Finding health care while having little to no money is difficult for older adults living on fixed incomes. While Medicaid, a federal-state public insurance program, helps people with fewer resources afford medical care, it may be harder to qualify if your limited income is still too high to qualify for Medicaid. You may need to do what's called a "Medicaid spend down" to become eligible.
What is a Medicaid spend down?
In a Medicaid spend down, a person uses or “spends down” the difference of their income and their state’s Medicaid income limit on health care expenses. Once they reach the limit, they qualify for Medicaid.
For example: Imagine you’re on Medicare, a federal health insurance program for older adults, and your state’s Medicaid income limit is $2,000 a month. If your monthly income is $2,200, you must spend the $200 difference on health care costs, such as your Medicare premium. If you spent $250, Medicaid would pay the extra $50.1
Spend-down programs may go by different names depending on where you live, such as “excess income program,” “surplus income program,” or “medically needy program.”2 State Medicaid programs also have different spend-down periods. This means you may need to spend down anywhere from one to six months’ difference of your income and the Medicaid income limit.3
How do I qualify for a Medicaid spend down?
You may qualify for Medicaid with a spend down if you have high medical expenses. Also, people who have income or assets over the limit for Medicaid for long-term care will also need to spend down.
Medically needy programs, for example, may restrict eligibility further to people who are age 65 or older, have a disability, or are blind.4 They also determine a person’s spend down using a state “medically needy income limit” based on the person’s cost of living and how many people live with them.4 For example: If a person’s income is $800, but their medically needy income limit is $300, they’ll need to spend down $500 to be eligible for Medicaid.
How do I apply for a spend-down program?
If your state Medicaid office tells you that your income is too high for Medicaid, ask them if there is a spend-down option. If there is, your state may have a separate application. Check with your local office on documents you’ll need, and whether you can apply online or in person.
What expenses qualify for Medicaid spend down?
Examples of health care-related expenses to spend down your income on include:5
- Medications
- Paid and unpaid Medical bills
- Nursing home care
- Health-related home renovations such as wheelchair ramps or chair lifts
- Transportation to medical appointments
Keep copies of medical bills and receipts for any health care-related purchases to show your state Medicaid office proof of what counted toward your spend-down period.
What income can I spend down?
Income is money you receive regularly. If you need to spend down money to qualify for Medicaid, it’s important to know your state’s Medicaid spend down rules about what counts as income to draw from.
In addition to your salary or wages, a state Medicaid program may consider the following as sources of income:6
- Social Security retirement payments
- Social Security disability payments like Social Security Disability Insurance (SSDI)
- Veterans benefits
- Pensions
- Interest from bank accounts and certificates of deposit
- Dividends from stocks and bonds
Your state’s Medicaid program will determine the amount of income you’re limited to for Medicaid eligibility. Income limits also depend on if you’re single or married. For married couples, the limits vary even more if one or both spouses need Medicaid.6
What if I don’t spend down enough income?
If you cannot spend down enough income during your spend-down period, you may temporarily lose Medicaid coverage.7 A Medicaid caseworker can answer questions and concerns you have about gaps in coverage during a Medicaid spend down. Your local State Health Insurance Assistance Program (SHIP) also has Medicare counselors to help you with Medicaid issues.
Because the math behind spending down for Medicaid can get confusing, a Medicaid planner can help you keep track of your finances to make sure you avoid any financial penalties. Your local Area Agency on Aging can help you locate free planning assistance.
What if my state doesn’t have a spend-down program?
While every state doesn’t have a spend-down program, some states may offer a Medicaid Buy-In option to help you reach income limits for Medicaid eligibility:2
Medicaid Buy-In programs allow working adults under age 65 with a disability to qualify for Medicaid. States with these programs have different eligibility rules. For example, there may be limits on how much income you’re allowed to have if you already receive SSI or SSDI. In some states, you may not have any income limits, or you may or may not have to pay a monthly premium to receive care.7
"Even if you think you have too much income for Medicaid Buy-In, you should still apply," said Jen Teague, NCOA's Director for Health Coverage and Benefits.
Because all states discount certain types of income, what’s left may help you qualify. In addition, you may qualify for financial help to buy health insurance through the health insurance Marketplace," Teague said.
Check with your state’s Medicaid office to see what your available options are. For in-person help, contact your local SHIP. You can also visit a Benefits Enrollment Center, if there's one near you. NCOA also has a HelpLine that you can call to get free support. To get started today, call 1-800-794-6559, .
Sources
1. Medicaid.gov. Medicaid Eligibility. Found on the Internet at https://www.medicaid.gov/medicaid/eligibility/index.html
2. Medicare Rights Medicare Interactive. Spend-down program for beneficiaries with incomes over the Medicaid limit. Found on the Internet at https://www.medicareinteractive.org/get-answers/cost-saving-programs-for-people-with-medicare/medicare-and-medicaid/spend-down-program-for-beneficiaries-with-incomes-over-the-medicaid-limit
3. Centers for Medicare & Medicaid Services. Medicaid Spenddown & Extra Help. Found on the Internet at https://www.cms.gov/Outreach-and-Education/Outreach/Partnerships/downloads/11249-P.pdf
4. U.S. Department of Health and Human Services. Implementation Guide: Medicaid State Plan Eligibility Medically Needy Income Level. Found on the Internet at https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/ig%2520medically%2520needy%2520income%2520level_5.pdf
5. U.S. News & World Report. How a Medicaid Spend Down Works. May 17, 2019. Found on the Internet at https://money.usnews.com/money/retirement/baby-boomers/articles/how-a-medicaid-spend-down-works
6. LongTermCare.gov. Medicaid Eligibility. Found on the Internet at https://acl.gov/ltc/medicare-medicaid-and-more/medicaid/medicaid-eligibility
7. Medicaid.gov. Medicaid “Buy-in” Q&A. Found on the Internet at https://www.medicaid.gov/sites/default/files/2019-12/medicaid-buy-in-qa.pdf
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