Medicaid Spend-down – Definition & Detailed Explanation – Elderly Legal and Financial Planning Glossary

What is Medicaid Spend-down?

Medicaid Spend-down is a process that allows individuals with income and assets above the Medicaid eligibility limits to qualify for Medicaid coverage by spending down their excess income on medical expenses. This process is also known as “Medically Needy” or “Share of Cost” Medicaid. It is designed to help individuals who have high medical expenses but do not meet the income and asset requirements for regular Medicaid coverage.

How does Medicaid Spend-down work?

When an individual applies for Medicaid Spend-down, they must first meet the income and asset requirements for their state’s Medicaid program. If their income and assets exceed the limits, they must spend down their excess income on medical expenses before they can qualify for Medicaid coverage. Once they have spent down their excess income, they will be eligible for Medicaid coverage for the remainder of the spend-down period, usually a month.

During the spend-down period, the individual is responsible for paying for their medical expenses up to a certain amount, known as the “share of cost.” Once the individual has reached their share of cost for the month, Medicaid will begin covering their medical expenses for the rest of the month. The individual must then repeat the spend-down process each month to continue receiving Medicaid coverage.

Who is eligible for Medicaid Spend-down?

To be eligible for Medicaid Spend-down, individuals must meet the income and asset requirements for their state’s Medicaid program. These requirements vary by state but generally include income limits based on the federal poverty level and asset limits that exclude certain types of assets, such as a primary residence and personal belongings.

In addition to meeting the income and asset requirements, individuals must also have high medical expenses that exceed the share of cost for their state’s Medicaid program. These medical expenses can include doctor’s visits, prescription medications, hospital stays, and other healthcare services.

What assets are included in Medicaid Spend-down?

Assets that are included in Medicaid Spend-down typically include cash, bank accounts, stocks, bonds, retirement accounts, and real estate other than a primary residence. These assets are considered when determining eligibility for Medicaid coverage and must be spent down to the allowable limit before an individual can qualify for Medicaid Spend-down.

Certain assets are exempt from the spend-down process, such as a primary residence, personal belongings, one vehicle, and certain retirement accounts. These exempt assets are not counted towards the asset limit for Medicaid eligibility and do not need to be spent down to qualify for Medicaid coverage.

How can individuals plan for Medicaid Spend-down?

Individuals can plan for Medicaid Spend-down by carefully managing their income and assets to meet the eligibility requirements for their state’s Medicaid program. This may involve spending down excess income on medical expenses, transferring assets to exempt categories, or creating a trust to protect assets from being counted towards the asset limit.

It is important for individuals to work with a qualified Medicaid planner or elder law attorney to develop a spend-down plan that meets their needs and ensures they receive the healthcare coverage they require. By planning ahead and understanding the Medicaid Spend-down process, individuals can navigate the complexities of the program and access the care they need.

What are the consequences of not completing a Medicaid Spend-down?

Failure to complete a Medicaid Spend-down can result in individuals being ineligible for Medicaid coverage and having to pay for their medical expenses out of pocket. This can be financially burdensome, especially for individuals with high medical expenses who rely on Medicaid for healthcare coverage.

In addition to the financial consequences, not completing a Medicaid Spend-down can also result in individuals not receiving the necessary medical care they require. This can lead to worsening health conditions, increased healthcare costs, and a decreased quality of life.

It is important for individuals to understand the Medicaid Spend-down process and take the necessary steps to qualify for Medicaid coverage. By planning ahead, managing their income and assets, and seeking guidance from experts, individuals can ensure they receive the healthcare coverage they need through Medicaid Spend-down.