Medicaid eligibility is based on income and financial assets. If you make too much money or have assets valued over a certain amount, you may not qualify for Medicaid. 

But what if you are ineligible for Medicaid because of your income level or asset value but you have considerable medical expenses that bring your effective income down to a qualifying level? 

That’s where the Medicaid spend down program comes into play. By “spending down” your income or assets, you may become financially eligible for Medicaid.

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It’s important to note, however, that there are specific rules you must follow in order to qualify for Medicaid through a spend down program – which might be called the Medically Needy Pathway, Share of Cost, Excess Income, Surplus Income or other name depending on your state.

What does spend down mean in Medicaid?

“Spend down” means to deduct qualifying medical expenses from your income to bring it to a level that would make you eligible for Medicaid. 

Each state sets its own income limits for Medicaid eligibility, and there are different types of Medicaid programs, each with its own income and asset limits. Not every type of Medicaid allows for the spend down program. But let’s use a hypothetical scenario to illustrate how a spend down program might work. 

John’s state requires an annual income of no more than $13,000 and countable assets valued at no more than $3,000 in order to qualify for Medicaid. His assets are valued at only $2,000, which is safely below the asset limit. However, his annual income is $18,000, which is above the income limit and therefore makes him ineligible for aged, blind and disabled (ABD) Medicaid. 

But John’s medical condition forced him to pay $7,000 out of pocket last year on health care costs, which effectively made his usable income just $11,000. His usable income is now under the income limit and he now qualifies for ABD Medicaid. 

Spend down can also be applied to your financial assets. For example, if you have $20,000 in a savings account, you will be over Medicaid’s asset limit. But if you use that money on a qualified expense (see below to learn about qualifying expenses), you can bring that asset down to the acceptable level for Medicaid eligibility.

The spend down program is also referred to as the Excess Income Program, the medically needy program or by another name, depending on your state.

What are countable assets for Medicaid spend down?

In most cases, home equity and a single vehicle are not counted toward your asset limits. Neither are pre-paid funeral expenses, whole life insurance policies with a cash value of under $1,500, term life insurance, jewelry and family heirlooms and household appliances. 

Assets that are counted toward Medicaid’s limit include:

• Cash and savings accounts
• Owned property beyond your primary home
• Retirement accounts
• IRAs/401Ks (rules vary by state)
• CDs, mutual funds, bonds and stocks  

What are allowable spend down expenses for Medicaid?

Medical costs are among the most common spend down expenses for Medicaid. These can include prescription drugs, unpaid medical bills, medical equipment or supplies, nursing home care and more. 

Some additional allowable expenses under the spend down program include:

• Legitimate debt
• Funeral and burial expenses
• Annuities
• Caregiver agreements
• Home improvements or repairs
• Vehicle repairs

Medicaid has rules in place to prevent “gifting” assets in order to spend down. 

Which states have a Medicaid spend down program?

Medicaid spend down programs can be found in the following states:

• Arkansas
• California
• Connecticut
• District of Columbia
• Florida
• Georgia
• Hawaii
• Illinois
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Montana
• Nebraska
• New Hampshire
• New Jersey
• New York
• North Carolina
• North Dakota
• Pennsylvania
• Rhode Island
• Tennessee
• Utah
• Vermont
• Virginia
• Washington
• West Virginia
• Wisconsin

Missouri and Ohio don’t technically have a spend down program, but do allow for some spending down to reduce income levels. 

How to get help spending down for Medicaid 

To learn more about your state’s Medicaid spend down program or to receive help with countable assets, allowable expenses and more, you can contact your state’s Medicaid program.

Medicare-Medicaid dual eligibility

While Medicare and Medicaid are two different programs, some people may be eligible for both Medicare and Medicaid. Those who are eligible for both programs are called “dual eligible” beneficiaries.

Dual eligible beneficiaries can receive coverage from both programs. Depending on where you live, may be able to enroll in a special type of Medicare Advantage plan called a Dual Eligible Special Needs Plan (D-SNP) if any are available in your area.