Quick Answer
The Medicaid spend-down program lets people with income above Medicaid limits qualify by deducting medical expenses. Once you 'spend down' to the Medicaid income threshold, the state covers remaining medical costs for that period.
Coverage Comparison by Plan Type
| Plan Type | Coverage | Notes |
|---|---|---|
| Full Medicaid | Full Coverage | Income at or below Medicaid limit - no spend-down required |
| Medicaid Spend-Down | Conditional Coverage | Income above limit - must spend down medical expenses to qualify |
| Medicare Savings Programs | Partial Help | MSPs help pay Medicare premiums/cost-sharing for those near Medicaid limits |
| Extra Help (LIS) | Part D Only | Reduces Part D drug costs for low-income beneficiaries |
Understanding Your Coverage Options
What is the Spend-Down Program?
The Medicaid spend-down program (also called a 'medically needy' program) is available in about 34 states. It allows people whose income exceeds the Medicaid limit to qualify for Medicaid by subtracting their medical expenses from their income until they reach the threshold.
Think of it like a deductible: once your medical bills for a given period equal the difference between your income and the Medicaid limit, Medicaid kicks in and covers the rest of your care for that period.
What It Covers
- Medical expenses that count toward the spend-down amount
- Medicaid benefits once the spend-down threshold is met
- Long-term care, home health, and nursing home costs
What It Doesn't Cover
- Not available in all states (only ~34 states offer medically needy programs)
- Coverage is not retroactive before the spend-down threshold is met
How the Spend-Down Calculation Works
Each state sets its own Medicaid income limit and spend-down period (typically 1 or 6 months). Your spend-down amount equals your income minus the Medicaid income limit. You must incur medical expenses equal to that amount before Medicaid begins covering your care.
Example: If your monthly income is $1,500 and your state's Medicaid limit is $900, your spend-down amount is $600/month. Once you have $600 in medical bills for that month, Medicaid covers any remaining costs.
What It Covers
- Medical bills from doctors, hospitals, and pharmacies count toward spend-down
- Medicare premiums and cost-sharing can count toward spend-down
- Unpaid medical bills from prior periods may count in some states
What It Doesn't Cover
- Non-medical expenses do not count toward the spend-down
- Some states exclude certain types of medical expenses
Dual Eligibility: Medicare ++ Medicaid
If you have both Medicare and Medicaid (dual eligible), Medicare pays first and Medicaid pays second - covering Medicare's deductibles, copays, and coinsurance. This can dramatically reduce your out-of-pocket costs.
Spend-down beneficiaries who meet their threshold become temporarily dual eligible. During the coverage period, Medicaid acts as a secondary payer, filling in Medicare's gaps.
What It Covers
- Medicare Part A and B cost-sharing (deductibles, copays, coinsurance)
- Part B premium (for QMB-level dual eligibles)
- Long-term care services not covered by Medicare
What It Doesn't Cover
- Medicaid does not cover services Medicare has already denied as not medically necessary
- Some Medicaid services require prior authorization
How to Apply for Spend-Down
Apply through your state Medicaid agency. You will need to provide proof of income, assets, and medical expenses. Your state will calculate your spend-down amount and coverage period.
Keep all medical bills and receipts - you will need to submit them to show you have met your spend-down amount. Some states allow you to use projected future medical expenses to meet the threshold.
What It Covers
- Application through state Medicaid agency (free)
- SHIP counselors can help with the application process
- Retroactive coverage once spend-down threshold is met
What It Doesn't Cover
- Not available in states without a medically needy program
- Asset limits may also apply in addition to income limits
Spend-Down Program at a Glance
| Program | Who Qualifies | What It Covers | How to Apply | Available In |
|---|---|---|---|---|
| Medicaid Spend-Down | Income above Medicaid limit with high medical expenses | Medicaid benefits after spend-down met | State Medicaid agency | ~34 states |
| QMB (MSP) | Income ≤ 100% FPL | Part A/B premiums, deductibles, copays | State Medicaid agency | All states |
| SLMB (MSP) | Income 100–120% FPL | Part B premium only | State Medicaid agency | All states |
| Extra Help (LIS) | Income ≤ 150% FPL | Part D premiums, deductibles, copays | SSA or state Medicaid | All states |
✦ Important Exceptions and Considerations
Not All States Offer Spend-Down
About 34 states and Washington D.C. have medically needy programs with spend-down provisions. States without this program include Alabama, Alaska, Arizona, Colorado, Delaware, Georgia, Idaho, Indiana, Mississippi, Missouri, Nevada, New Jersey, Ohio, South Carolina, and South Dakota.
Check with your state Medicaid agency to confirm whether a spend-down program is available in your state.
Asset Limits Apply
In addition to income limits, Medicaid has asset limits. For individuals, the typical limit is $2,000 in countable assets (some states are higher). Your home, one car, and personal belongings are generally excluded.
Even if you meet the spend-down income threshold, you must also meet asset limits to qualify for Medicaid.
Medicare Savings Programs May be Easier
If your goal is to reduce Medicare cost-sharing, Medicare Savings Programs (QMB, SLMB, QI) may be easier to qualify for than full Medicaid spend-down. MSPs have higher income limits and do not require spending down medical expenses.
Apply for Medicare Savings Programs first - they are available in all states and have simpler qualification rules.
✦ Legislative Update
H.R. 1 Medicaid Work Requirements
ProposedProposed legislation would require able-bodied Medicaid recipients to work, volunteer, or participate in job training. If passed, this could affect eligibility for some spend-down beneficiaries.
ACA Medicaid Expansion
PassedStates that expanded Medicaid under the ACA have higher income thresholds, reducing the number of people who need to use spend-down to qualify. As of 2026, 41 states plus D.C. have expanded Medicaid.
Extra Help Expanded to 150% FPL
PassedThe Inflation Reduction Act expanded Extra Help (Low-Income Subsidy) eligibility to 150% of the Federal Poverty Level starting in 2024, providing an alternative to spend-down for Part D costs.
Alternatives to the Spend-Down Program
If you don't qualify for Medicaid spend-down or live in a state without the program, other programs may help reduce your Medicare costs.
Medicare Savings Programs and Extra Help are available in all 50 states and can significantly reduce premiums, deductibles, and copays.
Programs to Explore
- Apply for Medicare Savings Programs (QMB, SLMB, QI, QDWI)
- Apply for Extra Help / Low-Income Subsidy for Part D
- Contact your state Medicaid agency about medically needy programs
- Ask your SHIP counselor about all available assistance programs
- Check if your state has a Medicaid waiver program for home and community-based services
- Look into Patient Assistance Programs for prescription drugs
- Consider a Medicare Advantage D-SNP if you are near Medicaid eligibility
✦ Frequently Asked Questions
David Haass
AuthorDavid Haass is a licensed Medicare expert who has been helping beneficiaries navigate their Medicare options for over a decade.
Ashlee Zareczny
ReviewerAshlee Zareczny is a licensed Medicare agent dedicated to helping those eligible for Medicare find the best coverage options.