Jane Dotson
If your income is too high to qualify for Medicaid, you may be able to use a Medicaid spend-down program to become eligible. In this case, you would need to spend the difference between your income and your state's Medicaid income limit on health care costs. This process can be confusing, and there are certain rules that must be followed to avoid penalties, so it is recommended that you contact your local State Health Insurance Assistance Program (SHIP) for help. Medigap insurance, also known as Medicare Supplement Insurance, is a type of private insurance that helps cover some of the costs that original Medicare doesn't cover, such as copayments, coinsurance, and deductibles. So, while Medigap insurance can help reduce your out-of-pocket costs, it is separate from Medicaid and the spend-down process.
| Characteristics | Values |
|---|---|
| Who is eligible for Medicaid spend-down? | Individuals with income above the qualifying limit for Medicaid |
| Who is not eligible for Medicaid spend-down? | Individuals with income above the qualifying limit for Medicaid who cannot spend down enough income during their spend-down period |
| What is the spend-down amount? | The difference between an individual's income and the Medicaid eligibility limit, as determined by their state over a given length of time (one to six months) |
| What can be included in the spend-down amount? | Medical bills, including Medicare premiums, and other qualifying medical expenses |
| What is not included in the spend-down amount? | Gifting |
| What is the process for applying for a Medicaid spend-down? | Contact your local or state Medicaid office to learn if a spend-down program is available in your state, and the rules for applying |
| What are the benefits of a Medicaid spend-down? | Individuals who qualify for a Medicaid spend-down may be able to receive financial help to buy health insurance through the health insurance Marketplace |
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What You'll Learn
Medigap insurance and Medicaid spend-down eligibility
Medicaid is a federal-state public insurance program that helps people with limited resources afford medical care. However, qualifying for Medicaid can be challenging for those with incomes slightly above the eligibility threshold. This is where the concept of a Medicaid spend-down comes into play.
A Medicaid spend-down allows individuals with incomes above the Medicaid eligibility limit to reduce their income through specific expenditures, making them eligible for Medicaid. The spend-down amount is the difference between an individual's income and the Medicaid eligibility limit set by their state. This process typically occurs over a period of one to six months.
Medigap insurance, also known as Medicare Supplement Insurance, is a private health insurance plan that helps fill the gaps in original Medicare coverage. It covers costs such as copayments, coinsurance, and deductibles. When an individual has both Medicare and full Medicaid coverage, they are considered "dually eligible." In this case, Medicare pays first for covered services, and Medicaid pays second for qualifying costs, including Medicare cost-sharing.
The interaction between Medigap insurance and Medicaid spend-down eligibility works as follows: if an individual has Medigap insurance, they can use any non-reimbursed medical expenses covered by Medigap to meet their spend-down requirements. For example, if Medigap covers a portion of a medical expense, only the amount that wasn't reimbursed can be applied toward the spend-down. This means that Medigap insurance can help individuals reduce their income to qualify for Medicaid while also providing additional coverage for costs not included in original Medicare.
It's important to note that not all states have a spend-down program, and the eligibility requirements and rules for the spend-down process can vary by state. Therefore, it is essential to contact the local Medicaid office to understand the specific guidelines and requirements for Medicaid spend-down eligibility in one's state.
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Spend-down and income limits
Spend-down programs allow individuals with income above their state's Medicaid eligibility limit to become eligible for Medicaid. This is done by spending the excess income on medical bills and expenses, such as medical charges, prescription medications, health insurance premiums, and doctors' appointments. This process is known as "spending down" and once an individual has spent their income down to the medically needy income limit (MNIL) on medical expenses, they will be eligible for Medicaid for the remainder of the "spend-down" period, which is typically between one and six months.
The spend-down amount is the difference between an individual's income and the Medicaid eligibility limit, as determined by their state over a given length of time. Some states require individuals to submit receipts or bills to Medicaid to show their monthly expenses, while other states allow them to pay a monthly premium directly to Medicaid for the amount that their income exceeds the state's Medicaid spend-down level. It is important to note that spend-down income limits may be lower than the regular Medicaid income limits.
Each period that an individual has enough medical expenses to meet their spend-down, they will have Medicaid coverage. If they do not meet their spend-down amount for a certain period, they will not be covered by Medicaid for that time. However, they can regain Medicaid coverage in the future if they meet their spend-down amount during another period.
While not all states have a spend-down program, some may offer a Medicaid Buy-In option to help individuals reach income limits for Medicaid eligibility. These programs allow working adults under the age of 65 with a disability to qualify for Medicaid. Additionally, states without a spend-down program typically have more generous Medicaid income guidelines for individuals requiring nursing home care.
It is important to be cautious when spending down assets to avoid violating Medicaid's 60-month Look-Back Period, which can result in a period of Medicaid ineligibility. Some states, like California, are in the process of eliminating their previous 30-month Look-Back Periods, while others, like New York, currently have no Look-Back Period for long-term home and community-based services.
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Qualifying for Medicaid through spend-down
The spend-down amount is the difference between your income and the Medicaid eligibility limit, as determined by your state, over a given length of time (usually one to six months). This process allows individuals to deduct certain medical expenses from their income to qualify for Medicaid. Medical bills can include medical charges, prescription medications, health insurance premiums, and doctors' appointments. Once an individual has spent their income down to the medically needy income limit (MNIL) on medical expenses, they will be Medicaid-eligible for the remainder of the "spend-down" period.
For example, if your state's Medicaid income limit is $2,000 a month and your monthly income is $2,200, you must spend the additional $200 on health care costs, such as your Medicare premium, to qualify for Medicaid.
It is important to note that the spend-down amount may be lower than the Medicaid income limits for those who do not have a spend-down. Additionally, states with spend-down programs may allow individuals to use the program to qualify for Medicaid coverage for nursing facility stays or home and community-based waiver services.
To qualify for Medicaid through spend-down, individuals must meet all other eligibility requirements for Medicaid, except for income and/or assets. Trusts, such as Miller Trusts and Supplemental Needs Trusts, are available in some states to help individuals become Medicaid-eligible. These trusts allow people with disabilities and income or assets higher than Medicaid eligibility guidelines to place a portion of their income or assets into the trust, which is then not counted towards the eligibility limit.
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Spend-down and medical expenses
Spend-down programs are a way to qualify for Medicaid even if your income is higher than the eligibility limit. These programs are available in certain states for aged, blind, and disabled (ABD) individuals who do not meet the income requirements for Medicaid. Spend-down programs allow you to deduct certain medical expenses from your income to qualify for ABD Medicaid.
The spend-down amount is the difference between your income and the Medicaid eligibility limit, as determined by your state over a given length of time, typically between one to six months. You will have Medicaid coverage for each period that you have enough medical expenses to meet your spend-down amount. If you do not meet your spend-down amount for a certain period, you will not have Medicaid coverage for that time, but you can still get it later if you meet the spend-down amount during another period of the year.
To qualify for Medicaid inpatient hospital coverage, your state may require you to qualify and apply for the spend-down for multiple periods. States with spend-down programs may allow you to use it to qualify for Medicaid coverage of your nursing facility stay or home and community-based waiver services. If your state does not have a spend-down program, it should have more generous Medicaid income guidelines for people who need nursing home care.
There are rules about how you can spend down your financial resources. For example, a rule prohibits gifting, and if this or any other rule is violated, the applicant will be denied Medicaid. Additionally, income and asset limits for Medicaid vary across the United States and even within each state. Therefore, it is important to check with your local Medicaid office to understand the specific eligibility requirements and rules for applying for the spend-down program in your state.
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Spend-down and long-term care
To qualify for Medicaid, applicants must meet eligibility requirements, including having a need for care and having limited income and assets. These limits vary by state, marital status, and program. For instance, the income and asset limits might be different for the regular state Medicaid program versus a Home and Community-Based Services (HCBS) Medicaid waiver or nursing home Medicaid.
If an applicant has countable assets that exceed the Medicaid asset limit in their state, they can spend down those assets to reach the limit and become eligible for Medicaid. This is called a Medicaid spend-down. While all states allow asset spend-down, not all states have a medically needy pathway, meaning not all states allow applicants to spend down their extra income on medical expenses.
The spend-down amount is the difference between the applicant's income and the Medicaid eligibility limit, as determined by the state over a given length of time (one to six months). Some states require applicants to submit receipts or bills to Medicaid to show their monthly expenses. Other states may let applicants pay a monthly premium directly to Medicaid for the amount that their income is over their state’s Medicaid spend-down level.
There are three types of Medicaid Long-Term Care: Nursing Home Medicaid, Home and Community-Based Services (HCBS) Waivers, and Aged, Blind, and Disabled (ABD) Medicaid. For individuals in most states in 2025, the asset limit for all three is $2,000. For married couples with both spouses applying, the 2025 asset limit in most states is a combined $3,000 or $4,000. For married couples with only one spouse applying for Nursing Home Medicaid or HCBS Waivers, the asset limit for the applicant spouse in most states is $2,000, and the asset limit for the non-applicant spouse is $157,920 (as of January 1, 2025), due to the Community Spouse Resource Allowance (CSRA). The CSRA does not apply to ABD Medicaid.
Medicaid Long-Term Care applicants who are over the asset limit can spend down their excess assets on themselves or their spouse to get under the limit, but they cannot give away their assets or spend them on other people. To ensure that applicants don't do this, Medicaid uses the Look-Back Period. In most states, the Look-Back Period is 60 months (five years). This means that Medicaid applicants must provide financial documents going back 60 months from their application date to prove they have not given away any money or other assets. If state officials find that an applicant has violated the Look-Back Period, their Medicaid application will be denied, and they will be subject to a period of Medicaid ineligibility that could last months or years.
There are several ways that applicants can spend down their assets without violating the Look-Back Period or jeopardizing their eligibility. These include paying off debt, such as credit card bills, vehicle loans, and mortgages; personal care/life care agreements, which allow seniors to pay in advance for caregiving; and irrevocable funeral trusts, which allow seniors to pay in advance for their funeral and burial expenses.
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Frequently asked questions
A Medicaid spend-down is a way to qualify for Medicaid if your income is above the eligibility limit in your state. You can spend down the difference between your income and the state’s Medicaid income limit on health care expenses to become eligible.
Medigap insurance, also known as Medicare Supplement Insurance, can help cover some of the medical expenses that you incur during the spend-down period. Any medical services not reimbursed by an insurer can be used to meet your spend-down.
Expenses that can be used for the spend-down include medical bills, prescription medications, health insurance premiums, and doctors' appointments. Some states may also include long-term services and supports (LTSS) such as nursing home care.
The income limit for the Medicaid spend-down varies by state and may be more restrictive than the regular income limits for Medicaid. For example, the asset limit for single applicants is often less than $2,000, while for married couples, it is typically $3,000.
If you are unable to meet your spend-down amount during a certain period, you may temporarily lose Medicaid coverage for that time. However, you can regain coverage in a subsequent period if you meet the spend-down amount.
