How to Spend Down Assets for Medicaid

Amy Beacham, MBA
assets on block letters with orange background

Medicaid is a joint federal and state program that provides healthcare coverage to those with limited income and resources. In the context of long-term care, Medicaid covers custodial care in a Medicaid-approved facility (typically a nursing home). In a long-term care crisis, individuals who did not pre-plan for their long-term care can use Medicaid to obtain much-needed financial relief.

What’s the catch? Medicaid applicants must meet strict criteria in order to qualify for benefits. In most cases, having too many assets prevents people from qualifying. After all, individuals can only retain $2,000 of countable assets in most states, while the healthy spouse can usually retain up to $148,620 in 2023. That said, not all assets are included in this limitation. Certain assets are exempt from Medicaid.

Unfortunately, many people believe misconceptions surrounding how to qualify for Medicaid. Some believe they must first exhaust their assets on the nursing home bill in order to achieve eligibility. Others think that if they spend money on anything besides the nursing home bill, they’ll incur a penalty period of ineligibility. In reality, your clients can spend money on any exempt assets, allowing them to accelerate their Medicaid eligibility.

Read More: How to Pay for Long-Term Care

What Does It Mean to “Spend Down” Assets?

The Medicaid spend-down amount refers to the amount of countable assets an individual or couple owns above their Medicaid asset limitation. The spend-down plan also includes the specific items your client intends to fund or purchase in order to eliminate their excess assets and qualify for benefits faster. Here are some of the ways your clients can spend down their assets for Medicaid:

  1. Purchase or improve exempt assets. Medicaid allows individuals to retain certain exempt assets, including their primary residence, one vehicle, furniture, and personal property. Upgrading or improving these items is a great way to spend down assets for Medicaid while also ensuring the healthy spouse has what they need to continue living comfortably at home and age in place.
  2. Pay off debts. Paying off any debts and liabilities is another way for clients to eliminate cash assets for Medicaid. This option also relieves the burden off their loved ones and simplifies financial processes after their passing.
  3. Set aside funds for a funeral. The reality is everyone needs a funeral at some point. Purchasing a preneed funeral contract or funeral expense trust allows your client to set aside funds for their loved ones to use when the time comes. In most states, policies with a face value below $15,000 are exempt from Medicaid. Policies for the spouse, children, and other immediate family members may also be exempt.
  4. Purchase a Medicaid Compliant Annuity. A Medicaid Compliant Annuity (MCA) is the ultimate spend-down tool for Medicaid. It is a single premium immediate annuity that converts assets into an income stream with no cash value, allowing your client to quickly spend down their assets while preserving them in the process. The entire spend-down amount can be funded into an MCA, or it can be used as a tool to eliminate excess assets not spent down on the items listed above.

If you’d like to learn more about the spend-down process and how a Medicaid Compliant Annuity can help, schedule a Discovery Call with our team.

Amy Beacham, MBA
By Amy Beacham, MBA | Marketing and Communications Director

As Marketing Director, Amy is responsible for all company communications and ensuring our clients have the most accurate and up-to-date information. In addition to her communication expertise, she has prior experience as a paralegal and a Krause Benefits Planner.

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