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States may adopt spend down rules which reduce your countable income for purposes of determining whether your income is too large to qualify for Medicaid.

Spend downs are called different things in different states. In some states, they are called a "Share of Cost." In others they are called a "Deductible." Spend downs are also commonly referred to as "Medically Needy."

Under a spend down, you can reduce your income in a month by medical expenses which were incurred during the month. Spend downs work are follows:

  • The difference between a person's income and the maximum income under Medicaid becomes like a monthly deductible that must be met before Medicaid starts paying the bills for that month.
  • Medical expenses incurred in the month.can be used to reduce income for purposes of eligibility. (Generally the question is the time of when the bill is incurred, for example when you see the doctor or take the test. It isnot necessarily when the expense is paid.)
  • Once medical bills are large enough during a month to reduce income to an eligible level, Medicaid coverage is triggered and takes over payment of the medical charges incurred for the remainder of that month.
  • Medicaid does not pay for the expenses that were used to meet the spend down.
  • The process is repeated every month. 

For more information, see:

NOTE: As a general matter, you can provide an estimated bill once you know about medical care you will incur in a month. You don't have to wait until you get the service or receive the bill. For example, if you have a doctor's appointment on October 5. It is currently September 15. You can get an estimated bill for the cost of the visit and submit it on October 1. By October 5 you've been cleared and Medicaid will cover any other medical bills incurred during that month.

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Spend Downs: An Example

In most states that provide coverage for the medically needy, income is only an issue when it exceeds the cost of the care, since medical bills are used to offset income in those states.

For example, Barry draws $3,000 per month in disability benefits in a state which limits monthly income to $600 a month. Let's say the cost of the nursing home is $5,000 per month.  If Barry pays $2,500 toward the cost, the payment will reduce Barry's income to below the $600 limit ($3,000  minus $2,500 = $500). Medicaid pays the difference between the cost of the nursing home and what Barry contributes. (Note: most of the states permit Barry to keep a small portion of his income, something like $30 to $75 per month, for personal needs while confined.)

Medically Needy rules are overridden by Income Caps in some states. Many states have imposed income caps for eligibility for Medicaid custodial care coverage. In those states, if your gross income exceeds the amount of the cap, even by as little as one dollar, there is no eligibility for Medicaid custodial care, regardless of the size of your medical bills or the cost of the nursing home.

Income Caps vary from as little as an amount equal to the Supplemental Security Income ("SSI") basic benefit amount for a single individual, to 300% of the SSI benefit. 

States That Provide Coverage To People Who Are "Medically Needy"




North Carolina



North Dakota






Rhode Island

District of Columbia













New Hampshire



New Jersey



New York

West Virginia




*The medically needy program in Texas covers only the "mandatory" medically needy groups. It does not cover the aged, blind, and disabled.  

How To Apply For Spend Down

The procedure is different in each state which permits spend downs. In general:

Step 1.    You  complete a form that indicates you want to apply for Medicaid with a spend down.
Step 2.    The Medicaid office will tell you your monthly spend down amount.
Step 3.    Each month you will need to supply receipts and bills showing that you have been billed for or paid the amount in allowable medical expenses for which you                      are responsible. (The state may exclude certain types of medical expenses from the spend down.)

NOTE: Depending on the state in which you live, you can ask Medicaid to look back three months prior to your application and to pay or reimburse you for medical expenses incurred when you would have been under the spend down limit.