Spending Down Assets to Qualify for Medicaid

Medicaid has strict asset rules that require applicants to "spend down" their assets before they can qualify for coverage.  It is important to know what you can spend your money on without endangering your Medicaid eligibility.

In order to be eligible for Medicaid in New York, applicants must have no more than $15,150 in "countable" assets (the dollar figure may differ in other states).  In addition, Medicaid also has strict asset transfer rules.  If an applicant transfers assets for less than market value within five years of his or her would-be Medicaid eligibility date, the applicant will be ineligible for Medicaid for a period of time, depending on the value of the asset(s) transferred.  Applicants for Medicaid and their spouses may protect savings by spending them on “non-countable” assets.

A Medicaid applicant can spend down money on anything that would benefit the applicant. Following are examples of what a Medicaid applicant may be able to spend money on without running afoul of the Medicaid transfer penalty rules:

Prepay funeral expenses. A prepaid or pre-need funeral contract allows you to purchase funeral goods and services before you die. The contract with the funeral home must be made “irrevocable” in order to avoid the funds paid to the funeral home being considered “countable” for Medicaid eligibility purposes.

Pay off your mortgage, car loan, or credit card debts. You can pay off the debt fully or make partial payments.

Make repairs to your principal residence. Fix the roof, make the house handicapped accessible, buy new carpet, etc.

Replace an old automobile with a new one. This can be useful for the healthy spouse.

Update your personal effects. Buy household goods or personal comfort objects. Buy yourself or your spouse a new wardrobe, electronics, or furniture.

Medical care and equipment. Purchase items that aren't covered by Medicare or Medicaid. See a dentist or get your eyes checked if those items aren't covered by your insurance.

Pay for more care at home. Make sure you get any caregiving agreements in writing, especially if family members are providing the care.

Buy a new home.A home can be an exempt asset, so it may be possible to purchase a new home.

In the case of married couples, it is often important that any spend-down steps be taken only after the unhealthy spouse moves to a nursing home if this would affect the amount of money the community spouse would get to keep, called the community spouse's resource allowance.

Each state has different requirements for spend down. Before making any spend down plans, consult with your elder law attorney.