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Medicaid: Spend Downs (also known as: Medically Needy)

Spend Downs: An Example

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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. 

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