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Medicaid Spend Down


If you need to qualify for Medicaid coverage for long term care, you may be trying to think of smart ways to spend down your assets. Burial plans can be set up as exempt assets so that they are not counted when applying for Medicaid coverage. This way, you are able to preserve some assets that your family will need one day.

What is Medicaid?

Medicaid is a state and federally funded health insurance program serving low income families and individuals in critical need for medical care. Medicaid covers over 72.5 million Americans including seniors, and many others. Those who are determined to be “medically needy,” but whose income is too high to qualify for Medicaid may be able to qualify by “spending down” their assets to a level that makes them eligible for the state’s medically needy qualification standards.

What does “spend down” mean?
Spend down is the process of divesting an individual’s assets down to the amount that makes him or her eligible for Medicaid coverage for long term care. Because of the high cost of nursing home care, which is usually between $6,000 and $7,000 per month, careful planning is essential before spending down.

How can I protect my assets from being spent on nursing home costs?
Most state Medicaid programs allow certain assets to be exempt from consideration, and thus protected from being spent out of pocket on nursing home costs. Before spending down, understand which assets are considered exempt, which are non-exempt, and how much you can preserve for your family. Most states follow the Social Security Administration’s (SSA) Supplemental Security Income (SSI) guidelines to establish Medicaid eligibility for seniors over 65 and for disabled individuals. Some states like Ohio use their own rules to establish eligibility for Medicaid which are different from SSA’s SSI rules.

Will my spouse be affected by Medicaid spend down?
The spouse of the person in long term care is afforded some measure of protection from spousal impoverishment.

In general, what kinds of assets are exempt from being counted for Medicaid qualification?
Other than the income that your spouse is allowed, you can also set up certain assets as exempt from being counted, at least for the time-being, for Medicaid qualification. The following is by no means an exhaustive list, but gives you an idea of the types of assets that generally are excluded by the state’s Medicaid program. Every state has the ability to set its own qualification rules, but in general, exempt assets include:

  • An irrevocable prepaid contract for burial space items (with no limitation on the amount) for you and your immediate family members including your spouse, your children (including adoptive and stepchildren), their spouses, your siblings and their spouses, and your parents. Burial space items are counted as separate from burial funds.
  • An irrevocable prepaid contract for burial funds for you and your current spouse only that includes funeral service costs such as transportation of the body, embalming, cremation, flowers, clothing, and services of the funeral director and staff, etc.
  • Your primary residence
  • Personal property and household belongings
  • One motor vehicle
  • Life insurance with a face value $2000 or under
  • Up to $2000 in funds set aside for burial, i.e. the burial fund
  • Certain types of  burial arrangements such as pre-need burial agreements
  • Assets held in specific kinds of trusts. See “Trusts” for more information about how a trust can affect your eligibility for Medicaid.
  • An account which is designated for burial funds, and is revocable, with a value of up to $2000 for the current spouse.
    • (Other burial funds, irrevocable burial contracts, and cash surrender value from life insurance will reduce this allowable amount.)
  • One wedding and one engagement ring.

A married couple can keep considerably more if one spouse is still well, and does not need Medicaid; in most cases half the assets up to a certain amount.

Non-exempt assets
Non-exempt assets are those that Medicaid considers as part of your accessible, countable assets when you apply for assistance. You will be expected to liquidate these types of assets to help you pay for long term care costs. Non-exempt assets will be considered as available to you to use toward paying the cost of your medical care. This includes money and a variety of real and personal property which can be valued and turned into cash. These include (but are not limited to):

  • Cash
  • Checking and savings accounts
  • CDs, stocks, bonds, or mutual funds
  • Retirement accounts including IRAs, 401(k)s, 403(b)s
  • Prepaid funeral contracts that are not irrevocable (can be cancelled)
  • Trusts (depending on how they are set up and your access to them)
  • Property other than the primary residence
  • Jewelry and valuable art or collections
  • More than one vehicle, boats, RVs, etc.
  • Cash surrender of life insurance with a face value of $2,000 or more

Regarding burial funds and burial space items, asset and income spend down; allow us at Edwards to help answer the questions you may have.

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