Spend-down

What it means

Medicaid eligibility is means-tested. A person whose resources are above the limit must reduce them — generally by paying for their own care — before Medicaid will contribute.

Some states also run a medically needy program, where somebody with income above the limit qualifies once medical costs have absorbed the excess.

Not everything counts. A home, in some circumstances, a vehicle, and certain personal property may be excluded, and rules protect a spouse still living at home.

Why it matters

It is the mechanism by which a lifetime of savings is consumed by care, and it is entirely predictable once the arithmetic is understood.

Attempts to shortcut it — giving assets away — collide with the look-back period and usually make things worse.

When you are likely to meet it

• When a parent's savings are being consumed by care costs.
• When applying for Medicaid.
• When somebody suggests transferring a house to the children.

How this varies by state

Asset and income limits, what is excluded, and whether a medically needy pathway exists are all set by each state within federal rules.

Related terms

• ABLE accountA savings account a disabled person can hold without losing means-tested benefits.
• Activities of daily livingThe everyday self-care tasks — bathing, dressing, eating, using the toilet, moving from a bed to a chair, continence — that care assessments and insurance policies measure.
• Community spouse resource allowanceWhat the husband or wife still at home may keep when the other qualifies for Medicaid care.
• Custodial careHelp with everyday living rather than medical treatment — bathing, dressing, eating, moving about. It is what most long-term care actually is.
• Funeral trustMoney set aside to pay for a funeral, held so it cannot be spent and often so it does not count for Medicaid.
• Home and community-based services waiverA Medicaid program paying for care at home instead of in a nursing facility.
• Look-back periodThe stretch of time before a Medicaid application during which gifts and transfers are examined, and can delay eligibility.
• MedicaidA joint federal and state program that pays for health care, including long-term care, for people with limited income and assets.
• Medicaid estate recoveryA state's claim against the estate of somebody whose long-term care Medicaid paid for, to recover what it spent.
• Personal care agreementA written contract under which a family member is paid to provide care.
• Skilled nursing facilityA facility providing nursing and rehabilitation care that has to be delivered by licensed clinical staff — not the same thing as a nursing home in the everyday sense.

Sahvelo guidance that uses this

• Housing transitions