What is a Medicaid Spend Down?
- Daniel Kurt
- Oct 30, 2025
- 4 min read
Updated: 1 day ago
Main takeaways
Medicaid isn’t just for low-income families—it’s often a crucial safety net for covering costly long-term care and home health expenses for those with moderate income.
The “spend down” provision lets people with excess income qualify for Medicaid, requiring them to pay out-of-pocket for medical costs until they meet their state’s eligibility threshold.
Rules vary by state, including whether a spend down is offered, the income limits and the length of the budget period to meet the requirement.
Medicaid is something you probably associate with low-income individuals and families. But if you’re facing significant expenses—like long-term care or home health costs that aren’t covered by Medicare—this affordable health insurance program can be the answer for all but the most well-heeled families.
Because of the asset requirements that Medicaid imposes, you first have to pay a certain amount out-of-pocket to qualify for coverage. If you or a loved one would like to enroll despite having considerable assets, understanding this “spend down” provision is key.
What is Medicaid?
Medicaid is a federal health insurance program for individuals and families. While the federal government provides much of the program’s funding, each state manages and determines eligibility guidelines for its own program.
The program covers essential health services like hospital stays, labs and doctor visits. And, crucially, it reimburses for nursing home care, a cost not typically covered by Medicare, the federal program for adults ages 65 and older. In several states, Medicaid also covers home and community-based services (HCBS) that allow people to receive care in their own homes or other community settings.
Given the staggering cost of care for the aging, Medicaid is often a financial backstop for families. Even if you don't meet the definition of “low income” by most standards, long-term care and home health expenses can quickly drain one’s resources.
Consider that the median cost of assisted living in the United States is $70,800, according to the latest data from Genworth Financial’s Cost of Care Survey. Nursing homes are even more expensive, with an average price tag of $9,733 for a private room.
Understanding the Medicaid ‘spend down’
Individual states have their own criteria for Medicaid eligibility, although your income, household size and disability status are typically among the biggest factors. If you meet the state requirements for non-financial factors but have too much income to qualify, you’re subject to a “spend down” requirement.
Essentially, a spend down is a deductible for Medicaid insurance. When your medical bills are greater than your excess income, you have to pay a certain amount out of pocket before you start receiving reimbursement through Medicaid. The amount of your excess income that you have to personally cover is your spend down amount.
Unfortunately, not every state offers a spend down provision. And among those that do, the income limits will vary from one program to another. Most states will send you a notice if you were denied coverage because of excess income and specify your spend down requirement, if applicable. That typically includes the amount you need to spend out of pocket and the timeframe, or “budget period,” in which you must spend those dollars in order for Medicaid reimbursement to kick in.
Medicaid spend down FAQs
Is there an alternative if my state doesn’t offer a spend down?
A good first step is to contact your state’s Medicaid office to get a better understanding of what options are available. For example, even some states without a spend down provision offer a Medicaid buy-in option that helps adults with disabilities who are under age 65 to qualify for coverage. Most states require you to pay a premium to get Medicaid benefits, although it’s often less expensive than buying private insurance.
Alternatively, you may qualify for tax subsidies when shopping for plans on the Marketplace. Those policies won’t provide help with long-term care, but they can help mitigate the cost of things like doctor visits, hospital stays and prescription drugs.
How do you know if you qualify for a spend down?
Some states with a spend down provision offer online screening tools to help you find out whether you qualify. However, that’s often not necessary. Most state Medicaid agencies will notify you with a letter if you apply and need to fulfill spend down requirements in order to receive benefits. If you’re not sure, contact the Medicaid agency where you live to find out whether the spend down applies.
What is a spend down budget period?
A spend down period is the length of time in which you need to spend excess income on medical expenses in order to qualify for Medicaid benefits. In some states, you need to spend a specific amount on health care expenses each month before Medicaid kicks in. However, other states analyze your income and expenses over a longer period—typically three months or six months.
The upshot
Medicaid can be a crucial lifeline when rising medical or long-term care costs threaten to overwhelm your budget. By understanding your state’s rules and how the spend down works, you’ll be better prepared to access the coverage you need.
