Why a Medicaid Spend Down Might Not Mean What You Think It Means

When families hear the term "Medicaid spend down," many immediately think it means giving away assets to qualify for benefits. This seemingly logical conclusion has led countless Ohio families down a dangerous path that can delay Medicaid eligibility for years. The reality is far more complex, and the consequences of getting it wrong can be devastating.

The Dangerous Misconception About Gifting

Here's what many people think: "If I have too much money to qualify for Medicaid, I'll just give it to my children or grandchildren. Problem solved!" Unfortunately, this approach often backfires spectacularly.

Medicaid spend down doesn't mean gifting away your assets. It means spending excess resources on legitimate, allowable expenses that benefit you or your loved ones directly, in a Medicaid approved manner. It also means converting countable resources to non-countable resources. When you gift assets to family members or friends, you're not "spending down", you're creating what Medicaid calls a "improper transfer"

The confusion stems from the word "spend." People naturally assume it means the money can go anywhere, as long as it leaves your accounts. But Medicaid has very specific rules about what constitutes acceptable spending versus prohibited gifting.

Ohio's Five-Year Lookback Period: Your Financial History Under a Microscope

In Ohio, Medicaid examines every financial transaction you've made for the past five years when you apply for long-term care benefits. This lookback period exists specifically to identify gifts and transfers that were made to artificially reduce assets.

Every check you've written, every bank transfer, every cash withdrawal gets scrutinized. If Medicaid finds that you gave away money or property during this period, they calculate a penalty period during which you'll be ineligible for benefits.

Here's how the penalty calculation works: Medicaid takes the total amount you gifted and divides it by Ohio's Medicaid penalty divisor (approximately  $7,787 in 2025). The result is the number of months you'll be ineligible for Medicaid coverage.

For example, if you gave your daughter $77,870 two years ago, you'd face a 10-month penalty period ($77,870 ÷ $7,787 = 10 months). During those 10 months, you'd need to pay for your care entirely out of pocket. Here is the kicker: the penalty period does not begin until you are otherwise eligible for Medicaid, meaning you'll have to privately pay for your care AFTER you reach the Medicaid eligibility threshold, usually less than $2,000. That is some painful math.

The emotional toll extends beyond finances. Families often feel betrayed by the system, angry at themselves for not knowing the rules, and guilty about the burden placed on other family members who must now cover care costs.

What Actually Counts as Proper Spend Down

Legitimate Medicaid spend down involves purchasing items or services that directly benefit you and don't violate the gifting rules. Acceptable spend down strategies include:

Medical and Care Expenses: Paying for dental work, hearing aids, medical equipment, or home modifications for accessibility. These expenses reduce your assets while improving your health and quality of life.

Home Improvements: Upgrading your home's accessibility, installing medical equipment, or making repairs that benefit your daily living. However, the improvements must be reasonable and necessary, and the price needs to be fair.

Prepaid Funeral and Burial Expenses: Ohio allows you to prepay for funeral services and burial costs, removing these funds from your countable assets while ensuring your final wishes are honored. There are strict limits on this though, as only $15,000 is exempt (in 2025).

Personal Care Items: Purchasing a reasonable supply of clothing, personal care items, and other necessities for your use.

Debt Repayment: Paying off legitimate debts like credit cards, mortgages, or medical bills counts as proper spend down since you're using your money to settle your own obligations.

What doesn't qualify: Giving money to children, paying off someone else's debts, making loans to family members, or purchasing items primarily for other people's benefit.

Also, the Medicaid numbers vary from year to year, and sometimes from month to month. It is important to know the exact numbers that will apply to your spend down.

The Income vs. Asset Confusion

Another common misconception involves confusing income spend down with asset spend down. There are different eligibility rules for assets and income, and the income spend down process is vastly different from the asset spend down required for long-term care eligibility.

An excess monthly income spend down requires a special type of trust called a Qualified Income Trust, also known as a Miller Trust, which takes care of excess income on a monthly basis. An asset spend down is a one-time reduction of your resources to meet eligibility limits. Gifting doesn't help with either situation, but the confusion between these processes leads many families to make costly mistakes.

Why Professional Guidance Is Essential

Medicaid planning requires understanding complex federal regulations, Ohio state rules, and local administration practices. The rules change periodically, exceptions exist for certain situations but not for others, and the application process itself can be daunting.

An experienced Medicaid planning attorney can help you:

• Identify legitimate spend down opportunities specific to your situation
• Navigate the complex application process correctly
• Understand how proposed gifts might affect your eligibility
• Develop long-term care strategies that protect both you and your family
• Respond to Medicaid requests for additional documentation

The cost of professional guidance pales in comparison to the potential penalties for misunderstanding the rules. Many families discover this too late, after they've already created penalty periods that could have been avoided.

Protecting Your Family's Future

The key to successful Medicaid planning is understanding that a spend down isn't about making assets disappear: it's about using them wisely to benefit you while meeting program requirements. Gifting assets might seem like a shortcut, but it usually creates more problems than it solves.

If you're concerned about qualifying for Medicaid or protecting family assets, start the conversation with qualified professionals before making any major financial decisions. The five-year lookback period means that planning ahead is crucial, but even families facing immediate needs have options.

Your family's financial security shouldn't be left to guesswork. Understanding what a Medicaid spend down really means, and what it doesn't, can make the difference between protecting your family's resources and creating years of financial hardship.

Don't let misconceptions about a Medicaid spend down jeopardize your family's future. The rules are complex, but with proper guidance, you can navigate them successfully while ensuring you receive the care you need and deserve.