What is a Medicaid spend down?

If a loved one needs long-term care services such as community-based, personal, or institutional care, they may face challenges financing these services. A common misconception is that financing mechanisms such as Medicare (and Medicare supplement plans), private disability insurance, and/or Social Security disability benefits will cover the costs for long-term care. 

Financing mechanisms that can help pay for long-term care services include personal savings, Medicaid, family caregiving (typically uncompensated), home equity, health savings accounts (HSAs), long-term care insurance, hybrid life/LTC and annuity/LTC products, and Department of Veterans Affairs.

In fact, of these, Medicaid is the nation's primary payer for long-term care services. As of March 2020, 64.1 million Americans were enrolled in Medicaid.

Medicaid provides health coverage and long-term care services to eligible low-income families including children and pregnant women, individuals with disabilities, and the older adult population. Medicaid is a jointly-funded partnership between states and the federal government. It is administered by states, according to federal requirements. Eligibility criteria varies by state, but applicants must have a certain level of medical impairment and limited financial resources.

Many individuals who need long-term care services may face the dilemma of having too much income and/or assets to qualify for Medicaid. However, they may also run out of money trying to pay for the services out of pocket.

One way to solve this is to consider “spend down” for Medicaid. What is a spend down? It refers to spending enough of one’s income or assets to bring those totals in line with the threshold for becoming eligible.

For example, say your elderly parent makes $900 a month from Social Security, while the state they live in has a Medicaid threshold of $600 a month. Your parent could “spend down” that $300 either on medical care, or on any accrued debt—such as a mortgage, a car payment, or a credit card balance—to bring their monthly income in line with eligibility requirements.

Assets get more complicated, primarily because every state approaches countable versus non-countable assets differently. If you or your loved one’s assets exceed the Medicaid limit, the best way to proceed is by involving a professional Medicaid planner, who can help determine how best to spend down and get in range for Medicaid eligibility. The American Council on Aging's website offers ways to find a reputable Medicaid planner.

Other great resources to guide you through this journey are elder law attorneys, medical social workers and/or state-employed case workers.

If you are looking for additional assistance with the spend down process or managing finances for long-term services, talk to our concierge service here at Peacefully. The concierge service can help with referrals to trusted professionals, offering case-specific advice, recommendations, and coordination for you. For more about our concierge service or to schedule a free consultation, click here.

— Lesley Hellow