Spend-down

The process of depleting assets to qualify for Medicaid long-term care benefits. Medicaid eligibility caps asset levels (varies by state but typically ~$2,000 in countable assets for an individual); patients with assets above that level "spend down" — paying for care out of pocket until they qualify. Substantial planning options exist (irrevocable trusts, Medicaid-compliant annuities, exempt assets) but most require professional help.

What it means in practice

Spend-down sounds simple — pay out of pocket until you've gone through enough money to qualify for Medicaid. In practice, it's one of the most consequential financial decisions a family makes, with rules that vary dramatically by state, and with a 5-year look-back that punishes families who tried to "spend down" by gifting assets to children.

The asset levels: typically $2,000 in countable assets for an individual, $3,000 for a couple in 2026. "Countable" excludes a primary residence (while one spouse remains in it), one car, prepaid funeral expenses, term life insurance, IRAs/401(k)s being taken in required minimum distributions, and some other narrowly-defined assets. The home equity exclusion has a ceiling ($731,000 in 2026 federally, higher in some states); above that, the home becomes partially countable.

The spend-down PROCESS — what counts as "legitimate spend-down": • Paying for care (nursing home, home aide) out of pocket • Paying off the mortgage on the primary residence • Home repairs and modifications (accessibility, safety) • Prepaying a funeral and burial • Replacing an old car with a newer one (one car allowed) • Buying medical equipment, hearing aids, glasses • Paying down debts • Buying a Medicaid-compliant annuity (in some states, for the well spouse)

What does NOT count as legitimate spend-down (and triggers look-back penalties): • Gifting cash or assets to children or grandchildren • Transferring property to family members for no compensation • Setting up a revocable trust • Selling property to family for less than fair market value

The community-spouse provisions soften the rule for married couples: the spouse remaining at home can keep a higher portion of marital assets (up to ~$157,920 in 2026) and a minimum monthly income allowance — so the well spouse isn't left destitute when the other spouse enters Medicaid-paid nursing care. These rules are intricate; an experienced elder-law attorney is the right partner.

When you'll hear it

When out-of-pocket nursing-home costs are unsustainable and the family is researching Medicaid eligibility. Elder-law attorneys handle this; the planning is much more effective started 5+ years before need than at the moment of crisis.

Is this the same as…?

Terms families frequently confuse with spend-down.

Related terms

• Medicaid — Joint federal-state program covering health care for low-income people, including many people with disabilities and many older adults who have spent down their assets.
• Look-back period — Medicaid's 60-month (5-year) review window in which any uncompensated asset transfers (gifts, transfers to family, sales for less than fair market value) are flagged as potential disqualifying transfers.
• Long-term care insurance — Private insurance designed to cover services not typically covered by Medicare — primarily extended nursing home stays, assisted living, and home care for ADL support.
• Skilled nursing facility — A facility providing 24-hour skilled nursing care — primarily for short-term rehabilitation after hospitalization, but also for long-term residence.
• Power of attorney — A legal document where one person (the "principal") authorizes another person (the "agent" or "attorney-in-fact") to act on their behalf in financial matters.

See also: all glossary terms · conditions by name · step-by-step playbooks