Allowable Medicaid Spend Down Items for Seniors + Examples

Many seniors who need long-term care find out their assets are above Medicaid limits. The “spend down” process gives you a legal way to lower those assets while also planning for your needs.

When you understand which allowable Medicaid spend down items for seniors Medicaid accepts, you can work toward qualifying for benefits without penalties or delays.

In most states, Medicaid limits individual applicants to about $2,000 in countable assets. Countable assets can include savings, investments, and extra property. If your resources are over the limit, you usually need to spend them down before you qualify.

Planning ahead makes this easier and helps protect your interests. The team at After can also help you understand how prepaid cremation may fit into a larger financial plan. You can call us 24/7 at 1-844-760-0427 for clear, pressure-free guidance.

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What Is Medicaid Spend Down for Seniors?

Medicaid spend down for seniors is the process of lowering your countable assets so that you meet eligibility rules. You do this by spending money on things Medicaid allows.

Some people think they can only spend money on medical care. But Medicaid often allows many other expenses too. This includes costs that support health, safety, and basic living needs.

You do need to follow the rules carefully. Spending money the wrong way can trigger a penalty period. During that time, Medicaid may deny benefits even if your assets are below the limit.

Most states also use a five-year look-back period, where they review past financial transactions before approving long-term care Medicaid.

Medical and Healthcare Expenses You Can Pay

Healthcare costs offer clear and approved ways to spend down assets while meeting real needs.

Out-of-Pocket Medical Bills

You can pay unpaid medical bills that insurance didn’t cover. This can include:

• Hospital stays
• Office visits
• Specialist care
• Diagnostic tests

Paying these bills lowers your assets and reduces debt.

Medical Equipment and Devices

Medicaid usually allows you to buy medical equipment you truly need, such as:

• Hearing aids and batteries
• Eyeglasses and prescription sunglasses
• Dentures and dental devices
• Walkers, wheelchairs, and canes
• Hospital beds and specialty mattresses
• Blood pressure monitors and glucose meters

The item should serve a real medical purpose. Buying things you don’t need may raise questions during review.

Prescription Medications

You can pay for prescriptions you already received. In many cases, prepaying for future services can be a problem, so it’s safer not to prepay for medications unless you’ve confirmed your state’s policy.

Home-Related Allowable Medicaid Spend Down Items for Seniors

Your primary home is often an exempt asset, but you can still spend money to maintain or improve it.

Home projects can help in two ways:

1. They reduce countable assets.
2. They make your home safer and easier to live in.

Many states view reasonable home expenses as practical and allowed.

Repairs and Maintenance

• Roof repair or replacement
• Plumbing or electrical work
• HVAC repair or replacement
• Foundation repairs
• Exterior paint or siding

Accessibility Modifications

• Wheelchair ramps
• Wider doorways
• Grab bars and shower seats
• Stairlifts
• Lowered counters and cabinets
• Roll-in showers

General Improvements

• New flooring or carpet
• Kitchen updates
• Bathroom renovations
• Energy-efficient windows
• Landscaping and yard care

Some people also add rooms, like a first-floor bedroom or bathroom, if it improves safety or access.

Be careful about using spend-down money to improve someone else’s property (like a child’s home). That may be treated as a gift in some cases.

Paying Off Legitimate Debts

Paying debt is often one of the simplest ways to reduce assets. You can generally pay debts that you or your spouse legally owes, including:

• Credit card balances
• Mortgage payments or payoff
• Auto loans
• Personal loans
• Past medical bills
• Property or income taxes
• Utility bills that are currently due

Paying off debt is often allowed because it serves a real financial purpose.

Prepaying for some monthly services (like rent or utilities) may raise questions in some states. Paying off a loan balance is usually clearer, since it is a real debt with a contract.

Vehicle Purchases and Maintenance

Medicaid usually exempts one vehicle for the household. That can make car-related spending allowable.

Buying a Vehicle

You may be able to sell your current car at fair market value and buy a newer, reliable one. The vehicle should meet practical transportation needs.

Buying an expensive luxury car may invite scrutiny.

Vehicle Repairs and Maintenance

Necessary vehicle costs are often allowed, such as:

• Engine or transmission repairs
• Brake replacement
• New tires or batteries
• Air conditioning repair

These should address real mechanical needs, not cosmetic upgrades.

Prepaid Funeral and Cremation Expenses

Many states allow prepaid funeral and cremation arrangements as part of a spend down.

In many states, you can set aside money for funeral or cremation costs without violating Medicaid rules, as long as the plan is structured correctly.

Most often, the plan must be irrevocable, meaning it cannot be canceled, and the money cannot be taken back. States may also have limits on how much can be protected this way, and those limits vary.

Because funeral rules vary by state, it helps to confirm:

• Whether prepaid funeral or cremation contracts are exempt in your state
• Whether the plan must be irrevocable
• Whether your state has a dollar limit

Items That Do Not Qualify as Allowable Spend Down

Understanding what Medicaid does not allow can help you avoid penalties.

Gifting Assets

Giving money or property to family, friends, charities, or certain trusts can cause a penalty if it happens during the look-back period.

Even if a gift would be allowed under IRS tax rules, it can still be a problem under Medicaid rules.

Selling Below Market Value

Selling an asset for less than fair market value can count as a partial gift. Medicaid may treat the difference as an improper transfer.

Prepaying for Future Services

Prepaying for services you haven’t received yet can cause problems in some states. Examples may include:

• Caregiver services (unless structured correctly)
• Rent beyond the current month
• Utility or phone service beyond what’s currently due
• Future medical care

If you want to prepay for anything, it’s smart to confirm state rules first.

The Five-Year Look-Back Period

Medicaid reviews about five years of financial history before approving long-term care Medicaid. Improper transfers during that period can lead to penalties. The penalty length depends on:

• How much was transferred, and
• Your state’s published penalty divisor (based on average nursing home costs)

For example, if a state’s divisor worked out to $250 per day, transferring $50,000 could create about a 200-day penalty. (States may calculate this using monthly or daily figures, depending on the state.)

These transfer rules and penalties apply to everyone. But if you are married, special rules may let your spouse keep more assets than you expect.

Protecting Your Spouse’s Financial Security

Special rules apply when only one spouse needs long-term care.

The Community Spouse Resource Allowance (CSRA) lets the healthy spouse keep more assets. In 2025, the maximum allowance is $157,920 in most states. The applying spouse is often still limited to about $2,000.

States calculate the spouse’s allowed amount differently. Some allow the spouse to keep about half the assets up to the limit. Others apply different methods.

Because of these rules, you may not need to spend down as much as you think.

How After Can Help

Allowable Medicaid spend down items for seniors include rules that vary by state and situation. Small mistakes can lead to costly penalties or delays when care is urgent.

Elder law attorneys and certified Medicaid planners can help ensure your spending meets all requirements. Their guidance can prevent expensive errors.

After offers direct cremation packages starting at $995, with clear and transparent pricing. Prepaying can lock in today’s rates and reduce future financial stress for your family.

When structured properly, prepaid cremation through After may qualify as an exempt asset for Medicaid planning in many states. This can help support eligibility while giving your family clarity and peace of mind.

Our team supports you with everything you need to organize a cremation in advance. Call 1-844-760-0427 or explore prepaid plans.

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Frequently Asked Questions

Can I Give Money to My Children Before Applying for Medicaid?

No, in most cases, you should not give money to your children before applying for Medicaid. Gifts made within the five-year look-back period can trigger a penalty, even if the amount is small. That penalty can delay when Medicaid will start paying for care.

Can I Pay Off My Child’s Debt?

No, you cannot pay off your child’s debt most of the time. Paying someone else’s debt is usually treated like giving them money, which can count as a gift. The main exception is if you are a legal co-signer and the debt is also your responsibility.

What Happens If I Violate the Look-Back Period?

If you violate the look-back period, Medicaid may delay your benefits by applying a penalty period. During that time, you may have to pay for care out of pocket. The penalty length depends on how much was transferred and your state’s penalty divisor.

Can I Buy a New House to Spend Down Assets?

Yes, you can buy a new house to spend down assets if it will be your primary residence. Buying a home can be an allowed spend-down strategy in many states. Some states limit how much home equity you can have and still qualify, so it’s important to check your state’s rules.

Does Spending Down Affect My Spouse’s Income?

Spending down does not usually affect your spouse’s income. But Medicaid rules about spouse income can be complicated, especially in long-term care cases. Your spouse may be allowed to keep a certain amount of income, and some of your income may be allocated to them depending on your situation and state.

How Long Does Medicaid Review Take After Spending Down?

Medicaid review timelines vary by state, but long-term care decisions often take 45 to 90 days, and sometimes longer. Missing paperwork, unclear bank records, or questionable spending can slow the process. Submitting complete documents upfront helps avoid delays.