What Is Medicaid Spend-Down?

Why It Matters

Many seniors have income slightly above their state's Medicaid limit, leaving them stuck: too much income for Medicaid, not enough to pay for care out of pocket. Spend-down programs close that gap. If your parent earns $200/month more than the Medicaid limit, they don't have to give up. They can use that $200 in medical expenses to qualify.

For families helping an aging parent, understanding spend-down can mean the difference between paying full price for care and getting Medicaid to cover it.

How Spend-Down Works

Here's the basic process:

  1. The state calculates your excess income. If Medicaid's income limit is $2,000/month and your income is $2,400/month, your excess is $400.

  2. You incur medical expenses equal to the excess. During the spend-down period (which varies by state from 1 to 6 months), you rack up qualifying medical costs that equal or exceed $400.

  3. Medicaid covers the rest. Once your medical expenses hit the threshold, Medicaid pays for any remaining covered services during that period.

What Counts as a Qualifying Expense

  • Medicare premiums (Parts B, C, D)
  • Doctor visit copays and deductibles
  • Prescription drug costs
  • Hospital and nursing home bills
  • Medical equipment and supplies
  • Health insurance premiums
  • Dental and vision expenses

What Doesn't Count

  • Over-the-counter medications (unless prescribed)
  • Health club memberships
  • Cosmetic procedures

Income Spend-Down vs. Asset Spend-Down

These are two different things, though people often confuse them.

Income spend-down (the medically needy pathway) applies to monthly income that exceeds the Medicaid limit. You reduce your countable income by applying it to medical expenses each month or spend-down period.

Asset spend-down refers to reducing your total assets (savings, investments, property) to meet Medicaid's asset limit (often $2,000). This might mean paying off debts, prepaying a funeral, making home repairs, or converting countable assets to exempt ones. Asset spend-down isn't a formal program; it's the general process of getting under the asset limit.

Texas and Spend-Down: A Key Difference

Texas doesn't have a traditional medically needy spend-down program. Instead, Texas uses a Qualified Income Trust (Miller Trust) for applicants whose income exceeds the $2,982/month limit.

A Miller Trust redirects income above the limit into a special trust account. The trust pays the nursing home directly, and the applicant qualifies for Medicaid. This achieves a similar result to spend-down but through a different legal mechanism.

If you're in Texas and your loved one's income is over the Medicaid limit, don't assume they can't qualify. A Miller Trust, which an attorney can set up for a few hundred dollars, solves this problem. Read our Texas Medicaid nursing home guide for the full details.

Not sure if spend-down or a Miller Trust applies to your family? Chat with Brevy for personalized guidance.

Common Misconceptions

"Spend-down means I have to waste money." No. You're spending money on legitimate medical expenses you'd likely incur anyway. The strategy is timing those expenses to fall within the spend-down period.

"If my income is over the limit, I can't get Medicaid." Not necessarily. Spend-down programs (in states that have them) and Miller Trusts (in states like Texas) exist specifically for this situation. There's almost always a path.

  • Medicaid eligibility: The income, asset, and medical requirements for qualifying for Medicaid coverage
  • Miller Trust (Qualified Income Trust): A legal tool used in states without spend-down programs to redirect excess income and qualify for Medicaid
  • Community Spouse Resource Allowance: The amount of assets the at-home spouse can keep when one spouse enters a nursing home on Medicaid
  • Activities of Daily Living (ADLs): The daily tasks (bathing, dressing, eating) used to assess need for long-term care

Learn More

Find personalized help understanding senior care benefits at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.

BC

Brevy Care Team

Expert eldercare guidance from Brevy's team of healthcare professionals and researchers.