Americans planning for long-term care often confront a gap between public coverage rules and private affordability, and that gap can drive families to explore Medicaid “spend down” strategies. Medicaid is a joint state and federal program, but states administer eligibility rules differently for nursing home and other long-term care settings, including assisted living. In many states, advocates and policy experts say the program’s limits are tight enough that families may find that savings alone can make a loved one ineligible—at least at the time of application.
Under a spend-down approach, families seek to qualify a relative for Medicaid by using the person’s assets on expenses that count toward Medicaid eligibility sooner rather than later. The goal, eldercare experts say, is to meet Medicaid’s income and asset thresholds for long-term or skilled nursing care, which generally require low income and minimal assets. The strategy can include paying for qualifying costs such as out-of-pocket nursing home care, certain hospital bills, and personal items and clothing, among other expenses.
The financial pressure behind these planning conversations can be steep. Medicaid eligibility for residential care is difficult for many families because of the program’s low income and asset limits, and the costs of assisted living and nursing home care are often described as running into thousands of dollars each month. A 2024 study cited in the coverage by insurance company Genworth Financial estimated that a home health aide cost averaged roughly $78,000 a year, while the average cost of a semiprivate nursing home room was roughly $111,000 a year. The article also contrasted those figures with median retirement savings for people ages 65 to 74 of $200,000, citing Federal Reserve data, and noted that an unplanned long-term nursing home stay can consume savings within a couple of years.
Eric Carlson, director of long-term services and supports advocacy with the national nonprofit legal advocacy group Justice in Aging, framed the likelihood of needing care as part of the reason some families begin planning early. “There’s a reasonably high likelihood that you’ll need nursing care for a period of their lives, and there’s a good chance you may need it for a long period of time,” Carlson said, describing his long experience working on older Americans’ legal and care-access issues.
Because Medicaid rules differ across states, the spend-down path can take different shapes depending on the state. In New York, for example, the coverage described an “excess income” or spend-down program that allows residents whose income exceeds Medicaid limits to qualify by deducting medical expenses—such as doctor visits, prescriptions, or home care—from their income until they reach eligibility thresholds for that month. Similar “medically needy” programs exist in more than 30 states, the article said, allowing people with high health care costs to qualify even if income is initially above Medicaid limits.
The planning details also matter. Medicaid applications commonly include a five-year “look back” provision that reviews an applicant’s assets and bank accounts to see whether there were improper transfers, according to the coverage. Eldercare specialists cited in the report say that families should not simply transfer assets of the person needing nursing care into a relative’s bank accounts “to appear poor on paper,” because that can run afoul of the look-back rules and potentially complicate eligibility.
Carlson also cautioned against unassisted planning. “People shouldn’t be doing ‘do it yourself’ financial planning in these matters. It can create significant problems with a person’s estate,” he said, adding that families “don’t want to wait until the day nursing care is absolutely necessary to make these sorts of decisions.” He and the coverage urged families to work with eldercare specialists and to use resources from groups that help navigate Medicaid and long-term care, including Justice in Aging and the Kaiser Family Foundation, as well as state and local liaisons.
For families who are years away from needing care, the report said long-term planning remains important because many Americans are likely to need help with daily living eventually. One option discussed was purchasing private long-term care insurance, typically bought in a person’s late 40s or early 50s, with the coverage describing policies costing “a couple hundred dollars a month” that could pay for care worth tens of thousands of dollars a year in the future.