How to Spend Down Income and / or Assets to Become Medicaid Eligible
From: www.medicaidplanningassistance.org
Medicaid Spend Down: An Overview
For Medicaid eligibility for long-term care, an applicant must have income and assets under a specified amount (as well as have a need for long-term care). If the applicant’s income or countable assets exceed Medicaid’s financial limits in their state, it is possible to become eligible by “spending down” one’s income or assets to the point where they become financially eligible. However, there are many rules about how one can legally spend down their financial resources and if these rules are violated, the applicant will be denied Medicaid.
The income and asset limits for Medicaid do not remain consistent across the United States, nor do they remain the same even within each state. The limits often vary based on the specific Medicaid program and on one’s marital status. However, one fact remains the same: all Medicaid programs for the elderly require either restricted income or assets or both. This holds true if one is applying for in-home care, nursing home care, or assisted living under a Home and Community Based Services (HCBS) Waiver.
This article discusses spend down of both income and assets but the main focus will be on asset spend down, which is more complicated than income spend down and is applicable across the 50 states, while income spend down is only relevant in a portion of the states.
Asset Spend Down
Also, as previously discussed, an applicant must have assets, also called resources, under a certain amount to qualify for Medicaid. However, being over the asset limit does not mean one cannot qualify for Medicaid benefits. When considering one’s assets, it’s important to be aware that some assets are exempt, or said another way, not counted towards the asset limit. (Further detail is below under Countable Assets and Non-Countable Assets). If one is over the asset limit after considering all non-countable assets, one will have to “spend down” assets in order to meet Medicaid’s asset limit. However, one needs to proceed with caution when doing so. Medicaid has a look-back period in which all past transfers are reviewed. If one has gifted assets or sold them under fair market value during this timeframe, a period of Medicaid ineligibility will ensue.
Income Spend Down
As mentioned above, in order for applicants to be eligible for Medicaid, they must have limited income. If one has income above the qualifying limit, one can still qualify for Medicaid via spend down. In many states, this option is known as the “medically needy pathway”. Depending on the state in which one resides, “medically needy” may be called something different. For example, the program might be called any of the following: Share of Cost, Excess Income, Surplus Income, or simply, Spend Down. Regardless of name, these programs all allow applicants to spend excess income on medical bills and expenses, such as past due medical charges, prescription medications, health insurance premiums, and doctors’ appointments. Once Medicaid applicants have spent their excess income (the amount over the income limit) on medical expenses, they will be Medicaid eligible for the remainder of the “spend down” period.
Not all states have a medically needy pathway. These states are called income cap states, and in these states, Medicaid applicants can still become income eligible via Qualified Income Trusts (QITs). Commonly called Miller Trusts, an applicant’s excess income is directly deposited into an irrevocable trust, which means it cannot be changed or dissolved. A third party, called a trustee, controls the QIT. The money in the trust is exempt from Medicaid’s income limit, and it is only available for very limited purposes, such as paying for the senior applicant’s long-term care and medical related expenses.
