What Is Medicaid Spend-Down and How Does It Work?

Costs & Finance Published: October 13, 2026 Updated: October 13, 2026 8 min read

Key Takeaways

“Spend-down” means two different things: spending savings down to Medicaid’s asset limit, or using medical bills to reduce income that is slightly too high.

The federal SSI resource standard is $2,000 for one person and $3,000 for a couple (2026). Many states use $2,000 for nursing home Medicaid. A home, one car and burial spaces are generally not counted.

Giving money away does not work. Medicaid looks back 60 months (5 years) and can delay coverage for transfers made for less than fair market value.

The spouse who stays home can keep $32,532 to $162,660 of the couple’s resources (2026).

After death, the state must seek repayment from the estate of people who were 55 or older when they got Medicaid long-term care. The home can be included.

Someone you love needs nursing home care, and the bill is about to run past what they have saved. Then a social worker says “spend down,” and it sounds like you must burn through everything before anyone helps. It is not that simple.

This article explains Medicaid spend-down in plain terms: the two kinds, which assets count, how the 5-year look-back works, what the spouse at home keeps, and what happens after death. The figures come from the Centers for Medicare & Medicaid Services (CMS) and federal regulations. Rules differ in every state, so treat this as a map and not as legal advice.

What Is Medicaid Spend-Down?

Medicaid pays for long-term care only for people with limited income and resources. Spend-down is how someone who is over the limit gets under it. It comes in two forms:

Type	What you reduce	How
Asset spend-down	Savings and other countable assets	Pay for care and other legitimate costs
Income spend-down	Monthly income	Subtract medical bills from income

Most families deal with the first kind. The second kind exists only in states that choose to offer it.

How Asset Spend-Down Works

To qualify for nursing home Medicaid, a single person usually must have no more than a set amount in countable assets. The federal SSI resource standard is $2,000 for an individual and $3,000 for a couple in 2026. Many states use $2,000 as the asset limit for nursing home Medicaid, but some set a different amount. Check your state’s page in our costs by state guide.

If your loved one has more than the limit, they pay for their own care until they reach it. Then Medicaid can begin.

What Usually Does Not Count

Here are the main exclusions under the federal rules for Supplemental Security Income (SSI). Many state Medicaid programs use similar ones, but each state sets its own, so check yours:

The home. A home is not counted “regardless of its value” when it is the person’s principal place of residence. Medicaid has a separate home equity cap, covered below.
One car. One automobile is excluded regardless of value if it is used for transportation. Equity in other cars is counted.
Burial spaces and burial funds. Burial spaces are excluded. Funds set aside for burial are excluded up to $1,500 per person, if they are kept separate from other money.

Money in the bank, investments and other property are not on these lists, so they generally count. Ask your state Medicaid agency exactly which items count.

What You Can Spend On

Spending your own money to buy something of equal value, such as care or medical services, is different from giving it away. The look-back rule targets transfers made “for less than fair market value”. Before spending on anything large, ask an elder law attorney. Our guide to senior care costs lists common ways families pay for care.

The 5-Year Look-Back Rule

When someone applies for Medicaid long-term care, the state reviews their finances for the 60 months (5 years) before the application date. It looks for assets given to someone else for less than fair market value. Cash gifts to children, transferring ownership of a home and selling property for less than it is worth can all count.

The Penalty

A transfer does not cancel eligibility. It delays it. The length of the delay is calculated like this:

Add up the value of assets transferred within the look-back period.
Divide by the state’s average monthly cost of nursing facility care for a private patient.
The result is the number of months Medicaid will not pay for long-term care.

Example, not real state figures: a parent gives a child $60,000. The state’s average private nursing home cost is $10,000 a month. The penalty is $60,000 / $10,000 = 6 months without Medicaid payment.

The delay starts on the later of two dates: the month of the transfer, or the date the person is in an institution and would otherwise qualify for Medicaid. Once it starts, it is not paused. It keeps running even if the person stops receiving institutional care.

Other Transfers Count Too

CMS also treats certain annuities, loans and life estates as transfers unless they meet strict conditions. States may waive a penalty for undue hardship, such as when it would deprive the person of food, clothing, shelter or medical care.

The Home Equity Cap

Medicaid will not pay for long-term care if the person’s equity in their home is above a limit. In 2026, the minimum cap is $752,000 and the maximum is $1,130,000, and each state picks within that range. The cap does not apply when a spouse, or a minor, blind or disabled child, lives in the home.

How Income Spend-Down Works

Some people have too much monthly income for Medicaid but large medical bills. States can offer a medically needy program for them.

Here is how it works:

The state sets a medically needy income level (MNIL).
If your countable income is above it, medical and care expenses are subtracted from the income.
When income falls to the MNIL or below, Medicaid begins for that period.

The “spenddown” is the gap. CMS gives this example: a person has $600 in countable monthly income and the state’s MNIL is $400. The spenddown is $200 a month. Once they have $200 in medical bills that month, Medicaid pays for the rest.

States choose a budget period of 1 to 6 months for this calculation. Not every state has this program, so ask your state agency.

For nursing home Medicaid, the SSI-based income cap is 300% of the federal benefit rate, which is $2,982 per month in 2026. Some states use it as an income cap, and others use different methods.

What the Spouse at Home Can Keep

Federal law protects the husband or wife who stays at home, called the community spouse. Congress created these protections in 1988 so the spouse is not left with “little or no income or resources”. They apply most often when one spouse is in a nursing facility, and sometimes to home and community-based waiver services.

Here are the 2026 federal figures:

Protection	2026 amount
Community spouse resources, minimum	$32,532
Community spouse resources, maximum	$162,660
Minimum monthly income allowance	$2,705
Maximum monthly income allowance	$4,066.50

The minimum monthly allowance took effect July 1, 2026. It is higher in Alaska ($3,381.25) and Hawaii ($3,111.25). States set the exact amount within these limits, so ask your state Medicaid office.

After Death: Medicaid Estate Recovery

Spend-down is not the only cost to plan for. After a Medicaid recipient dies, the state may ask to be repaid from their estate. This is called estate recovery.

Who it covers. States must seek recovery from the estate of anyone who was 55 or older when they received Medicaid. They must also recover from people who are permanently institutionalized, at any age. The required services are nursing facility care, home and community-based services, and related hospital and prescription drug costs. States may choose to recover other Medicaid costs too.
The home. The home is usually not counted to qualify, but it is generally part of the estate that can be recovered, unless it is protected for a spouse or certain close relatives. Some states can also place a lien on the home of a person who is not expected to return to it.
What delays it. The state cannot recover while a surviving spouse is alive, or while a child under 21, or a blind or disabled child, survives. When there is a lien on the home, recovery also waits if a sibling who lived there for at least 1 year, or a child who lived there for at least 2 years and provided care, still lives in it.
Hardship. States must have a process to waive recovery for undue hardship. Federal guidance suggests examples such as a family farm or business that is the heirs’ only income, or a home of modest value, but states set their own rules.

Estate recovery rules differ a great deal from state to state. Ask your state Medicaid agency and an elder law attorney before moving a home or other property.

Before You Spend a Dollar

Do not give money away. Even a small gift is reviewed during the 60-month look-back.
Keep records. Save bank statements, receipts and care bills for the full look-back period.
Talk to an elder law attorney. The rules are state-specific and the penalties are hard to undo.
Contact your state Medicaid agency. Ask for its asset limit, home equity cap, whether it offers medically needy spend-down, and how it handles estate recovery.

For what Medicare pays first, see Does Medicare Pay for Nursing Home Care? If a long-term care insurance policy exists, see whether long-term care insurance is worth it.

Frequently Asked Questions

What is the Medicaid asset limit for a single person?

The federal SSI resource standard is $2,000 for an individual in 2026, and $3,000 for a couple. Many states use $2,000 as the asset limit for nursing home Medicaid, but some set a different amount, so check with your state Medicaid agency.

Can I give my money to my children before applying for Medicaid?

You can, but it can delay coverage. Medicaid reviews transfers made in the 60 months before you apply. If you gave assets away for less than fair market value, the state divides the amount by its average monthly nursing home cost to set a penalty period, during which Medicaid will not pay for long-term care.

How long is the Medicaid penalty period?

It depends on the amount transferred. The state divides the total value of assets given away during the look-back period by its average monthly private nursing home cost. For example, $60,000 divided by $10,000 is 6 months. The penalty starts when the person would otherwise qualify and does not pause once it begins.

Can Medicaid take my home after I die?

It can try. States must seek repayment from the estate of people who were 55 or older when they received Medicaid long-term care, and the home is generally part of that estate. Recovery must wait while a surviving spouse or a minor, blind or disabled child is alive, and states must offer a hardship waiver. Ask your state Medicaid agency how it applies the rules.

Does my spouse have to spend down too?

The spouse at home is not required to spend everything. Federal spousal impoverishment rules let the spouse at home keep between $32,532 and $162,660 of the couple’s resources in 2026, plus a monthly income allowance of at least $2,705. Ask your state how it divides the couple’s assets.

Sources

Centers for Medicare & Medicaid Services. “Updated 2026 SSI and Spousal Impoverishment Standards.” CMCS Informational Bulletin, April 27, 2026. https://www.medicaid.gov/federal-policy-guidance/downloads/cib04272026.pdf. Accessed: October 2026.
Medicaid.gov. “Spousal Impoverishment.” https://www.medicaid.gov/medicaid/eligibility-policy/spousal-impoverishment. Accessed: October 2026.
Centers for Medicare & Medicaid Services. “Important Facts for State Policymakers: Transfer of Assets in the Medicaid Program.” January 8, 2008. https://www.cms.gov/regulations-and-guidance/legislation/deficitreductionact/downloads/toabackgrounder.pdf. Accessed: October 2026.
Centers for Medicare & Medicaid Services. “State Medicaid Director Letter #06-018, Enclosure: Sections 6011 and 6016.” July 27, 2006. https://downloads.cms.gov/cmsgov/archived-downloads/SMDL/downloads/toaenclosure.pdf. Accessed: October 2026.
Centers for Medicare & Medicaid Services. “Implementation Guide: Medicaid State Plan Eligibility, Handling of Excess Income (Spenddown).” https://www.medicaid.gov/resources-for-states/downloads/macpro-ig-handling-excess-income-spenddown.pdf. Accessed: October 2026.
Electronic Code of Federal Regulations. “20 CFR 416.1212, Resources Excluded: The Home.” https://www.ecfr.gov/current/title-20/chapter-III/part-416/subpart-L/section-416.1212. Accessed: October 2026.
Electronic Code of Federal Regulations. “20 CFR 416.1218, Resources Excluded: Automobile.” https://www.ecfr.gov/current/title-20/chapter-III/part-416/subpart-L/section-416.1218. Accessed: October 2026.
Electronic Code of Federal Regulations. “20 CFR 416.1231, Burial Spaces and Funds.” https://www.ecfr.gov/current/title-20/chapter-III/part-416/subpart-L/section-416.1231. Accessed: October 2026.
Centers for Medicare & Medicaid Services. “State Medicaid Manual, Part 3 - Eligibility, Section 3810: Medicaid Estate Recoveries.” Transmittal 75, January 11, 2001. https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/downloads/r75sm3.pdf. Accessed: October 2026.
U.S. Department of Health and Human Services, ASPE. “Medicaid Estate Recovery.” Policy brief, March 31, 2005. https://aspe.hhs.gov/reports/medicaid-estate-recovery-0. Accessed: October 2026.
Administration for Community Living, National Center on Law and Elder Rights. “Preserving Homeownership Series, Part 3: Medicaid Estate Recovery.” Training slides by Justice in Aging, December 6, 2022. https://pfs2.acl.gov/strapib/assets/Medicaid_Estate_Recovery_Slides_d2b24c5997.pdf. Accessed: October 2026.