Medicaid Spend-Down Strategies

I was performing a little Medicaid research one day in the 2010s. On my computer screen was a copy of New York’s Medicaid Reference Guide. I figured it was a good idea to know exactly how a regulation was worded if I was going to mention it during a fair hearing. My intention was to print out only the two relevant pages and place them in the case folder.

Clicking “print” did not immediately set off any alarms.

However, after the seventh page was spit out of the printer, I realized the computer thought I wanted to print the entire guide. For those keeping score at home, New York’s Medicaid Reference Guide is 1,006 pages – slightly shorter than Stephen King’s post-apocalyptic epic novel “The Stand” and only marginally less depressing.

Normally, a quick-twitch reaction would lead me to cancel the print job and start over. This time, however, the cancelation had no impact on the printing. Buttons were pressed, but no appropriate electronic impulse followed. Page after page exited the machine in defiance of the laws of science.

Following some drastic anti-computer maneuvers, the printer stopped. The final page count was well north of 300. Lessons were learned, safeguards were set up. No such printing mishap ever happened again.

The real takeaway from this episode was that Medicaid has an excessive amount of rules.

The sheer number of Medicaid rules may be exorbitant, but these rules are not necessarily designed to be adverse to a Medicaid applicant and their family members.

Medicaid planning includes a concept known as the “spend-down.” Although Medicaid is a federal health insurance program, the states and local counties administer it. State law tailors many of the Medicaid eligibility rules to fit community norms. For example, the Individual Medicaid resource limit for 2025 is $32,396. While Community Medicaid applications are not penalized for asset transfers, Nursing Home Medicaid asset transfer penalties are a fact of life.

Getting below that number can be a challenge, especially considering the realities of dealing with a serious long-term illness and the concerns regarding the five-year lookback. Add to that, New York has a well-known reputation as a high cost-of-living state. Luckily, Medicaid allows applicants to use excess resources to pay for home repairs and modifications which may ultimately benefit a spouse or other occupant.

In a Nursing Home Medicaid situation where the applicant still owns their residence and an intent to return home letter is filed, repair costs can significantly lower the resource total without incurring a penalty. Maintaining good records and receipts is a must in that situation.

Irrevocable Pre-Need Funeral Plans are another popular spend-down option. Contracting with a chosen funeral home allows the Medicaid applicant to set aside a sizable amount of money to cover funeral costs without a penalty.

For a cost that will eventually have to be paid by the family, the pre-payment solves a Medicaid problem and removes a familial burden at the same time.

Medicaid also has an income spend-down protocol incorporated into the Community Medicaid system. The current Medicaid income limit for 2025 is $1,800 per month. For many New Yorkers, their pension and Social Security amounts far exceed that $1,800 limit. Excess income can either be protected with a Pooled Supplemental Needs Trust or by reducing the amount by submitting paid or unpaid medical bills.

This medical bill spend-down program ensures excess income is not wasted or unnecessarily paid to the provider for the coverage months impacted. 

We may not be enamored of all of the regulations contained within the 1,006 pages of the Medicaid Reference Guide, but what we do appreciate is the collective understanding that New Yorkers pay more for goods, services, and housing costs than residents of other states.

A New York Medicaid applicant should be able to maintain a secure and sustainable quality of life while receiving the best health care possible.

 Alan D. Feller, Esq., is managing partner of The Feller Group, located at 572 Route 6, Suite 103, Mahopac. He can be reached at alandfeller@thefellergroup.com.