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An Easy Guide on Spending Down Assets to Qualify for Medicaid

Tuesday, July 21, 2020

Medicaid is designed as a program to provide access to healthcare for low-income individuals living in the state of New York and across the United States. To qualify, your income and assets have to be below a certain level, which usually varies depending on your state of residence.


But if you’re a senior living with a disability in New York, where the cost of living and medical expenses, on average, are higher than other parts of the country, you may not qualify for Medicaid even though you might feel like you’re barely able to meet your expenses.


Fortunately, there is a way that you might meet the requirements even if your income and assets are technically over the eligibility limit. 


And this brings us to our topic: Medicaid spend down.


In this article, we’ll cover everything you need to know about Medicaid spend down. We’ll discuss what it is, how it works, what assets and income you can “spend down” to potentially qualify for Medicaid, and we’ll also address some of the most frequently asked questions.

What is a Medicaid spend down?


As you know, to qualify for Medicaid, you need to meet certain income and asset requirements, among others, depending on your state of residence.


If you meet all the other requirements, but don’t meet the income or asset limits, then you can qualify for Medicaid through an income and/or asset spend down.


In New York, Medicaid spend down is also known as the “surplus income” or “excess income” program.


The way it works is this.


If you accumulate medical bills that exceed your excess income above the eligibility for Medicaid, then you can spend your excess income on your medical bills to qualify for Medicaid for the rest of your medical expenses.


In other words, you spend your income or assets that exceed the Medicaid eligibility requirements on specific medical or wellness expenses to bring your income/assets down to the level where you would qualify for Medicaid.


As with all things Medicaid, your specific requirements may vary based on your state, but the general idea remains the same.


It might sound a bit convoluted at first. So, let’s look at a couple of examples of how Medicaid spend downs might work to further clarify the concept for you.

How does Medicaid spend down work?


In the state of New York, your monthly income must not exceed $895 as an individual, or $1,304 as a couple, to qualify for Medicaid (in 2020).


Let’s say you earn $1,400 per month. Although your income exceeds the limit to qualify for Medicaid, it might not be enough to meet all your medical and other expenses, especially if you need home care due to a disability.


In this scenario, your income exceeds the Medicaid limit by $505 ($1,400 - $895 = $505).


Now let’s assume that your medical bills for the month amount to $805.


If you spend your excess income of $505 on your medical bills, you will have $895 left, which makes you eligible for Medicaid. Now, Medicaid will cover the rest $300 of your medical bills ($805 - $505 = $300).


So, you spent your excess income of $505 down on medical expenses to become eligible for Medicaid in New York. This is how Medicaid spend down works.


There’s also an asset component when it comes to eligibility for Medicaid, but you can spend down assets as well. We’ll cover more of the specifics on both income and asset spend downs below. 


But first, let’s take a look at the criteria to be eligible for the excess income program in New York.

Who is eligible for the Medicaid spend down program in New York?


To be eligible for a Medicaid spend down in New York, you must meet the following requirements.


  • You’re under the age of 21
  • Or, you’re 65 years of age or older
  • You’re certified blind
  • You’re certified disabled
  • You’re pregnant
  • You’re the parent of a child under the age of 21


If you fall under any of these categories, then you might be eligible for Medicaid through the excess income program even if your income is too high. 

What is considered excess income for Medicaid qualification?


In the example above, we illustrated a simple situation to demonstrate how a spend down might work.


But in reality, it is a bit more complex than that, and your Medicaid caseworker will help you determine the exact amount that is in excess of what you need to qualify for Medicaid.


Your caseworker will take your monthly income, and make certain deductions to calculate your countable income for Medicaid purposes. Your excess income is only the difference between this countable income and Medicaid limit ($895 in NY in 2020).


Your deductions will also vary based on your qualifying criteria for the excess income program. For example, your deductions will be different if you qualify through disability than if you’re eligible because you’re pregnant.


What bills can apply towards the Medicaid spend down?


Generally, any of your medical or wellness related expenses can count towards the spend down. In this section, we’ll list all the specific expenses that can help you qualify for your income limit.


One thing to note is that when your medical providers do not have to be Medicaid approved for your expenses to count towards the spend down. But once you qualify for Medicaid after the spend down, Medicaid will only cover expenses from approved providers.


Here are the expenses that qualify for the excess income program.


Medical expenses - Any kind of medical expenses, like doctor’s visits, dental or eye exams, lab tests, etc., can qualify towards a spend down. Your prescription drugs bill will also qualify (also if you’re covered through Medicare Part D). The providers do not have to be Medicaid approved.




Transportation - If you incur any costs during your transportation to and from your medical appointments, such as uber, taxi, bus fare, etc., make sure to keep your receipts/tickets. You can count these expenses towards your income spend down. 


Therapists - If you see a nurse, a therapist, or a home health aide recommended by a doctor, your expenses would qualify. The Community Alternative Services Agency (CASA) or Social Services must approve your personal care aides. 


Copayments - All your copayments and deductibles are qualified expenses. Whether it’s through private insurance, or you have Medicare, your out of pocket expenses can be used towards the spend down. Medicare Part D copayments, which covers prescription drugs, also qualify. 


One thing to note is that If you have Medicare or private insurance, you can only count the part of the bill that is not covered under those programs.


Surgical and medical supplies - Anything you spend on surgical and medical equipment, like wheelchairs, prosthetic devices, hearing aids, etc. are qualified expenses. But non-medical expenses like cosmetic procedures won’t count.


EPIC and ADAP bills - Any of your bills that are paid through Elderly Pharmaceutical Insurance Program (EPIC), or the AIDS Drug Assistance Program (ADAP), or any other public programs through the public programs in your state or county can qualify. 


In this case, it’s not only your copayments that count, but also any expenses paid by EPIC or ADAP.


If you participate in these programs, be sure to call and get three month’s statements prior to the month you plan on applying for Medicaid benefits.


Chiropractic services - A qualified chiropractor can provide immense benefits to seniors. They can help with pain relief, range of motion, core strength, stability, joint health, and lower your risk of falls


What’s better is that your expenses for chiropractic services can also count towards excess income and help you qualify for Medicaid.


Family member’s medical bills - When it comes to the spend down, it’s not just your own expenses that count, but also those of some family members. If your spouse, or your children under 21 (even if they are not living with you)  incur medical expenses, you can count them towards the excess income program.


And if you’re under the age of 21, and your parents have medical expenses, you can also count their bills to qualify for the Medicaid income limit.


Unpaid bills - Even your unpaid medical bills can count towards the spend down. Once you get your bill from the doctor or the provider, you can submit that bill to your Medicaid caseworker for it to count towards your required spend down. The added flexibility might help you manage your cash flow and monthly expenses.

Spending down assets to qualify for Medicaid


When it comes to Medicaid, whether in the state of New York or elsewhere in the country, there is usually a limit on the assets you can own to qualify for Medicaid.


But just like income limits, you can spend down assets on qualified expenses to meet the requirements for Medicaid.


For example, if you prepay for funeral services, you’re taking part of your cash assets and spending it towards a service that qualifies for asset spend down. Now, you’ve reduced the value of your assets, and you’re closer to meeting the limits for Medicaid.


Before we delve into all of the specific ways you can spend down assets, let’s first examine the asset limits in New York to qualify for Medicaid.


If you don’t live in New York, then you should check with your state’s Medicaid agencies for the asset limits. But the general idea of spending down assets will be the same.

What are the asset limits to qualify for Medicaid in New York?


The amount that you can own in assets will vary depending on whether you’re single or married. There are also some assets that are exempt from being counted towards your countable assets for Medicaid eligibility.


There are also different levels of services that you can get through Medicaid, and your asset limits will be different based on what you need.


Here are the three types of Medicaid.


  • Institutional / Nursing Home Medicaid - Living in a nursing home.
  • Medicaid Waivers / Home and Community Based Services - Living at home but requires help with daily activities. This program has limited space and is not an entitlement.
  • Regular Medicaid / Aged Blind and Disabled - No long term care required.



For detailed information about your specific asset limits based on your individual circumstances and medical needs, you can also contact the Medicaid representatives in your county.


Or, you can also call New York Medicaid at 1-800-541-2831 for more individualized information depending on your circumstances.


Below, we’ll list the asset limits based on your marital status, as well as the level of care you require.


If you’re single and applying for Medicaid


Nursing home - $15,750


Home care / daily activities - $15,750


Regular Medicaid - $15,750

If you’re married and applying for Medicaid as a couple


Nursing home - $23,100


Home care / daily activities - $23,100


Regular Medicaid - $23,100

If you’re married but only one partner is applying for Medicaid


Nursing home - $5,750 for the partner who is applying for Medicaid. The spouse not applying for Medicaid can have assets up to $128,640.


Home care / daily activities - $5,750 for the partner who is applying for Medicaid. The spouse not applying for Medicaid can have assets up to $128,640.


Regular Medicaid - $23,100


Countable vs. exempt assets


When it comes to Medicaid qualification, there are two kinds of assets - countable and exempt.


The countable assets are the ones that count towards your asset limits when determining eligibility for Medicaid. Exempt assets are assets you can own but won’t count towards your limit.


Let’s look at both types of assets in further detail.

What are countable assets for Medicaid eligibility?


Here are some of the most common countable assets. If you own an asset that isn’t listed here, or in the exempt list below, please contact your county Medicaid agency to ask if it would count.


  • Cash assets
  • Bank accounts - savings and checking
  • Property excluding primary residence (vacation homes, investment properties, etc.)
  • Retirement accounts
  • Certificate of Deposits (CDs)
  • Mutual funds
  • Bonds
  • Stocks


If you hold IRAs, 401Ks, or other investment accounts with deferred taxes, they might count as income instead of assets, as long as you’re receiving the required minimum distribution (RMD). Consult with your Medicare caseworker to determine if your 401Ks, etc. count as income or assets.


Either way, whether they are income or assets you can spend them down. We already explained how to spend down income, and we’ll discuss how to do the same with assets below.

What are exempt assets for Medicaid eligibility?


Some assets are exempt from being counted towards your limits for Medicaid qualification. As always, you should check with your local agencies, but here are some of the most common ones.


Your home of residence - Your primary home, where you live, is an exempt asset as long as the equity value is less than $893,000 in New York. 


There are a couple of exceptions. 


If you have the intent to return to a home you’re currently not living in, that home can be exempt as well. 


The other exception is if your spouse is living in a home you own. In that case, it is also an exempt asset even though you’re not personally living there. There is also no equity limit in this case.


Prepaid funeral or burial expenses - Prepaid funeral or burial expenses, as long as they are not refundable, can count as exempt assets.


We briefly mentioned this before, but it is also one of the strategies to spend down your countable assets, as we’ll cover again below in further detail.


One vehicle - You can own one car with no limit on value that will be exempt from your list of assets.


Certain life insurance policies - Life insurance policies with a cash value of lower than $1,500 are not counted.


Term life insurance - If you have term life insurance, then that value of that asset is exempt.


Personal/household items - Your household items, appliances, furniture, etc. are all exempt.


Jewelry - Jewelery, including wedding and engagement rings, family heirlooms, and other types, are all exempt from your asset limits.

How to spend down your countable assets to qualify for Medicaid


You may have countable assets that exceed the limits mentioned above, which are for New York. If you live in another state, then your limits might be different. But regardless, there are ways you can spend down your assets to qualify for Medicaid.


But remember, these are only some of the strategies that can make sense. Consult with a financial advisor who can suggest other ways to spend down assets in a way that makes sense for you.


Here are some of the strategies that are popular when trying to reduce countable assets for Medicaid. 


Prepay funeral expenses 


Prepaying funeral expenses is one way to reduce your cash assets. You can either prepay for the services or purchase a pre-need funeral contract.


You can also buy an irrevocable funeral trust. An irrevocable trust (IFT) means that you cannot cancel the trust or ask for a refund. 


When determining eligibility, Medicaid will no longer consider these funds to belong to you, and therefore won’t count towards your asset.


However, once the beneficiary passes away, the funds can be used for various funeral expenses like the service, casket, burial grounds, etc.

Pay off debt or purchase an annuity


You can use your excess assets to pay down debt, whether it's towards your mortgage, children’s student loans, credit cards, or anything else.


If you don’t have any debt, you can also purchase an annuity. You pay down a lump sum of money, and either you or your spouse will receive monthly income for a set period, depending on the plan.


When purchasing an annuity, be sure to consider how that might affect your income when it comes to qualifying for Medicaid.

Make repairs/improvements to your home


If you’ve been putting off home repairs or improvements, now could be a perfect opportunity to get them down to spend down some of your countable assets.


If you or your spouse is living with disabilities, you could make your home more accessible. 


You could install a wheelchair-ramp, make adjustments to your bathroom to make it less risky for falls, or anything else that would improve the quality of life for the person living with a disability.


Otherwise, you could also make any repairs and improvements that you feel are necessary.


Repair or purchase a new automobile


Buy a new car or make repairs to your current car. If you’re driving with a disability, you can also make your car more accessible for either yourself or your spouse.


If you don’t want to invest more money into your current car, you could also sell it and buy a new one.


Either way, the money you spend will bring your assets down and help you qualify for Medicaid. 


Also, remember that when it comes to vehicles, only one is exempt. So, if you purchase an additional car, that would count against your spend down.

Invest in personal wellness


Investing in your personal wellness can have two positive effects. Your personal health and wellbeing will improve, and you might also be able to spend down some of your excess assets.


You can purchase household items that increase your wellness, such as a bed that supports better sleep posture. You could also invest in a home gym, or hire a personal trainer.


Otherwise, you could buy new electronics and furniture to increase your comfort in your home. 

Hire a friend or family member to provide care


If you need assistance with activities of daily living due to a disability or chronic illness, then you can hire a friend or family member to provide care services.


This is a great way for you to continue living at home, maintain your independence, as well as providing income to a close friend or relative who could benefit from it. And it reduces your assets so you can qualify for Medicaid.


One thing to note is that for caregiving services, you must pay reasonable wages for the area where you live, even if it is a family member.


If you like the idea of having a relative or friend as caregiver, and want to continue it once you do qualify for Medicaid, check out CDPAP if you live in New York.


CDPAP is a New York Medicaid program that allows you to hire friends and relatives for home care. For detailed information, check out our guide on CDPAP

What is the 5 year rule for Medicaid?


Since Medicaid is a program designed to provide access to healthcare to low-income individuals and families, the government has implemented various measures to make sure that people don’t try to qualify for the program unless they really need it.


One of those measures is the Medicaid “look-back period”.


This is a period of five years (except in California) prior to the application for Medicaid during which certain transactions can be penalized when it comes to qualifying for Medicaid.


Medicaid will review your financial transactions to make sure you weren’t trying to unnaturally reduce your assets to qualify for Medicaid. 


Transactions that might be penalized are the ones where you might have transferred assets like cars, homes, money, etc. as gifts, or you sold them below fair market value. If one spouse made such a transaction, it could also affect the other spouse’s eligibility. 


If you did make a significant gift or sold something well below market value, then you might have to wait five years from that date to qualify for Medicaid. 


How to get around Medicaid look-back


Medicaid look-backs can be quite complex. Depending on your state of residence, there might be some options available to you.


One of the things you can do is to recuperate the assets that you sold under market value, if possible. Of course, this could be a complicated process depending on what you sold to whom, and to how many people.


As always, it might be best to discuss your options with your Medicaid caseworker. 





What is the process of getting Medicaid through the excess income process in New York?


To get started with the process, you can visit or contact your local agency that handles Medicaid in New York, and let them know you want to participate in the excess income program.


They will evaluate your case, and if you qualify, you will get a notice with your amount of excess income.


Then you can spend your excess income in ways explained above. If you have assets in excess of what you need to qualify, make a list of all the ways you can spend down. Check some of the tips mentioned above to see if they apply to you.


Speak to your local agency about the procedures about gathering and submitting bills to qualify for Medicaid through spending down.


Also, be sure to check out New York state’s Medicaid page for all the up-to-date information. 

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