Spend Down On Care Last Updated January 21, 2018

Table of Contents:
  1. Introduction
  2. How Does It Work?
  3. Who is it for?
  4. How do I begin spending down on care?

Since Medicaid eligibility is determined by need, having too much income may disqualify you from receiving benefits. Each state determines its own "maximum allowable income" threshold for Medicaid eligibility, and if your total income exceeds it, you could be denied Medicaid. This is often called the "too much income" problem.

However, most states allow you to qualify for Medicaid even when your income is too high, provided that you spend your "excess income" (the amount over the maximum allowable income) on qualifying medical care. This strategy of attaining Medicaid eligibility is called "spending down on care."

Spending down on care is an effective, legal way of meeting Medicaid income requirements by spending your excess income on medical care.

Note that, when considering your Medicaid eligibility, your Medicaid caseworker will look at your total monthly income, which includes both "earned income" (wages) and "unearned income" (pensions, dividends, Social Security benefits, etc.).

How does it work?

Let's say you do not earn wages from a job, but you do collect both Social Security and a pension from a former career. Combined, your monthly income tallies $2,500 before taxes. If your state's maximum allowable income is $2,000 per month, then your excess income is $500, meaning you are $500 over the income limit. In theory, this would disqualify you from Medicaid.

But let's say you have ongoing medical expenses, including drug prescriptions and installments on hospital bills, which total $600 per month. If you file your claim correctly, that $600 is an allowable "spend down" of your excess income, bringing your considered income to $1,900 ($2,500 - $600). You are now within the maximum allowable income limit, so assuming you otherwise qualify, you can begin receiving Medicaid.

A broad array of medical expenses qualify for spending down, including:

  • Hospital and medical bills (including past unpaid bills)
  • Prescription drugs
  • Payments for various therapies and treatments
  • Nursing care and home health aides
  • Medical equipment (hearing aids, surgical supplies, etc.)
  • And more...

There are also medical expenses that Medicaid will not pay for, but will count toward your spend down, including services not covered by medicaid, services from providers that do not accept medicaid, and some medically-necessary over-the-counter items.

Who is it for?

While spending down on care is allowed under federal Medicaid eligibility requirements, whether it will work for you depends largely on your state of residence. Most states have "medically needy" ("spend down") provisions that explicitly permit the strategy, so spending down on care will work. To qualify, you typically must be either a senior over 65 years old, a child under 21, disabled or blind, or in a family where one or both parents are not providing income (due to absence, death, disability, or unemployment).

While most states allow income spend-down to qualify for Medicaid, some states prohibit the strategy by setting a hard limit on qualifying income. These "income cap" states deny Medicaid benefits to anyone whose total monthly income exceeds a defined amount, so spending down on care in these states would not work. Currently, the states with income-cap provisions are Alabama, Alaska, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Idaho, Iowa, Kentucky, Louisiana, Mississippi, Nevada, New Mexico, New Jersey, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, and Wyoming. However, it can still be possible to qualify for Medicaid in income cap states by placing your excess income in a Qualified Income Trust, also known as a "Miller trust."

How do I begin spending down on care?

If you have too much income to qualify for Medicaid, have ongoing medical expenses, and live in a state with a "medically needy" provision, then you will likely benefit from spending down on care. However, the strategy requires detailed knowledge of your state's Medicaid rules, qualifying medical care, income thresholds and more, all of which are subject to change. Professional advice from a Medicaid expert is strongly advised.