Medicaid can help aging individuals pay for long-term care and treatment. In some cases, it can even help cover the costs of a nursing home, or home- and community-based health services. These are things a lot of people would not be able to afford without those Medicaid benefits.

However, the income limit for Medicaid is very low. This leaves many people stuck between a rock and a hard place – they make too much money to be eligible for Medicaid, but can not actually afford the care they will need.

The concept of spending down

The idea of the Medicaid spend down is fairly simple. It’s about strategically minimizing certain income and resources in order to ensure you do not exceed the income and resource limits. There are a few ways to do this.

Georgia’s Medically Needy Program lets people with medical debts essentially subtract that amount from their income. When done correctly, this can help those individuals qualify for Medicaid. (Keep in mind the benefits will not pay for your medical debts.)

There may be other avenues, as well. For example, certain trusts can sometimes be utilized, but it depends on the situation.

Beware the look-back period

Similarly, if you plan ahead, you may be able to organically reduce your income and resources as you prepare to apply for Medicaid. There is a caveat to this path, however. There is a look-back period of five years.

That means Medicaid will look to see if you sold or gave away anything for below its worth in the 60 months immediately prior to submitting your Medicaid application. The government may take that as a sign you quickly tried to dump assets in order to qualify. This can lead to a penalty, making you ineligible for Medicaid benefits for a period of time.

If this sounds a bit complicated, that’s because it is. There are many small rules and requirements you need to know. This complexity underscores why Medicaid planning is so important. It is not something you can do effectively at the drop of a hat. Instead, it requires thorough preparation and sound knowledge of the law.