What Expenses Qualify for Medicaid Spend Down? Full List

Medicaid spend-down allows people with income above the Medicaid limit to qualify by spending down their excess income on qualifying medical and long-term care expenses until they reach the state's Medicaid income threshold. Qualifying expenses include most out-of-pocket medical bills, prescription costs, health insurance premiums, and certain long-term care services — but not housing, groceries, or other non-medical expenses.

What Is Medicaid Spend Down?

Medicaid spend-down (also called the "medically needy" pathway in states that offer it) is a mechanism that lets individuals with income above the Medicaid eligibility limit still qualify by subtracting allowable medical expenses from their income until it falls at or below the state's Medicaid income standard.

Think of it as a deductible system: the state sets an "income cap" for Medicaid eligibility (typically the Federal Poverty Level plus a small margin, or a flat dollar amount). If your income exceeds that cap, you must spend down the excess on qualifying medical costs before Medicaid begins paying. Once your approved medical expenses equal or exceed the spend-down amount, Medicaid coverage kicks in for the rest of that period.

Not all states offer spend-down. As of 2026, approximately 34 states plus the District of Columbia operate a medically needy program that includes a spend-down pathway. The remaining states use strict income limits only — if your income exceeds the cap, you do not qualify regardless of medical expenses, unless you enter a Qualifying Income Trust (QIT/Miller Trust).

"The medically needy spend-down program allows individuals to subtract incurred medical expenses from their income to meet Medicaid eligibility requirements. Qualifying medical expenses include bills that have been incurred but not yet paid, as well as expenses paid in the current coverage period." — Medicaid.gov, Eligibility Overview: Medically Needy.

Expenses That Qualify for Medicaid Spend Down

The key principle: expenses must be for medical care, health services, or long-term care that would otherwise qualify under Medicaid's covered services — even if Medicaid is not yet paying for them during the spend-down period.

Qualifying Medical Expenses (spend-down eligible)

Hospital and physician services
- Hospital inpatient and outpatient bills
- Physician office visits, specialist visits, emergency room care
- Surgical fees and anesthesia costs
- Laboratory tests, imaging (X-rays, MRI, CT scans)
- Ambulance and emergency transportation

Prescription medications
- Prescription drug costs paid out-of-pocket
- Insulin, insulin syringes, and diabetic supplies
- Specialty drugs not covered by Medicare Part D (gap costs)

Long-term care services
- Nursing-home care costs paid out-of-pocket
- Assisted living facility fees (in states that cover assisted living under Medicaid)
- Adult day care and adult day health services
- Home health aide services and skilled nursing visits at home
- Personal care services (bathing, dressing, grooming) paid out-of-pocket

Medical equipment and supplies
- Durable medical equipment (wheelchairs, walkers, hospital beds, CPAP machines)
- Ostomy supplies, wound care supplies
- Hearing aids and batteries (when medically prescribed)
- Eyeglasses when prescribed by an ophthalmologist

Dental and vision services
- Dental treatment, dentures, oral surgery
- Prescription eyeglasses and contact lenses
- Eye exams from a licensed optometrist or ophthalmologist

Mental health and behavioral health services
- Psychiatrist and therapist visits
- Inpatient psychiatric hospitalization
- Substance abuse treatment

Health insurance premiums
- Medicare Part B and Part D premiums paid by the individual
- Medicare supplement (Medigap) insurance premiums
- Long-term care insurance premiums

Expenses That Do NOT Qualify for Medicaid Spend Down

The following costs are non-medical and cannot be applied toward the Medicaid spend-down amount, even if they are large or burdensome:

• Rent or mortgage payments
• Utilities (electricity, water, gas, internet)
• Groceries and food
• Clothing and personal care products (non-prescription)
• Over-the-counter vitamins and supplements (unless specifically prescribed by a physician)
• Transportation to non-medical appointments
• Entertainment and recreation
• Pet care
• Cable or streaming subscriptions

When Can Incurred-But-Unpaid Bills Be Used?

One important and often overlooked rule: Medicaid spend-down allows you to count medical bills that have been incurred (billed to you) but not yet paid, not just bills you have already paid in full.

This is a critical distinction. If you receive a $3,000 hospital bill in the current coverage period, you can apply that $3,000 toward your spend-down immediately — you do not need to have written the check yet. Once you present proof of the incurred bill to your state Medicaid office, it counts toward the spend-down calculation.

This rule prevents spend-down from being an unworkable cash-flow trap for people living on fixed incomes who receive large medical bills.

"Medical expenses incurred during the budget period — whether paid or merely incurred and unpaid — may be used to meet the spend-down amount. Prior incurred but unpaid medical expenses can also be applied if the individual was eligible in a prior period and carries those balances forward." — American Council on Aging / Medicaid Planning Assistance, Medicaid Spend Down: How It Works.

How the Spend-Down Calculation Works

State Medicaid offices calculate spend-down on a budget period basis — typically monthly or every six months:

1. Calculate excess income — Subtract the state's income standard from your monthly income. The difference is your spend-down amount.
2. Document qualifying medical expenses — Submit bills, EOBs, and receipts for all allowable medical expenses incurred during the budget period.
3. Offset the spend-down — Once your documented allowable expenses equal or exceed your spend-down amount, Medicaid coverage begins for the remainder of the period.

Example:
- State income standard for nursing-home Medicaid: $2,800/month
- Your monthly income: $3,400/month
- Spend-down amount: $600/month
- You incur $1,200 in home health aide costs in January
- After applying $600 of those costs to the spend-down, Medicaid covers the remaining $600 of home health costs for January

Alternatives to Spend Down for High-Income Medicaid Applicants

If you live in a state without a medically needy program, or if your income is too far above the cap for spend-down to be practical, two other options may apply:

Qualifying Income Trust (QIT / Miller Trust): Excess income is deposited monthly into an irrevocable trust — the trust pays a Personal Needs Allowance to the individual and routes the rest to the nursing home, with Medicaid paying the gap. See Qualifying Income Trust: How a Miller Trust Works.

Medicaid Asset Protection Trust (MAPT): Addresses asset excess rather than income excess — used to protect the family home from Medicaid's estate recovery program by transferring it into an irrevocable trust at least five years before applying.

Related Articles on WhyIsMy.org

• Qualifying Income Trust: How a Miller Trust Works
• Medicaid Asset Protection Trust: How a MAPT Works
• Medicaid Look-Back Period: How the 5-Year Rule Works
• What Assets Are Exempt From Medicaid?

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In Short

Medicaid spend-down qualifying expenses include most out-of-pocket medical bills (hospital, physician, prescription, dental, vision, mental health), durable medical equipment, long-term care services, and health insurance premiums. Non-medical expenses like housing, food, and utilities do not qualify. A key rule: bills that have been incurred but not yet paid still count toward the spend-down. About 34 states plus DC offer a medically needy spend-down pathway — in states without it, a Qualifying Income Trust (Miller Trust) is the alternative for income-over-limit applicants.

What You Also May Want To Know

Does every state have Medicaid spend down?

No — about 34 states plus Washington DC offer a medically needy program that includes spend-down. The remaining states use strict income limits only (sometimes called "209(b) states" or strict-income states). In those states, individuals with income above the cap must use a Qualifying Income Trust (Miller Trust) or may not qualify at all.

Can you use old medical bills for Medicaid spend down?

Yes, in some cases. Many state Medicaid programs allow incurred-but-unpaid prior-period medical expenses to be carried forward and applied toward the current period's spend-down if the individual was otherwise eligible in the prior period when the expense was incurred. The rules vary significantly by state.

Does Medicare paying a bill first affect my Medicaid spend down?

Yes. Only the amount you owe out-of-pocket after Medicare (or other insurance) pays can be applied toward the spend-down. The insurance-covered portion does not count as your expense.

What documentation does Medicaid require for spend-down?

Medicaid offices typically require original billing statements or Explanation of Benefits (EOB) forms from the provider, showing the date of service, description of the service, the total charge, any insurance payments applied, and the balance owed by the patient. Keep all medical bills for the full budget period.

Can you use health insurance premiums toward spend down?

Yes. Medicare Part B and Part D premiums, Medicare supplement (Medigap) premiums, and long-term care insurance premiums paid by the individual all qualify as allowable deductions in the spend-down calculation. These premiums are typically deducted from income first, before other medical expenses are applied.

Reviewed and Updated on June 30, 2026 by George Wright