Medicaid Spend Down: Pay for More Than Just Medical Bills

3/2024

Since the 1960s, Medicaid has provided health care coverage for low-income people across the United States. For millions of seniors, Medicaid offers financial assistance, helping them to cover the cost of long-term care services. Today, this joint federal-state program also benefits other qualifying populations with limited income, including children and people with disabilities.

Qualifying for Medicaid

You may not foresee yourself applying for Medicaid in the future. Yet in reality, research shows that roughly one in seven seniors are likely to require long-term care at some point later in life. Long-term care can be extremely costly; this is why many people have come to rely on the Medicaid benefits that cover these costs.

Given these sobering statistics, consider gaining a better understanding of Medicaid and shaping your plans sooner rather than later. To qualify for Medicaid, you may need to carry out certain actions at least five years prior to when you apply. That’s because most state Medicaid agencies will look back at the five years leading up to when you submit your application for the program.

If you happened to make certain purchases or gifts during this so-called “lookback” period, you could end up facing a penalty. Unfortunately, these penalties could mean you have to wait months, or even years, before you become eligible for Medicaid.

Medicaid is for people living on limited incomes. So, among the main criteria to qualify for Medicaid is that you have limited income and assets. Generally, you must have no more than $2,000 in your name to be eligible for this public benefits program. (Note that this limit can vary according to state, however.)

If you have more than that, you may find yourself having to “spend down” your extra assets to meet the $2,000 limit. Only after you have fulfilled this (and other) requirements would Medicaid begin paying for basic long-term care expenses.

The upside, however, is that not all your assets count against you in the eyes of Medicaid. For example, your primary home is typically exempt. You also can own one car without worrying about exceeding Medicaid’s asset limits. And, depending on your state, you may be able to spend your excess money on certain items that help make your life more comfortable.

Medicaid Spend Down

As mentioned above, each state dictates what the income and asset limits are for Medicaid applicants. These figures also tend to shift a bit every year.

Take note that not every state allows for a Medicaid spend down. These so-called “income cap” states follow different rules.

Also, take care that items you do decide to buy as part of your spend down are specifically for the Medicaid applicant.

So, What Can You Pay For?

All that said, Medicaid applicants can generally spend down their excess income in several ways. Paying off credit card debt or medical bills is one possibility. Prepaying for your funeral services is often a legitimate spend down option, too. Admittedly, these sorts of payments might not bring you much enjoyment, but they still may be able to count toward your spend down amount.

In many cases, you can spend down your surplus assets on medical services, equipment, or health insurance premiums.

Perhaps you have come to rely on a wheelchair or cane or could benefit from hearing aids. You may want to have an eye doctor check your vision. If your prescription eyeglasses are out of date, you may be able to purchase a new pair. These are all medical expenses that could potentially be part of your spend down efforts.

At the same time, your excess income can go toward much more than unpaid medical debt or other bills. Purchases that help improve your quality of life tend to be permissible. Here are five tangible types of items you may be surprised to find you can legally purchase as part of your Medicaid spend down:

• A new vehicle – You may need a reliable car or a wheelchair accessible vehicle to get to medical appointments. Keep in mind that some states place a limit on the value of your one vehicle. For example, you might not want to plan on purchasing an RV camper for road trips if you are seeking Medicaid assistance.
• Electronics – In some states, upgrades to your smartphone, laptop, television set, or another communications device may be a possibility.
• New clothes – It might be an ideal time for you to stock up on new socks, pajamas, or other clothing necessities.
• Books or subscriptions – Sources of entertainment can boost your quality of life, too. You may prefer books or magazines, or subscriptions to streaming services like Netflix.
• Towels and bedding – Check with a professional to see whether you can refresh your bedding or towel supply as part of your spend down. If moving to a long-term care facility, ask whether they provide these types of items for you.
• Furniture – You may be moving to a facility that allows you to bring along certain preapproved furnishings. For example, you might benefit from a recliner chair with a power lift in your new space.
• Home improvement – Even if you’ll receive long-term care at home, you might be able to spend your excess income on modifying your residence. Maybe you need to invest in fixing your plumbing, paving your driveway, or installing a wheelchair ramp.

Consult with your attorney to understand what is and is not permissible. (A bonus is that you may in fact be able to include legal fees as part of your spend down process.)

Why It’s Key to Work With Your Elder Law Attorney

The rules regarding Medicaid get complicated quickly. Be sure to talk to your elder law attorney about Medicaid planning. Discuss your needs with them and ask what your options might be for spending down your assets. They can identify strategies to help preserve your hard-earned savings while avoiding potential Medicaid penalties.

Whatever you do choose to purchase, keep all your receipts and detailed documentation in case any questions come up. You don’t want to break the rules by accident and end up facing a Medicaid penalty period.