the assets may not simply be given away or used to buy gifts, or exchanged for less than fair market value. If the applicant for nursing home coverage has given away assets during that five-year period, in an attempt to qualify for Medicaid nursing home coverage, that coverage may be denied for a period of time determined by the amount given away and the average nursing home costs in that state.