It is easiest to think of Medically Needy Medicaid — also called a Spend-Down Program, Medicaid’s Excess Income Program, or a Share of Cost Program — as a partial acceptance into the Medicaid program. (Please note, state Medicaid programs go by different names depending on the state in which one resides. As an example, in California, the Medicaid program is called Medi-Cal. In Massachusetts, it is called MassHealth. In Oklahoma, it is called SoonerCare. And in Tennessee, it is called TennCare). The Medically Needy Pathway to Medicaid eligibility is intended to assist individuals whose income exceeds the Medicaid limit, but who have unusually high medical expenses that they cannot afford.
In general terms, Medically Needy Medicaid works as follows: An individual “spends down” their excess income on medical expenses, which may include Medicare premiums, to a predetermined amount. This is often referred to as a Medically Needy Income Limit (MNIL), as it is in Georgia. However, some states, such as California, use a different term, such as Maintenance Needs Allowance (MNA).
Please note, the level to which one must “spend down” his or her excess income on medical expenses varies by state. Once one has spent his or her income down to the required level for the state in which he or she resides, the state Medicaid program covers the remainder of the individual’s care costs for the rest of the medically needy period. One may think of the medically needy program like an insurance deductible, but one that must be met in one month, three months, or six months instead of each year. (The time frame varies based on the state in which one lives).
For example, an elderly woman in Georgia has a one-month medically needy period, and she has monthly income of $1,200. For a single Medicaid recipient, the medically needy income limit is $317 (in 2022). Based on this example, the woman is required to pay the additional $883 / month ($1,200 – $317 = $883) to her medical providers. Stated differently, she has a “spend down” of $883, which is the difference between her monthly income and the medically needy income limit. Any medical expenses she incurs after paying her $883 “spend down” will be paid by the state for the rest of the medically needy period. If, in any given month, she does not have at least $883 in medical bills, she pays only her expenses and is allowed to keep the rest of her income. For example, in June, her income is $1,200 and she has $300 in medical expenses. She pays the $300 in medical bills, leaving her with $900 in income. Since the MNIL is $317 and she has not “spent down” her income to this level, she does not qualify for medically needy Medicaid for this month.
As another example, a senior man in California has a one-month medically needy period, and he receives $1,700 / month in income. However, instead of California having a medically needy income limit, the state has a Maintenance Needs Allowance (MNA), which is used to determine his “share of cost.” For a single applicant, the MNA is $600 for someone living in the community. (If he were to live in a nursing home, the MNA would be $35.) The way his share of cost is determined is by subtracting the maintenance needs allowance from his monthly income, which comes to a cost share of $1,100 ($1,700 – $600 = $1,100). For any month, if he does not have over $1,100 in medical bills, he pays only his expenses and is allowed to keep the rest of his income. If “share of cost” is not met, he does not qualify for medically needy Medicaid.
“Medically Needy” describes a type of Medicaid program that looks at the individual’s income and medical expenses as opposed to having a hard income limit which is called “Categorically Needy.” As mentioned above, one can spend “excess” income on medical expenses, bringing their income down to the MNA or MNIL, and therefore, qualify for Medicaid.
Medically Needy Medicaid may be called by many different names. However, to avoid confusion, they are all referring to the same medically needy pathway to Medicaid eligibility. As mentioned before, “Medicaid Spend-Down Program” and “Share of Cost Program” (in California and Florida) are two commonly used phrases for “Medically Needy Medicaid.” In Pennsylvania, it is called the Medically Needy Only Medical Assistance (MNO-MA) Program. And in Georgia, it is called the Adult Medically Needy Program. Other names by which it might be called include Aged, Blind and Disabled – Medically Needy Program (ABD-MN) and Medicaid Deductible Program.
As of August 2022, the following states have a Medically Needy Pathway to Medicaid eligibility.
The amount an individual must pay on medical expenses in order to reach the Maintenance Needs Allowance or the Medically Needy Income Limit, and hence, become Medicaid eligible, is often called a Spend-Down or a Share of Cost (SOC). It may also be referred to as a “patient pay.”
SOC, Spend-Down, and insurance deductibles are similar in that once the consumer has spent a specific amount, then insurance covers the rest. However, deductibles are at a set level shared by everyone in a particular type of insurance. Share of Cost and Spend-Down are specific to the individual. One can think of SOC and Spend-Down as a custom deductible based on one’s income and medical expenses.
Co-payment amounts, sometimes shortened to “co-pays,” are a portion of a specific medical expense for which the consumer is responsible. This is different from SOC and Spend-Down because all medical expenses are considered in aggregate, while with co-payments, each procedure or medication will have a specific co-payment amount.
If one thinks of Spend-Down and Share of Cost as a partial acceptance into Medicaid, then one can avoid them by being fully or unconditionally accepted into Medicaid. Qualifying for Medicaid unconditionally means the individual has income and assets less than the eligibility limits. In 2022, in most states, for elderly persons requiring nursing home Medicaid or long-term Home and Community Based Services (HCBS) via a Medicaid Waiver, single applicants are limited to $2,523 in monthly income and $2,000 in assets, excluding their primary home and vehicle. Please note that the income limit for long-term care, such as personal care assistance, through the regular state Medicaid program is generally lower than the income limit listed above. Details available here.
There are multiple techniques used to lower one’s income and assets to meet Medicaid’s eligibility limits while still preserving those assets for one’s family. Read about qualified income trusts, which may help lower one’s countable income when the medically needy pathway is not available, and funeral trusts, which lower one’s countable assets.
Qualifying for Medicaid is complicated. There are professional advisors, both public and private, that help families qualify. Medicaid is managed at the state level; find a Medicaid Planner in your area to help.