Medicaid is a U.S. government program that offers health coverage to Americans who meet specific criteria. Eligible beneficiaries include low-income adults, children, pregnant women, the elderly and people with disabilities, according to the official Medicaid website. Though the program is administered by state governments, compliance with federal requirements is mandatory. Funding appropriation is a joint effort by the states and the federal government. Medicaid reports that 63.9 million people were covered at the end of 2019.
Understanding spend down
The concept of spend down comes into play because income and assets above a certain level disqualifies applicants for long-term care under Medicaid. Spending down is a way to legally bring income and assets in line with eligibility requirements. It is important to research how this is done in your specific area because the parameters vary across the country and even within the states. Since this is complex, some people take advantage of the expertise offered by professional Medicaid planners. The American Council on Aging website offers a free service with a list of spend-down tactics and links to find planners. The process of spending down is an education in itself, and it helps to understand the vernacular.
Spend down terminology
- Asset spend down: Spending resources down to meet the asset ceiling set by Medicaid.
- Countable assets: Sometimes referred to as non-exempt assets or liquid assets that can easily be converted to cash because these assets count toward the maximum you can possess for Medicaid eligibility. Examples are bank accounts, vacation homes, stocks and bonds.
- Non-countable assets: Resources that are exempt from the asset limit, such as your private primary home, provided it does not exceed a set equity value as determined by your state.
- Income spend down: Spending down income in excess of the qualifying limit, such as depositing money into an irrevocable trust controlled by a third-party.
- Look-back period: Time frame that Medicaid looks at to determine if assets were given away in an effort to qualify for Medicaid when these assets could have been used to cover the cost of long-term care. This period is 60 months in most states and 30 months in California.
Asset spend down methods
Following are examples of some ways people spend down assets:
- Pay off credit card balances, a mortgage, or personal or auto loans.
- Buy medical items not covered by your health insurance, such as dentures, glasses and hearing devices.
- Reconstruct your home to make it more senior-friendly, such as adding a walk-in shower.
- Purchase an annuity.
- Buy an irrevocable funeral trust.
Resources for more information
To learn more about Medicare insurance and Medicaid, visit Medicaid.gov, Medicare.gov, cms.gov and medicaidplanningassistance.org. There you can find details about the programs, criteria for qualification and links to additional resources.