A Medicaid spend down means bringing your money down to the level where Medicaid starts helping pay for care. It can apply to your monthly income, your assets, or both. This guide covers both and starts with how to tell which one applies to you. For long-term care, Medicaid reviews asset transfers from the last 60 months. A monthly income spend down has no look-back
If you manage your parent’s money and provide care, this article will help you find out how you can get paid for caregiving.
Medicaid spend down means reducing your income or assets to your state’s limit so Medicaid can help pay for care. There are two kinds: income spend down (also called medically needy or share of cost) and asset spend down.
Income spend down is for someone whose monthly income is over the state limit. Asset spend down is for someone who needs long-term care and has countable assets, like savings accounts, over the limit. You may also see it written as “Medicaid spenddown,” but it means the same thing.
With medically needed spend-down, you pay for medical bills to cut income to state income limits, so Medicaid covers care. Medical costs count from the day you are billed as long as it is during the three months before you applied. They count paid or unpaid. Income spend-down happens every budget period, which is no more than six months. However, each state has different budget periods.
Not every state runs run a medically needy program, and the names differ. Georgia runs one for aged, blind or disabled adults, and Connecticut does too. Ohio does not. Michigan calls its version a “deductible.”
Some states call it something different, but the spend-down meaning is the same. For example, Florida has the “Share of Cost” (SOC) Program, and Michigan assists MI Choice.
States without a medically needy coverage may allow spend-down for the mandatory 209(b) group, which includes people aged 65 or over, blind, or disabled (ABD). If your loved one is in the ABD group, then they can spend down their income to qualify for Medicaid. Your local Office for the Aging or social worker can help you see available state programs.
Asset spend-down applies to nursing facility level of care (NFLOC) and Home and Community Based Services (HCBS) if countable assets are higher than state limits. Medicaid reviews assets during the application process and looks back 60 months. Medicaid reviews purchases that affect eligibility. Depending on state rules, Medicaid may review assets again during renewal, but usually it reviews assets once.
HCBS waiver services may lower long-term care costs. Many families aren’t ready for what a nursing home actually costs. Or an unexpected illness or fall results in your family member needing a nursing facility level of care. For dementia or Alzheimer’s disease, long-term memory care is a solution. But most families can’t afford a nursing home or long-term memory care.
Caregivers can learn how to apply for Medicaid and state programs to cover medical expenses and possibly get paid for family caregiving.
During the Medicaid look-back period, Medicaid reviews your family member’s transactions for the last 60 months for transfers that affect Medicaid eligibility. Medicaid adds up those transfers and divides the total by a figure your state sets, usually the average monthly private-pay cost of a nursing home. The result is the number of months of delayed coverage. Medicaid totals any transfers from the 5-year period and divides them by a state-set figure, usually the average monthly private-pay nursing home cost. Federal law lets states use the statewide average or sometimes the applicable community rate.
The penalty clock usually starts at approval. It begins on the later of two dates: the month of the transfer, or the date your family member would otherwise be eligible and is receiving institutional-level care. The penalty applies only to long-term care coverage: nursing facility care, institutional-level care and HCBS waiver services. Regular Medicaid health coverage is not affected.
The look-back window covers only the 60 months before you apply, but the penalty itself isn’t capped at 60 months.
Federal law sets the 60 months, and states can apply it differently. Here is where to check in four states:
If you break the look-back rule, you may have a penalty period without any Medicaid benefits. Penalty length is different in each state. The length usually depends on the severity of the violation. Breaking the look-back rule can trigger a Medicaid fraud investigation, legal action or fines. Consult with an elder law attorney or your state agency.
These are common ways to spend down without a transfer penalty. Rules vary by state, so confirm with your state agency or an elder law attorney first:
Use the Medicaid Spend Down Calculator from the American Council on Aging to estimate how much of your (and your spouse's) assets you must spend before qualifying for Medicaid long-term care benefits. To estimate it yourself, subtract your state’s asset limit from your countable assets
Note: The Spend Down Calculator is a third–party estimator. Eligibility numbers are from state agencies.
Not everything your family member owns counts toward the Medicaid asset limit. To figure out whether they're over the Medicaid asset limit, you need to know which assets count and which don't. Each state sets the limit, and it changes.
Medicaid reviews non-exempt, or countable, assets to decide eligibility. Depending on your state’s specific rules, Medicaid may include:
Medicaid doesn’t look at exempt assets when deciding a person's eligibility. Medicaid might exempt:
The primary home exemption has equity minimums and maximums, and each state is different. Home equity limits are $752,000 to $1,130,000 in 2026. If your family member plans to return to the primary home, it is normally exempt. They may need to fill out paperwork with the state if they intend to return.
If your family member goes to a nursing home but their spouse or dependents still live in the primary home, the home is usually not counted. Countable and exempt assets may change for married couples whose spouse does not need Medicaid-funded long-term care. Medicaid estate recovery might still apply after death. Check with your state Medicaid agency.
Married couples don’t need to spend down all of their income and assets when one partner needs long-term care, and the other spouse stays in the primary home. Spousal impoverishment protections let spouses keep some income and assets to pay for living expenses and monthly maintenance if their partner needs long-term care.
The spouse who remains home, called the “community spouse,” has a maximum community spouse resource allowance (CSRA). While each state has different standards, in 2026 the CSRA needs to stay between the federal limits of $32,532 and $162,660.
The federal minimum monthly maintenance needs allowance (MMMNA) is $2,705 in all states except Alaska and Hawaii. The maximum for all fifty states is $4,066.50. States set the allowance between these boundaries.
Both the minimum monthly maintenance needs allowance and the community spouse resource allowance apply to Medicaid, not SSI eligibility rules. Many times a person who qualifies for SSI also qualifies for Medicaid. However, the process is different. Speak with your case manager or your local Office for the Aging to start the application process.
An undue hardship waiver sets aside the Medicaid transfer-penalty period if it deprives a person of necessary medical care, shelter, and basic needs. It’s not applied automatically and depends on your state’s rules. Federal law requires each state to have an undue hardship process and contact the Medicaid recipient. They must decide quickly and allow an appeal.
A nursing facility can file for a resident, with their permission, to cover nursing home expenses and hold a bed for a period of time.
You’ve quit your job, spent down your parent’s savings, and no money is coming in. Once your parent qualifies for Medicaid, the state program may pay you for caregiving. With Medicaid self-directed care, the state pays a qualified family caregiver your parent chooses. States have different rules regarding eligibility, pay rates, and approved hours, so talk with your local Medicaid office.
Some families write up a personal care agreement between the caregiver and the care recipient. This written agreement makes sure the caregiver receives a fair rate as payment for services. Medicaid doesn’t treat this as a gift. The personal care agreement needs to be in writing and signed before you get paid. In most cases, caregivers owe separate taxes on their pay.
Each state has different requirements, like requiring notarization or barring lump sums. Discuss your situation with an elder law attorney.
With a Medicaid self-directed care program, the care recipient chooses their caregiver, including family. Medicaid’s Structured Family Caregiving (SFC) program pays the family caregiver for services. That’s how Structured Family Caregiving works. Estimate what you could be paid.
In most cases, Medicaid won’t pay a “legally responsible relative,” like a spouse or parent of a child, unless the state plan option allows for “extraordinary circumstances.” Usually, caring for someone who can’t do daily tasks like feeding themselves or bathing is considered “extraordinary circumstances”. This rule is why spouses usually cannot be paid.
IRS Notice 2014-7 excludes these payments from federal gross income as “difficulty of care” payments if they qualify. That’s how difficulty of care payments are taxed. Check your possible caregiver pay.
IRS Notice 2014-7 requires payments to follow these rules:
Many times family caregivers care for their parents in their parents’ home. Because the caregiver has a separate home, the payments aren’t excluded for tax purposes. The IRS treats each case individually. Speak with your tax advisor.
Each state program applies federal eligibility rules a little differently. And regulations often change. For example, Medicaid eligibility in Ohio may not be the same as Medicaid eligibility in Georgia. Both Ohio and Georgia provide for pregnant women, but they have different income limits.
Medicaid eligibility in Connecticut is under the HUSKY Health program, an in-state health insurance program for low-income families and people with disabilities. It has some similarities to Medicaid eligibility in Michigan and other states, like providing a spend-down option for families. But its income limits for children and pregnant people aren’t the same. They also apply SSI rules differently.
Social Security and Medicare payroll taxes, called Federal Insurance Contributions Act (FICA) taxes, may still apply in some states. Speak with your tax advisor or elder law attorney for guidance.
In a personal care agreement, the care recipient pays with their money for services paid at fair market value. For an example of fair pay rates, see caregiver pay rates in Georgia. Or see caregiver pay rates in Connecticut.
In a self-directed program, state Medicaid self-directed care programs pay after your family member qualifies.
Givers helps families through enrollment in self-directed Medicaid programs at no upfront cost. A family caregiver like you might be eligible to get paid for care you already provide.
Items allowed for Medicaid spend down can include accessibility repairs to your home, legitimate debt (a mortgage), prepaid funeral expenses and medical expenses. However, giving money away or changing a name on a deed or account can result in a penalty.
Yes, federal Medicaid law has a 5-year look-back for applicable long-term care transfers. Each state applies regulations in its own way. Federal look-back doesn’t apply to regular Medicaid health coverage. The 5-year look-back only applies to long-term care coverage. Check the state’s 60-month look-back requirements with your local Medicaid agency.
No. Medicaid doesn’t have a 7-year Medicaid look-back period. Medicaid has a 5-year look-back period. Medicaid reviews transfers made during those 60 months. Any penalty from this 5-year period may be longer than five years. There’s no maximum penalty length. The 7-year Medicaid look-back is a misconception.
Each state sets the limit, and Medicaid eligibility rules can change. Medicaid considers your state program, household size, coverage, eligibility and more. Check your state Medicaid agency long-term care eligibility page or contact the local Medicaid office before making any financial decisions. Review countable and exempt assets.
Gifts in the 60-month look-back window can delay coverage, with penalties usually lasting longer than families expect. There are no federal maximum limits for penalties. There are a few exceptions. For example, if you are a family caregiver, you can get paid if you meet qualifications and have a written personal care agreement. Ask your elder law attorney.
The Medicaid penalty period usually starts on the later date of the transfer-related date and the day your family member qualifies for Medicaid and receives institutional-level care. Usually the penalty doesn’t begin until the application is approved unless there’s a disqualifying transfer.
Yes, in some cases you can pay a family caregiver during Medicaid spend down if there’s a written personal care agreement that meets state rules. The written agreement must reflect fair-market-value rates for services given before Medicaid approval. See how family caregiver payment works.
Spend-down rules are different in each state, and they often change. Always speak with a financial advisor before making any financial decision.
