Older adults living on fixed incomes often struggle to afford the health care they need. Medicaid, a government health insurance program administered by states, helps people with limited means afford medical care and other services. But it may be harder to qualify if your limited income is still too high to qualify for Medicaid. You may need to do what's called a  "Medicaid spend-down program" to become eligible.

What is a Medicaid spend down program?

In a Medicaid spend-down, a person uses or “spends down” the difference of their income and their state’s Medicaid income limit on health care expenses. Once they reach the limit, they qualify for Medicaid.

For example: Imagine you’re on Medicare, a federal health insurance program for older adults, and your state’s Medicaid income limit is $2,000 a month. If your monthly income is $2,200, you must spend the $200 difference on health care costs, such as your Medicare premiums, deductibles, copayments, and other appoved medical costs.¹

Spend-down programs may go by different names depending on where you live, such as “excess income program,” “surplus income program,” or “medically needy program.”² States with Medicaid spend-down programs use different budget periods, typically ranging from one to six months. During that period, you may need to incur medical expenses equal to the difference between your income and your state's Medicaid income limit before you can qualify for coverage.³ 

How do I qualify for a Medicaid spend down?

You may qualify for Medicaid through a spend-down program if your income is too high for regular Medicaid, but you have significant medical expenses. People applying for Medicaid long-term care may also need to spend down excess income or assets to meet their state's eligibility requirements.

Medically needy programs, for instance, may restrict eligibility further to people who are age 65 or older, have a disability, or are blind.⁴ They also determine a person’s spend-down using a state “medically needy income limit” based on the person’s cost of living and how many people live with them.⁴ If your income is above your state's medically needy income limit, you may still qualify for Medicaid if you have enough medical expenses. For example, if your income is $800 and the limit is $300, you may need to incur $500 in qualifying medical costs before Medicaid coverage begins.

How do I apply for a spend-down program?

If your state Medicaid office tells you that your income is too high for Medicaid, ask them if there is a spend-down option. If there is, your state may have a separate application. Check with your local Medicaid office to see what documents you’ll need, and whether you should apply online or in person.

What expenses qualify for Medicaid spend down?

Examples of health care-related expenses you can use to spend down your income:

• Doctor visits and medical services
• Hospital care (inpatient and outpatient)
• Prescription drugs
• Dental care
• Laboratory tests and fees
• Physical therapy and other rehabilitative services
• Home health care
• Nursing services
• Nursing home costs
• Organ transplant expenses
• Prosthetic devices, such as artificial limbs, hearing aids, eyeglasses, and crutches

Keep copies of medical bills and receipts for any health care-related purchases. These will serve as proof of expense during your spend-down period.

What income can I spend down?

Income is money you receive regularly. If you need to spend down money to qualify for Medicaid, it’s important to know your state’s Medicaid spend-down rules about what counts as income to draw from.

In addition to your salary or wages, a state Medicaid program may consider the following as sources of income:⁵

Your state’s Medicaid program will determine the amount of income you’re limited to for Medicaid eligibility. Income limits also depend on if you’re single or married. For married couples, the limits vary even more if one or both spouses need Medicaid.⁵

What if I don’t spend down enough income?

If you cannot spend down enough income during your spend-down period, you may temporarily lose Medicaid coverage.⁶ A Medicaid caseworker can answer questions and concerns you have about gaps in coverage during a Medicaid spend-down. Your local State Health Insurance Assistance Program (SHIP) also has Medicare counselors to help you with Medicaid issues.  

Because the math behind spending down for Medicaid can get confusing, a Medicaid planner can help you keep track of your finances to make sure you avoid any financial penalties. Your local Area Agency on Aging can help you locate free planning assistance.

What if my state doesn’t have a spend-down program?

While every state doesn’t have a spend-down program, some states may offer a Medicaid Buy-In option to help you reach income limits for Medicaid eligibility:²

Medicaid Buy-In programs allow working adults under age 65 with a disability to qualify for Medicaid. States with these programs have different eligibility rules. For example, there may be limits on how much income you’re allowed to have if you already receive Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI). In some states, you may not have any income limits, or you may or may not have to pay a monthly premium to receive care.⁷

"Even if you think you have too much income for Medicaid Buy-In, you should still apply," said Jen Teague, NCOA's Director for Health Coverage and Benefits.

Because all states discount certain types of income, what’s left may help you qualify. In addition, you may qualify for financial help to buy health insurance through the health insurance Marketplace," Teague said.

Check with your state’s Medicaid office to see what your available options are.

You can also:

• Contact your local SHIP.
• Visit a Benefits Enrollment Center, if there's one near you.
• Call the NCOA HelpLine at 1-800-794-6559.

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