The Medicaid Spend-DownMedicaid is intended to help people with limited assets and income. If you have too much of either, you must dispose of the excess before qualifying. The good news is that the required spend-down of your assets does not count all of them. Some of them are countable, and others noncountable.
There are also some noncountable items they allow you to keep when you apply for Medicaid. They include term life insurance, whole life insurance having a combined cash value of less than $1,500, one vehicle, household effects and appliances, jewelry, and prepaid burial and funeral expenses.
Most states allow applicants to have assets of $2,000. Some states permit you to have more, such as Nebraska, where the limit is $4,000. When both spouses apply, the limit is often $3,000—but New York allows you to have up to $30,182, and California will let you have up to $130,000 in assets.
The spend-down qualification requires applicants to use up their assets to qualify. They must reduce them to the qualifying level the state requires where they live.
Married Couples, but Only One ApplicantWhen there is only one applicant from a marriage, the state considers the assets jointly owned. The applicant is limited to $2,000 in assets, but the other spouse (called a community spouse) can have much more. The maximum allowable amount in any state for the community spouse is $148,620 ($154,140 in 2024). Other states may limit the couple to retain only $29,724 in assets.
Expenditures Permitted by Applicants for the Spend-DownWhen your state requires you to spend down your assets and income you can do it several ways. Nolo recommends that you consult with a financial adviser first to ensure that the methods used conform with your state’s regulations. The adviser might suggest:
Pay off legitimate debt.
Buy new noncountable assets.
Consider a qualified income trust.
Consider other legitimate ways to spend down assets.
Prepayments Not AllowedA payment for services or items not yet delivered is not permitted. If you do, it may disqualify you from getting Medicaid. Although you can use the money to pay a caregiver, you cannot pay the caregiver in advance. Debts such as car loans, other loans, and mortgages are permitted because they are legitimate debts.
The Five-Year Look BackWhen you apply for Medicaid, they will take a look at your finances for the past five years—the look-back period. They do this to discover the assets you owned within the past five years because they want to know what you had and how you disposed of them. The American Council on Aging says that some ways of disposing of your assets are illegal, such as gifting, which may cause your Medicaid benefits to be denied.
Spend-Down Limits May Result in Limited PaymentsStates operate differently as to how they handle the spend-down requirements. Some states may require you to send a monthly payment directly to Medicaid when your income is too high, MedicareInteractive says. You may also need to submit receipts or bills for qualified expenses to show you meet the requirements. Some states will only provide Medicaid payments when your income is within the limits for that period.
Qualifying for Medicaid by spending down your assets and income can be tricky. Before making any decisions, consult a professional estate planner to ensure you have the correct guidelines to get the financial help you need.