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Is Medicaid Spend Down the Best Choice for Your Financial Plan?

Is Medicaid Spend Down the Best Choice for Your Financial Plan?
Medicaid Planning
January 19, 2021

Medicaid is designed to improve the health of people who might otherwise go without medical care for themselves. Long-term care costs can be overwhelming for families. A Florida Medicaid Planning Attorney can assist with legally and ethically shifting assets from "unprotected" to "protected" so an individual may qualify for Medicaid benefits. This can greatly help a family with long-term care costs and keep assets with the spouse. This process is known as Medicaid Spend Down

A Medicaid planning attorney can provide information to determine whether a Medicaid Spend Down financial Strategy is the best plan for your family.

What is Medicaid Spend Down?

An individual can use Medicaid Spend Down - which is really not one “thing” but a series of financial strategies - when his or her assets are too high to qualify for Medicaid. An individual must "spend down" some of these countable resources to reduce the level and qualify for Medicaid.

States have different asset thresholds at which an individual would have to spend down eligible assets to receive benefits, in Florida this threshold is $2,000. Countable assets to determine your "spend down" could include savings accounts, IRAs, and 401(k)s, and other investments including stocks, bonds, and mutual funds. In other circumstances, certain categories of funds are deemed “exempt” or “non-countable.” However, how to conduct a spend-down can depend on a variety of factors. To determine how to calculate the spend-down amount while considering each individual financial situation, you should consider working with a Medicaid Planning Attorney.

When is Medicaid Spend Down a Useful Tool?

Some of the biggest concerns include paying for prescriptions, expensive medical care, home health care (home health aides), ALF bills, and nursing home bills. For those who are disabled or over age 65, "spending down" allows you the opportunity to receive mandatory benefits, including inpatient and outpatient hospital services, physician services, laboratory and x-ray services, and home health services, among others. You also may receive optional benefits including prescription drugs, case management, physical therapy, and occupational therapy.

Prescription Drug Coverage

Using Medicaid Spend Down can be particularly helpful for individuals with high medical expenses because they can receive Medicare prescription drug coverage if they are using Original Medicare, a Medicare Advantage Plan, or if they have existing prescription drug coverage.

Nursing Home Coverage

Engaging a Florida Elder Law attorney to provide Medicaid Spend Down strategies can provide benefits not covered under Medicare, such as nursing home care (after 100 days) and personal care services at home or in an Assisted Living Facility.

Do you qualify for lower Prescription Costs? How the "Spend Down" Impacts Medicare's "Extra Help" Program

Certain income and resource levels may qualify an individual for "a program called Extra Help from Medicare to pay the prescription costs, premiums, deductibles, and coinsurance of Medicare drug coverage."

The Department of Health and Human Services explains that "When a person who qualifies for Medicaid through a spend-down (and is eligible for Extra Help), the Extra Help the person gets will potentially reduce the medical expenses they would otherwise use to meet spend down. This might change the speed that the person meets their spend down to qualify for Medicaid." To understand whether this may impact your situation, discuss your specific details with a Medicaid planning attorney.

Examples of Medicaid Spend Down

Spending Down Large Asset Amounts

A common reason people will need to spend down their assets is if they start with, or they were to receive, a large sum of money that would put them over the allowable Florida medicaid eligibility limits. This happens due to a personal injury settlement, an inheritance, or any other large payout. Sometimes, if the increase in assets only puts the person over the threshold by a few thousand dollars, the spend down would be as simple as paying off some debt, prepaying for funeral expenses, or fixing up the house (even taking a vacation). If the person is way over the limit, however, a Medicaid Planning Attorney should be consulted to make sure that the spend down is done appropriately and that money isn’t wasted. For that, we have a variety of strategies using special needs trusts, medicaid compliant annuities, and certain other investments to name a few - that allow your Medicaid spenddown plan to not be wasteful - and in some cases, allow you to set aside money to use at a later date.

Extra Help and Medicaid Spend Down

With Extra Help and a Medicare drug plan, an individual does not pay a monthly premium, has no deductible, and pays only small copayments. His copayments will be $1 for each of his 10 generic prescriptions, for a total of $10. 

"Spousal Refusal" in Florida for Medicaid Services Eligibility

New York and Florida are unique in that they permit something called "spousal refusal." In these scenarios, the well (or community) spouse will refuse to provide support for the spouse who needs nursing home care. As a result, the spouse who needs care will immediately be eligible for Medicaid and receive services (with these facilities costing $10,000+ per month, this can mean huge savings).

How to Apply for Medicaid Using Medicaid "Spend Down"

  1. Develop a system to monitor health care spending.
  2. Each state regulates Medicaid spend-down eligibility differently, as such, first individuals should understand the eligibility rules and limitations.
  3. Discuss your eligibility with a Medicaid planning lawyer as soon as possible to make sure you are not jeopardizing their ability to qualify for Medicaid.
  4. You can apply for Medicaid through your state Medicaid agency, or you can fill out an application through the Health Insurance Marketplace.
  5. If you have been denied full coverage under the Medicaid program, you should determine whether you qualify for a spend down and, if so, how much the spend down for medical expenses needs to be.
  6. Complete an income or asset spend down with your Medicaid planning attorney to determine what costs you can put toward a Medicaid spend-down. 
  7. Spend down all qualified assets needed to be entitled to receive benefits according to the threshold designated by the state.
  8. When looking to apply for Medicaid, ensure that you have not given assets away with 5 years of a Medicaid application. This can result in a Medicaid transfer penalty.
  9. Work with a Medicaid planning attorney to determine the impact of a fund transfer to an irrevocable trust or to discuss other strategies to allow you to qualify for Medicaid long-term care services now.

Additional Considerations to Discuss Medicaid Planning Attorney

  1. Do you receive Social Security Income?
  2. Are you married or single?
  3. Are you living at home or in an ALF or nursing home?

Secure Your Opportunity for Benefits under a Medicaid Spend Down

As you can see there are many factors and considerations when determining whether utilizing the Medicaid Spend Down to receive Medicaid benefits should be a portion of your financial plan. Furthermore, if you do utilize Medicaid Spend Down as part of your financial plan, there are many determinations that will hinge on your situation. Speak with a Medicaid planning lawyer as soon as possible to make sure they are not jeopardizing their ability to qualify for Medicaid.

Reach out today to schedule a consultation.

Jason Neufeld is the Founder and Managing Partner of Elder Needs Law, a Florida estate planning and elder law firm he created in 2017. With more than 15 years of experience practicing law, he represents clients in a wide range of legal matters, including Medicaid planning, estate planning, elder law, probate, Medicare, and life insurance.

Jason received his Juris Doctor from the University of Miami — School of Law and is a member of the Florida Bar and the Broward County Bar Association. He has received numerous accolades for his work, including being named a Rising Star and Super Lawyer by Super Lawyers and among the Florida Legal Elite by Florida Trend in 2024.

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