What is “Spending Down” for Medicaid Eligibility?
Medicaid is the largest government assistance program that is jointly funded by the federal and state governments. The program is called a variety of alternative names that vary by state including Medicaid, Medi-Cal, Medical Assistance, etc. Currently, there are 68 million enrolled in the program and over 4.6 million are low-income seniors that cannot afford to privately pay for services such as long-term care. Each state holds discretion over certain services funded by Medicaid and various eligibility rules apply. Two of the most important eligibility rules include having a need for care and having limited income or assets, or that your financial income is spent mostly on medical care. Qualifying for eligibility through Medicaid is a complex subject, and it is necessary to check your state’s regulations and rules for applying. For those that meet eligibility requirements for Medicaid aside from their income and/or assets, some states allow a process called “Spending Down” to be able to fully qualify for financial assistance. Let’s look at the process itself and successful ways to meet the requirements without harming you or your loved one’s chance of Medicaid eligibility.
Spending down may be done in a couple of different ways: income spend down and asset spend down.
What is Income Spend Down?
If you as an individual or both you and your spouse have a monthly income that is an excess of the eligibility amount of the Medicaid requirement of your state, you can use your excess income to “spend down” to meet the income requirement. A common example of this is using your “excess” income to pay off medical bills each month including:
- Health insurance premiums
- Prescription drugs
- Unpaid Medical Bills
- Doctor visits
What is Asset Spend Down?
An asset, a valuable resource (or resources) that you or you and your spouse own can exceed the qualifying eligibility amount, but sometimes it will be necessary to spend down assets to become eligible. There are also strict rules that generally say the money being spent down on assets must benefit the person applying for assistance.
There are two different types of assets: countable assets and non-countable, or exempt assets. Countable assets, or resources that count towards Medicaid’s asset limit vary by state but generally cannot exceed $2,000 for individuals or $3,000 for a married couple. The non-countable assets will not count towards Medicaid’s asset limit.
Countable Assets include:
- Savings/Checking Accounts
- Property beyond one’s primary home
- Retirement accounts
- Other financial holds such as CDs, Stocks, Mutual Funds, and Bonds
Non-Countable Assets include:
- One Vehicle
- Primary Household
- Pre-paid funeral and burial costs
- Jewelry and other personal values
- Term Life insurance
- Life Insurance Policy with Cash Value Less than $1500
Common ways to “Spend Down” on Assets:
Again, it is important to check with your state’s rules and regulations to be sure that you or your loved one are not penalized or withheld from receiving Medicaid assistance due to wrongly “spending down” on a countable asset.
- Prepay funeral and burial expenses
- Repair your home or make renovations to improve your quality of life in your house such as adding a wheelchair accessible ramp or renovating a bathroom to have a walk-in shower or bathtub
- Replace an older car with a newer model for a safer vehicle and less maintenance hassle
- Purchase medical equipment not provided by insurance such as dentures, eyewear, or hearing aids
- Pay for care within your home, even for family members acting as caregivers. Make sure the cost is reasonable and respectable in your area of living
- Purchase a new home for your primary household
- Pay off Debt
Remember, it is important to check with your own state's rules and regulations on spending down for Medicaid and other necessary qualifications for eligibility. Also, there are many states that use an income cap model that would change the approach to financial eligibility; for this process it is a good idea to look into setting up a qualified income trust for excess income. It is a good idea to plan before yourself or a loved one needs long-term services and realistically look at your finances to see if you will need assistance. The federal Deficit Reduction Act of 2005 was passed by congress to help prevent Medicaid fraud (so those that need assistance receive it and others cannot take advantage of the system). Medicaid will look back through five years of financial history to help determine eligibility and it is important to keep hold of/have access to bank statements for this process. Using an Elder law attorney or a Medicaid planning professional are both beneficial for this complicated process.
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