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Medicaid Spenddown: How it Works

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Medicaid Spenddown Can Make You Eligible for Long-Term Medicaid Benefits

As you get older, there may come a time when you need long-term care. Long-term care can be expensive without Medicaid, a government program that helps cover healthcare costs. Medicaid can cover long-term at-home care and institutional care. However, qualifying for Medicaid can be difficult, as applicants must have income and assets under a specific amount to be eligible. If you or a loved one currently finds themselves in this position, there is a solution called Medicaid spenddown. Spending down requires many rules, and if you don’t legally follow them, it can result in Medicaid denial.

Medicaid spenddown planning refers to both income and assets. However, it’s more commonly concerned with an individual’s assets. In this article, we’ll share some information on Medicaid spenddowns so you can qualify for the program’s long-term care.

Income, Countable Assets & Non-Countable Assets

Many people wonder how much money is too much to get Medicaid. 

The federal government sets a criterion for how much an individual can own to qualify for Medicaid. The criteria refers to both income and countable assets. Concerning income, in 2022, a single adult who earns $13,590 or less is considered eligible for the program. Note that this financial threshold increases by the size of the household. For example, a family of eight that generates an income of $46,630 is also eligible. Every state can set the income limit for individuals to become eligible for Medicaid. However, income limits are typically under $1,000/month per person.

It’s important to clarify that income refers to, but is not limited to:

  • Work wages
  • Personal belongings
  • Social Security benefits
  • VA benefits
  • Alimony
  • Pensions
  • Individual retirement account (IRA) distributions

When referring to assets (also known as resources), you need to look at countable and non-countable assets. Cash, stocks, bonds, investments, savings, and checking accounts are all examples of countable assets. Your home, household goods and furniture, and one personal car are all examples of non-countable assets. In general, when it comes to non-countable assets, you don’t have to worry about how to spenddown for Medicaid. These assets are usually exempt, meaning they do not count toward the state’s asset limit. Nonetheless, whether certain assets are non-countable will depend on your state laws, living arrangements, marital status, and other considerations.

You will know whether you qualify for a Medicaid spenddown if the Medicaid program denies you full coverage. You should receive a notice that tells you whether you qualify and how much to spenddown for medical costs and expenses.

What is Asset Medicaid Spenddown?

Again, your state’s spenddown program usually refers to your assets, which applies across all states. The income spenddown, on the other hand, only applies to some states in the U.S. Pay attention to your state’s Medicaid spenddown rules on countable assets. Medicaid spenddown asset rules are usually hard to understand. Some find it challenging to determine whether they’re over the asset limit and by how much. 

The rules also vary depending on your marital status and residence.

To make things easier, start by knowing the allowable spenddown items. If you know this this, it can prevent you from violating the program’s look-back period. The look-back period is in place to prevent applicants from gifting items or selling them under fair market value to become eligible for the program. The program reviews your finances dating back five years (60 months) from the date you qualify for long-term Medicaid benefits.

The look-back period differs in some areas. Not every state has a five-year look back period. For example, California and New York look back 2.5 years (30 months). Additionally, the look-back period does not apply to all programs, but it does apply to Medicaid benefits for long-term care. Unfortunately, you will receive a penalty f your income or assets were spent down for less than the fair market value during the look-back period. As a result, you won’t be eligible for Medicaid for a while. Again, this varies depending on the state and the number of assets transferred.

Thankfully, there are ways to spenddown assets without violating the look-back rule.

  • Home improvements – your home is a non-countable asset, so you can spenddown by investing in it. Replace your roof, renovate your bathroom, or find other ways of putting funds into your home.
  • Car repairs – one personal vehicle is exempt, as well. Fix any damages in need of repair. Alternatively, you can sell your old car and buy a new one.
  • Pay off your debt – if you have credit card debt, medical debt, auto loans, or personal loans, you probably won’t violate Medicaid spenddown rules by paying these off.

Consider speaking with a Medicaid expert beforehand, no matter which avenue you take.

What is Income Medicaid Spenddown?

Not all states have a spenddown program for income, also known as a medically needy pathway. Contact your local Medicaid office to see if the program exists where you live and how to apply. If your state offers a spenddown program for the aged, blind, and disabled, you can begin spending down your income to meet your state’s income guidelines for Medicaid eligibility. Excess income put towards your medical bills and expenses monthly can be deducted from your income. As a result, you may qualify for the program. Qualifying medical bills and expenses include:

  • Health insurance premiums
  • Prescription drugs
  • Physician visits
  • Unpaid medical bills
  • Medical expenses paid by specific public programs
  • The portion of any medical bill Medicare or private insurance did not cover
  • Transportation expenses to medical appointments
  • Medical equipment, hearing aids, surgical supplies, etc. ordered by a physician

Spending down doesn’t stop with medical bills. You can also place excess income into a qualified income trust and name someone else as the trustee. Therefore, the funds are no longer yours and won’t count as your income. You must use the funds for specific purposes. Putting your income into a trust can be complex, as they vary by state. Therefore, you may need to contact your local Medicaid office or an attorney for guidance.

Sign Up for Government Programs & Eliminate Your Phone Bill

medicaid spenddown program

If you go through the tedious effort of spending down to become Medicaid eligible, why not take advantage of everything the program can offer? For example, if you qualify for Medicaid, you may also participate in one of two government programs: Lifeline and the Affordable Connectivity Program (ACP). These FCC programs were created for low-income individuals to access cell phone services to stay connected to friends, family, work, school, and 911 Emergency service calls.

At Q Link Wireless, if you qualify for Lifeline, you will receive FREE Data, Talk, & (UNLIMITED) Text. If you are eligible for the ACP, you will receive FREE UNLIMITED Data, Talk, & Text. Experience these services on one of America’s fastest 4G LTE/5G networks.

Find out if you qualify! Signing up takes 5 minutes or less.