What is a Medicaid Spend Down?
The term “spenddown” or “spend down” (sometimes I see it as one word, other times as two words) in a Medicaid context essentially refers to one of two situations:
- A current medicaid recipient receives assets (usually from a gift, personal injury settlement or inheritance) which, without taking additional action, would result in the loss of Medicaid eligibility. The medicaid recipient may be advised to spenddown their excess assets to remain Medicaid qualified; or
- Someone does not currently meet Medicaid-eligibility requirements, because they have too much money (or other assets countable by Medicaid) but would benefit from Medicaid (perhaps to pay for some or all of their long-term care expenses). This person may also be advised to spend down their assets in order to become Medicaid qualified.
“Medicaid spend down” is not a legal term. It’s just a common way to refer to how one can get rid of excess assets in order to qualify for Medicaid.
How to “spenddown” for Medicaid?
In Florida, one must have less than $2,000 in total countable assets. What Medicaid considers non-countable (or exempt) assets is further discussed in the linked article. But, anything in a bank (savings / checking / money market) or brokerage (equities, stocks, mutual funds, ETFs, bonds, etc…), unless in a qualified retirement plan, will be considered countable.
If you have more than $2,000 in countable assets at the end of any calendar month, you will not be eligible for most Medicaid programs for that entire month and will need to spenddown those assets.
You can spend down your own money to become Medicaid eligible
A Medicaid spenddown can literally refer to spending one’s money to get below $2,000.00.
I was recently approached by a potential client who was a medicaid recipient and had $1,000 to her name - but was about to receive $5,000.00 from a personal injury settlement. If this person did nothing, she would have $6,000.00 and lose her Medicaid. I explained that, if she could purchase $4,000.00 or more worth of goods or services, she would be back under $2,000.00.
During our consultation, I discovered that she had about $3,000 in credit-card debt and her car needed approximately $1,000 worth of repairs and a new paint job. So, our Medicaid spenddown plan was just to pay off her Visa card in full and get those repairs. If, after paying Visa and the mechanic, she was still slightly over $2,000 she could buy new clothes, eat out at a nice restaurant, etc… to get back into the medicaid eligibility zone. I explained that, after her spenddown, it would be important for her to report the change in circumstances to Medicaid.
After our initial consultation, she didn’t need to hire me.
Had this Medicaid recipient received a personal injury settlement that was significantly larger, she may have wanted to hire me because it would likely be wasteful for her to spend so much money within a month! We would have reviewed a number of other Medicaid spend down strategies.
Essentially, this is the value I as an Elder Care Lawyer who focuses on Medicaid planning bring to my clients. I help people who have too much (or will have too much) by way of income or assets legally and ethically qualify for Medicaid by protecting their assets in a Medicaid-compliant manner (in a way that does not trigger the five-year look back for Medicaid).
We have a number of ways to do this: some involve trusts, others caregiver contracts, there are even certain investments available that are Medicaid compliant.
How NOT to spend down for Medicaid Qualification
Do not give away assets.
Giving assets away or gifting results in a Medicaid penalty period. Gifting is only appropriate as a Medicaid spend down if my client understands that they will be intentionally subjecting themselves to a period of disqualification from Medicaid.
Giving away assets is how Medicaid recipients get into trouble (e.g. you have $50,000 and decide to give $48,000 to your children = no Medicaid for approximately five months and possibly owing money to Medicaid!)
As a result of the penalty period, gifting or giving away assets is never advised when my client already has medicaid and wants to maintain benefits after receiving a personal injury settlement or inheritance.
To discuss how to spend down assets in a way that will not result in Medicaid disqualification in Florida, please schedule a consultation today.
Medicaid Spend Down Planning Resources