For Medicaid eligibility for long-term care, an applicant must have income and assets under a specified amount (as well as have a need for long-term care). If the applicant’s income or countable assets exceed Medicaid’s financial limits in their state, it is possible to become eligible by “spending down” one’s income or assets to the point where they become financially eligible. However, there are many Medicaid spend down rules about how one can legally spend down their financial resources and if these rules are violated, the applicant will be denied Medicaid.

The income and asset limits for Medicaid do not remain consistent across the United States, nor do they remain the same even within each state. The limits often vary based on the specific Medicaid program and on one’s marital status. However, one fact remains the same: all Medicaid programs for the elderly require either restricted income or assets or both. This holds true if one is applying for in-home care, nursing home care, or assisted living under a Home and Community Based Services (HCBS) Waiver.

This article discusses spend down of both income and assets but the main focus will be on asset spend down, which is more complicated than income spend down and is applicable across the 50 states, while income spend down is only relevant in a portion of the states.

Asset Spend Down
Also, as previously discussed, an applicant must have assets, also called resources, under a certain amount to qualify for Medicaid. However, being over the asset limit does not mean one cannot qualify for Medicaid benefits. When considering one’s assets, it’s important to be aware that some assets are exempt, or said another way, not counted towards the asset limit. (Further detail is below under Countable Assets and Non-Countable Assets). If one is over the asset limit after considering all non-countable assets, one will have to “spend down” assets in order to meet Medicaid’s asset limit. However, one needs to proceed with caution when doing so. Medicaid has a look-back period in which all past transfers are reviewed. If one has gifted assets or sold them under fair market value during this timeframe, a period of Medicaid ineligibility will ensue.

Income Spend Down
As mentioned above, in order for applicants to be eligible for Medicaid, they must have limited income. If one has income above the qualifying limit, one can still qualify for Medicaid via spend down. In many states, this option is known as the “medically needy pathway”. Depending on the state in which one resides, “medically needy” may be called something different. For example, the program might be called any of the following: Share of Cost, Excess Income, Surplus Income, or simply, Spend Down. Regardless of name, these programs all allow applicants to spend excess income on medical bills and expenses, such as past due medical charges, prescription medications, health insurance premiums, and doctors’ appointments. Once Medicaid applicants have spent their excess income (the amount over the income limit) on medical expenses, they will be Medicaid eligible for the remainder of the “spend down” period.

Not all states have a medically needy pathway. These states are called income cap states, and in these states, Medicaid applicants can still become income eligible via Qualified Income Trusts (QITs). Commonly called Miller Trusts, an applicant’s excess income is directly deposited into an irrevocable trust, which means it cannot be changed or dissolved. A third party, called a trustee, controls the QIT. The money in the trust is exempt from Medicaid’s income limit, and it is only available for very limited purposes, such as paying for the senior applicant’s long-term care and medical related expenses.

Understanding Exempt vs. Non-Exempt Assets
Not all assets held by the applicant are counted towards Medicaid’s asset limit. When determining if one is over the asset limit, it’s critical to know which assets are counted and which are not.

Countable Assets
Countable (non-exempt) assets are counted towards the asset limit. They are also sometimes referred to as liquid assets, which are assets that are easily converted to cash. Countable assets include cash, bank accounts (checking, money market, savings), vacation houses and property other than one’s primary residence, 401K’s and IRA’s that are not in payout status (depending on the state in which one resides, this isn’t always the case), mutual funds, stocks, bonds, and certificates of deposit.

Non-Countable Assets
Non-Countable (exempt) assets are not counted towards Medicaid’s asset limit. Exempt assets include one’s primary home, given the individual applying for Medicaid, or their spouse, lives in it. Some states allow “intent” to return home to qualify the home as an exempt asset. There is also a home equity value limit for exemption purposes. As of 2019, the equity value cannot exceed $585,000 or $878,000, depending on the state in which one resides. However, there is no equity value limit if a Medicaid applicant’s spouse lives in the home. Another exception to the rule is California, which has no home equity value limit whatsoever (for certain types of Medicaid). Other exempt assets include pre-paid burial and funeral expenses, an automobile, term life insurance, life insurance policies with a cash value no greater than $1,500 (this limit can be the combined face value of multiple small life insurance policies), household furnishings / appliances, and personal items, such as clothing and engagement / wedding rings.

Determine Your Asset Limit and How Much Must be Spent Down
When considering the gray line between exempt and non-exempt assets and the complicated rules governing single applicants versus married applicants and who holds what assets, it can be difficult to determine if one is over the Medicaid asset limit, and if so, by how much. Furthering the complexity is the fact that asset limits vary based on the state in which one resides.

Individual Applicants
It is fairly standard that a single elderly applicant is limited to $2,000 in countable assets, but again, this figure varies based on the state in which one resides. For instance, in Maryland, single applicants can keep up to $3,000 in assets, Mississippi allows up to $4,000 in assets, and New York has a much higher asset limit of $15,450 (in 2019).

Married Couples
In most cases, married couples (with both spouses as applicants) are able to retain up to $3,000 of their combined countable assets. Again, there are exceptions to this rule based on the state in which one resides. North Dakota allows married couples to keep up to $6,000 in assets, Oklahoma allows up to $4,000 in assets, and Rhode Island couples can retain up to $8,000 in assets.

Married Couples with One Applicant
When only one spouse of a married couple is applying for nursing home Medicaid or long-term care via a Medicaid waiver, the non-applicant spouse, commonly called the community spouse, is able to retain a higher number of assets. As of 2019, this figure, called the Community Spouse Resource Allowance (CSRA) can be as great as $126,420. That said, there are a few exceptions, such as Illinois, which only allows a community spouse to keep up to $109,560 in assets, and South Carolina, which allows the community spouse to keep assets up to $66,480.

The CSRA is further complicated by the fact that some states are 50% states, while others are 100% states. In very simplified terms, in 50% states, the community spouse can keep up to 50% of the couples’ assets, up to the maximum allowable amount. (As mentioned above, this figure, as of 2019, is $126,420 in most states). There is also a minimum resource allowance, which as of 2019, is $25,284. This means that if the combined assets of the couple are at or below $25,284, the community spouse is able to retain 100% of the assets. In 100% states, the community spouse is able to retain 100% of the couples’ joint assets, up to the maximum allowable amount. (Again, this figure, as of 2019, is $126,420 in most states).