A Medicaid spend down is a process where you reduce your income or assets to meet Medicaid's eligibility limits. Think of it like a deductible: you pay medical expenses out of pocket until your remaining income falls below the threshold, and then Medicaid kicks in. It is one of the most searched Medicaid topics, but here is the catch: Texas does not use a traditional income spend down. Texas is an "income cap" state, which means a completely different set of rules applies.
Why Texas Is Different
In about half of U.S. states, if your income is above the Medicaid limit, you can subtract qualifying medical expenses until your income drops below the threshold. That is a traditional spend down.
Texas is one of roughly 16 states that use an income cap instead. For nursing home Medicaid and waiver programs like STAR+PLUS, the limit in 2026 is $2,982 per month. If your income is even one dollar over, there is no mechanism to subtract medical bills to get below it. This trips up families who read about spend down online and assume it applies everywhere.
The Miller Trust: Texas's Workaround
If your income exceeds the cap, Texas allows a Qualified Income Trust (QIT), commonly known as a Miller Trust.
An elder law attorney sets up an irrevocable trust (usually $500 to $1,500). Each month, you deposit the income that exceeds the Medicaid limit into the trust. That money no longer counts toward eligibility. After Medicaid pays for your care, the trust pays any remaining patient share to the care provider.
The Miller Trust does not shelter money or let you keep extra income. It simply lets people in income cap states qualify when their income is above the limit.
Asset Spend Down: This Does Apply in Texas
While Texas does not allow income spend down, you can spend down your assets to qualify. The countable asset limit is $2,000 for a single applicant.
Many things are exempt: your primary home (up to $752,000 in equity), one vehicle, household furnishings, prepaid burial arrangements, and life insurance under $1,500 face value. Everything else counts: bank accounts, investments, and additional real estate.
Legitimate ways to spend down assets include paying off debt, making home repairs, purchasing exempt items like a prepaid funeral, and paying for medical or dental care.
Be careful with gifts or transfers. Texas has a 60-month lookback period. If you gave away money or sold property below fair market value in the five years before applying, HHSC will impose a penalty period during which Medicaid will not cover your long-term care.
What This Means for Your Family
- Income over $2,982/month? You need a Miller Trust, not a spend down. Talk to an elder law attorney.
- Assets over $2,000? You can spend down assets on legitimate expenses before applying. Plan carefully and keep records.
- Do not give away money in the five years before a Medicaid application. The penalties are severe.
For the full application process, see How to Apply for Medicaid in Texas. To understand which programs cover long-term care, read Texas Medicaid Programs for Seniors.
Have questions about your family's situation? Chat with Brevy to check your eligibility. It is free and takes just a few minutes.
Frequently Asked Questions
Not for income. Texas is an income cap state, so if your monthly income is over the long-term care Medicaid limit ($2,982 in 2026), you cannot subtract medical bills to qualify. Texas does allow asset spend down: you can reduce countable assets to the $2,000 limit by paying off debt, prepaying funeral arrangements, or making home repairs.
The income cap for nursing home Medicaid and most HCBS waivers is $2,982 per month (300% of the SSI federal benefit rate) in 2026. If you are over the cap, a Qualified Income Trust (Miller Trust) is the workaround, not a spend down.
An elder law attorney sets up an irrevocable trust. Each month, you deposit the income that exceeds the Medicaid limit into the trust. That money no longer counts toward eligibility. Medicaid then pays for your care, and the trust pays any remaining patient share to the provider. The Miller Trust does not let you keep extra income; it just lets income-cap-state residents qualify when their income is above the limit.
Legitimate ways to spend down assets include paying off debt (mortgage, credit cards, medical bills), prepaying funeral arrangements, repairing or modifying your home, replacing a car, and paying for medical or dental care. The home (up to $752,000 in equity), one vehicle, and personal belongings are exempt and do not need to be spent down.
Texas uses a 60-month (5-year) lookback period. If you gave away money or sold property below fair market value in the five years before applying, HHSC will impose a penalty period during which Medicaid will not cover your long-term care. Always document any large transfers and consult an elder law attorney before making them.
Learn More
- How to Apply for Texas Medicaid
- Texas Medicaid Programs for Seniors
- Texas Medicaid Long-Term Care & Nursing Homes
- Texas STAR+PLUS Waiver Program
- What Texas Medicaid Covers
- Texas Medicare vs. Medicaid
Find personalized help with the Texas Medicaid spend-down 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.