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Medicaid spend down and personal assets: tips for eligiblity

by Shannon Lee

Understanding the role of personal assets in Medicaid eligibility can be confusing. Learn what Medicaid Spend-Down means, and what it might take to qualify for the coverage.

Many people who need Medicaid to help cover medical expenses might not be eligible, thanks to income limits. That is where Medicaid "Spend-Down" comes in. Spend-Down looks at your medical bills, your ability to pay, and your assets in determining whether you can become eligible for Medicaid assistance.

What is Medicaid? Do I Qualify?

Medicaid is a government program that helps pay the medical bills of those with low incomes. It is also available to those who are disabled or over the age of 65. If you are pregnant or have small children, you might also qualify.

However, if your income puts you above the federal guidelines set for Medicaid eligibility, you might have to prove that you cannot pay the medical bills you are facing. That is called Medicaid Spend-Down.

How Does Medicaid Spend-Down Work?

In order to qualify for Medicaid Spend-Down, you must have a certain amount of medical bills. This is called your deductible. Each family typically has a different deductible, depending upon income.

You should save all of your medical bills, including receipts for medical-related items, such as transportation to the doctor, durable medical equipment, home health care, and over-the-counter medications. You can even include previous medical bills that have not been paid in full. If you have Medicare, your premiums and co-pays can be added to the total.

When you have enough in medical bills to meet your deductible, you may be eligible for Medicaid.

Medicaid Eligibility and Personal Assets

However, many people find they need Medicaid but have too many assets to qualify. In this case, families might be able to transfer assets in order to "spend down" to Medicaid eligibility. Not all transfers are acceptable, however, and Medicaid can look at up to 60 months of your past financial history to determine where your assets went.

If a transfer was found to have been completed for the express purpose of spending down to Medicaid, there might be a penalty imposed that would prevent Medicaid eligibility for a period of time. There are transfers that are always acceptable, however. These include:

  • Assets transferred to your spouse or to a third party with the intention of benefit for the spouse
  • Assets transferred by your spouse to a third party for the benefit of the spouse
  • Assets transferred or trusts established for disabled individuals
  • Transfers that were completed for some purpose other than qualifying for Medicaid

Tips to Prepare for Medicaid Spend-Down

In the midst of a medical crisis, families often realize they may soon be facing a financial one as well. By planning far ahead, families can avoid a nightmare of red tape. Here are a few tips to consider:

  • The "look-back" period for Medicaid eligibility is up to 60 months. If you have a chronic medical condition that you know may require hospitalization or significant medical expenses in future years, consider transferring assets into a trust long before the need arises. A good attorney can help you choose the proper one.
  • If you live in an "income cap" state, you can set up an Income Trust to handle your income, and thus might be able to save much of it. Again, an attorney's help may be necessary.
  • Learn what assets are countable and which are not. For instance, your home should not count against you, but your bank account might. Knowing which assets matter most can help you plan for the future.

A Final Word on Medicaid Planning

Protecting your assets is important, but so is protecting your end-of-life wishes. Obtaining durable power of attorney is another important step for peace of mind. Between your medical planning and financial considerations, your family should be able to breathe easier if a medical crisis does occur.