The Nursing Home Spend Down

By Rick Law of the Estate Planning Center at Law Elder Law in Aurora, IL.  Senior advocates, estate planners, and elder lawyers.

Individuals with more assets than allowed by Medicaid must “pay down” or “spend down” their assets before they can qualify to be eligible for Medicaid benefits. If someone applies for Medicaid before “spending down” to the allowable assets, some states will deny the application and others will place the applicant in a “spend down”.  The “spend down” requires that all assets over the allowable amount be spent on care before eligibility is triggered. Although that might seem harmless, it is not!

This is an email that the I received from a client: “I don’t know if you can help me. My mom doesn’t have a lot of assets. She owns a home and she has about $42,000 of assets. She went into the hospital but she wasn’t there long enough before she was transferred to a skilled nursing facility for nursing home rehab.”

Typically that person is going either to long-term care or skilled rehab. The basic rule is that the person has to have three midnights as an inpatient in a hospital to trigger Medicare paying for a skilled-nursing facility post-hospital stay. What’s happening now is that the centers for Medicare or Medicaid services have hired recovery audit contractors, who are independent contractors who get paid a lot of money to deny care, in order to save money for Medicare.

Right now the recovery audit contractors are disallowing about 90 percent of one- to two-day stays in the hospital. In order to get to a skilled-nursing care facility, a person has to have a stay of three nights, or three midnights, to trigger the skilled-nursing care facility coverage that follows up.

So the client is saying her mother was on her own dime in the hospital. Now she’s on her own dime in a skilled-nursing facility. They don’t know what’s going to happen next and don’t know what they should do.

The nursing home may have even volunteered to work with the family to submit the Medicaid application. If they provide the asset information and she is approved for a spend down, the remaining $42,000 plus any sale proceeds from the home (in states where the home will not remain exempt) MUST be spent on care.

What if she has not yet paid for her funeral? What if she has some credit card debt? What about the ongoing expenses related to the home? What if the real estate taxes come due next month?

See, not as harmless as one might think.

Under the Deficit Reduction Act, if she made any “non-allowable transfers” in the past five years, the transfers would be totaled and a penalty assessed, and that penalty will not start to run until she is “otherwise eligible,” which means not until she has completed her spend down—then the penalty period will begin, and she won’t get benefits until it ends.

Too many families needlessly lose everything they have.  Don’t let that be you.  If you need help paying the overwhelming cost of long term care, give our office a call at 800-310-3100.  Your first consultation is absolutely free.  We’ll let you know what steps you need to take, right now, to protect yourself and your family.  Call now, because when you’re out of money, you’re out of options!


Rick L. Law, Attorney, Estate Planner for Retirees.

Rick was named the #1 Illinois elder law estate planning attorney by Leading Lawyer Magazine. He has been quoted in the Wall Street Journal, AARP Magazine,, and numerous newspapers and articles. Rick is the lead attorney for Law Elder Law, LLP, focusing in Estate Planning, Guardianship, and Nursing Home Solutions. His goal is to give retirees an informed edge when it comes to dealing with an uncertain future.  Get flexible retirement strategies that work during good times and bad, plus information on how you can save your home and assets from being used to pay for long term care.  Call 800-310-3100 for your free consultation now!

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