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Medicaid Spend-down – What is it?

What are people talking about when they say you have to “spend down” to become eligible for Medicaid? Well, it can describe two different things. Most of the time elder law attorneys are referring to to resource spend-down where the applicant is trying to get below the resource eligibiity threshold. But it can also refer to income.

Income Spend-Down: Medically Needy Classes of Assistance

Almost every Medicaid class of assistance has an income limit as well as a resource limit. If your monthly income exceeds the Medicaid income limit, sometimes you can qualify for the medically needy class of assistance by spending down any income that exceeds the Medicaid program guidelines. To get Medicaid benefits, you must submit current paid or unpaid medical bills equal to or greater than your monthly spend-down amount. Once your medical bills reach this amount, you will get Medicaid coverage for the remainder of the calendar month. In Georgia, if the applicant’s income is less than or equal to the adult medically needy income limit, then the applicant is “de facto eligible” and no spend down is necessary. If the applicant’s monthly income exceeds the income limit, then the excess is call the spenddown. The spend down must be met before the applicant is approved for medically needy eligibility. See Appendix A.2 for Georgia medically needy income limits.

Resource Spend-Down

Most Medicaid planning includes potential spenddown options. One reason for spending down is that applicant’s potentially save 100% of their resources when they convert countable resources into exempt resources. So, for example, if a married couple has countable resources exceeding the Community Spouse Resource Allowance, one plan might be to make long overdue repairs to the home or update appliances. The Community Spouse might be driving a clunker that should be traded in toward the purchase of reliable transportation. As long as direct or indirect gifting is not a component, there is no rule saying how a Medicaid applicant must spend-down. As long as the spending benefits the applicant, the applicant’s spouse, or their property, and it moves them closer to the eligibility threshold, any spending is acceptable. The goal is not to spend willy-nilly, but to spend on items that either increase the value of exempt resources (e.g., the home), or improve quality of life or safety for the applicant.

The following list, which is by no means complete, includes some potential spend-down options. The only real limits are your creativity and whether the purchased item(s) are for the benefit of the Medicaid applicant:

  • Paying debt (e.g., mortgage, credit cards)
  • Repaying debt to family members (with supporting documentation);
  • Home
    • Purchasing a home if none is owned
    • Sell existing home and purchase larger home (for self or upsizing to permit intergenerational living arrangements)
    • Add in-law suite to child’s home
    • Purchase acreage adjoining home;
  • Upgrades, Repairs, Expansion, Remodel
    • Modifying a home to accommodate an individual’s disabilities
    • Add additional space
    • Enhance for potential resale
    • See list below;
  • Paying medical expenses/bills not covered by Medicaid or Medicare (e.g., better quality wheelchair than what is authorized by Medicaid/Medicare);
  • Personal Items Not Covered by Medicare/Medicaid
    • Dental expenses
    • Dentures (or replacements)
    • Eye glasses, contact lenses or other vision assistance
    • Hearing aids (or replacements)
    • Incontinence supplies
    • Physical therapy or other therapy
    • Any support services not covered by benefits programs
  • Education expenses (including computer, software, books, etc.);
  • New phone or other communications devices (e.g., iPad);
  • Entertainment/recreation expenses
    • Books
    • Magazines
    • Movie/concert tickets
    • Sporting events
    • Audio/video equipment
    • Subscription services such as Netflix, Hulu, YouTube TV, Sirius, etc.
  • Vacation travel
    • Airline tickets,
    • Train/bus passes,
    • Food & shelter while temporarily away from home on vacation, etc.
  • Pay an attorney to do estate planning and/or Medicaid planning;
  • Prepay burial arrangements
  • Personal hygiene (haircuts, manicures)
  • Purchase a automobile or trade-in an existing vehicle for a more reliable vehicle (1 vehicle of any value is exempt), pay for registration and insurance
  • Purchase clothing
  • Set aside up to $2,000 for a single person, or up to $3,000 for a married couple, in non-exempt resources, e.g., in savings, checking, etc.

Examples Home Improvements or Modifications

  • Roof (new roof or repairs)
  • Windows
  • Siding (e.g., repair or improve)
    • Insulation
  • Painting interior/exterior
  • Gutters
  • Driveway
  • Landscaping
    • Patio
    • Deck
    • Walkway
    • Fencing
    • Tree removal
    • Pool
    • Hot tub
    • Outdoor kitchen or fireplace
    • Survey
    • Pave roads for future lots (if you have acreage)
  • Home Systems
    • Sprinkler/alarm system
    • Heating/Air conditioning
    • Hot water heater (buy a larger water heater to supply hot tub or spa bathub)
    • Fireplace
    • Add gas lines for fireplace, kitchen, water heater, etc.
  • Carpet/Flooring/Hardwood/Tile
  • Kitchen (update, remodel or expand)
    • Cabinets
    • Plumbing
    • Appliances
      • Refrigerator
      • Dishwasher
      • Stove
      • Microwave
  • Bathroom (update, remodel or expand)
    • Vanity/cabinets
    • Tub/shower
      • Walk-in shower
      • Jetted tub
      • Sauna
      • Steam room
    • plumbing
  • Waterproof basement
  • Finish unfinished areas
    • Enclose and finish deck or carport
  • Window treatment/shutters
  • Purchase, repair or replace appliances
    • Ceiling fans
    • Washer
    • Dryer
    • Additional Freezer
  •  Electrical
      • Light fixtures
      • Wiring
  • Prepay Expenses
    • Maintenance fees
    • Homeowners insurance
    • Yard maintenance
    • Property taxes
    • Assessments
    • Utilities

Personal Items

  • Clothing
  • Electronics
    • Stereo
    • Television
    • Satellite TV/Radio
    • Telephone
    • Computers (desktop/notebook/tablet)
    • Gaming systems
    • Handheld devices
  • Furniture
    • Beds and bedding
    • Chairs
    • Sofas
    • Lighting

Other Spending

  • Athletic events
  • Theater, symphony
  • Casino (make sure the applicant pulls the slot lever)
  • Entertainment
  • Family reunion
  • Caregivers/sitters
  • If the Community Spouse is operating a business, his or her tools of trade are exempt, so upgrading them might be an option. Keep in mind, the Community Spouse will likely have to prove those tools are used for his or her self-support so be prepared to provide tax returns

Although technically it’s not spend-down, if the applicant is allowed to fund an individual or pooled special needs trust, resources placed in a special needs trust are exempt.

The key is that spending must be for the benefit of the applicant or the applicant’s spouse. This includes improvement of their property. For example, if repairs are done to an applicant’s home, the delivery address for supplies must be the applicant’s address. Purchases that are obviously for items the applicant will not or cannot use will raise questions with Medicaid caseworkers. For example, purchasing powers tools for a paraplegic may not pass the smell test. Having said that, creativity is allowed. There is nothing in the rules stating that a future Medicaid applicant is limited to a single bedroom hotel room when traveling. So, a person who is contemplating the possibility of a future Medicaid application could rent a beachfront home for the week and invite guests to join him or her. While there, if the future Medicaid applicant wanted to go deep-sea fishing, there’s no rule limiting the size of the boat he or she should rent. So he or she could rent a large boat and let family or friends tag along.


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