How To Qualify For Medicaid By Spending Down Assets

Posted on: 8 February 2016

If you ever need a nursing home, you could be disqualified from government insurance because of your assets, since Medicaid uses strict income guidelines to determine eligibility. Spending down your assets is one way to qualify for Medicaid. As it implies, spending down involves lowering your income to meet eligibility. Here are some tips to spend down your assets.

Qualify as Medically Needy

Check to see if your state has a medically needy program, which means you spend down to the income limit through medical expenses. Some states and areas that have a Medically needy program include: Arkansas, California, Washington D.C, Iowa, Kansas, Vermont, Northern Mariana Islands, Rhode Island, and Tennessee. 

This expense will be subtracted from the income after the spend-down period. For example suppose you have a monthly income of $1,500, and your state requires a medically needy income of $800 and a spend-down period of 6 months to be eligible for Medicaid. If needed medical expenses total $800 after six months, the $800 is deducted from $1,500, which leaves $750 making you eligible.

Spend on Allowable Assets

Medicaid allows $2,000 worth of countable assets for single people, and $3,000 for married couples occupying the same residence. Non-countable assets are ones that you do not have to sell to qualify for Medicaid, or assets you can buy to lower your income. Some examples of non-countable assets include one vehicle regardless of age or model, life insurance policies with a cash value of under $1,500, a primary home, and $1,500 worth of pre-paid burial arrangements.

Countable assets used to determine eligibility for Medicaid include stocks, bonds, CDs, bank accounts, and a second residence or vehicle.  Be aware, even if you own an asset jointly with someone, the entire value could count toward your eligibility. A vehicle can only be non-countable if it is going to be driven by a spouse, and a new home purchase must meet exemption criteria. 

Buy an Annuity

An annuity is a type of insurance that converts an asset into a steady wage for a spouse for a certain time period, and it counts as exempt for Medicaid qualification. The applicant still qualifies for Medicaid because the annuity is not a gift, and spouse's income doesn't count toward eligibility. However, you must purchase a non-transferable (can't be signed over to anyone else), fixed annuity (payments stay the same each month), and list the state as beneficiary.

The payment period must end before your spouse reaches life expectancy. For example, a 50-yr old female is expected to live another 33.07 years. You could not buy an annuity beyond that period, or you may get disqualified from benefits.

Medicaid commonly imposes a 5-year look-back period on transfers. If you have made an asset transfer in the past five years, or you have other questions, talk to an elder law attorney like Edward G. Foster  before applying for Medicaid.