What You Need to Know About Medicaid Spenddowns

By the Legal Aid Society

A Medicaid spenddown is when your monthly income is more than the income limit for Medicaid. The difference between your income and the Medicaid limit is called a “spenddown” or a “surplus.” You also might be told you are “over-income” for Medicaid or have “excess income.”

How is a spenddown calculated?

Your Local Department of Social Services (LDSS) – the Human Resources Administration (HRA) in New York City – determines your total income (gross income), subtracts various deductions (parts of your income that aren’t counted by Medicaid), and compares that final amount with the Medicaid limit. If your income is greater than the Medicaid limit, the difference is your spenddown amount.

Can I still get Medicaid?

You may still qualify for Medicaid. One way is by participating in the Medicaid Spenddown Program. 

Who qualifies for the Medicaid Spenddown Program?

Adults who have a disability, are blind, or are 65 or older, may qualify for the Spenddown Program. You must also fall below the Medicaid resource limit for your household size.*

*Resources are assets like cash savings, bank accounts, property and other assets you own. In addition to meeting the Medicaid income and resource limits, you must meet all other Medicaid eligibility criteria, like New York State residency and immigration status.

How does the Medicaid Spenddown Program work?

Each month, in order to get Medicaid coverage, you have to “meet your spenddown.” You may do this in two ways:

Paying the amount of your spenddown directly to your LDSS through the Pay-In Program. You may pay for one to six months of coverage at a time. If you pay between one and five months of coverage, you will have Medicaid coverage for all outpatient services for that number of months. If you pay for six months of coverage, you will have Medicaid coverage for all outpatient and inpatient services for the next 6 months.*

OR

Submitting medical bills to your LDSS that are equal to or greater than your spenddown amount. How the bills are treated by the Spenddown Program depends on the type of bill you submit:

• Paid Bills: Paid medical bills that total or are higher than the amount of your monthly spenddown will give you coverage for current and future months. Any paid bill used to meet your spenddown must be less than three months old.
• Recent Unpaid Bills (within 3 months of your Medicaid activation): Unpaid medical bills that total or are higher than the amount of your monthly spenddown can be used to meet your spenddown as long as the provider is still seeking payment on them. These bills will give you coverage for the month(s) you received the service. Importantly, when you submit your bills to the Spenddown Program, you are still responsible for any payment to your doctor up to the amount of your spenddown, but any costs above that amount will be covered by Medicaid. For example, if you have a spenddown of $90, and submit a medical bill for $100, Medicaid will only cover $10 of that bill.
• Older Unpaid Bills (from 3 or more months before your Medicaid was activated): Bills for services 3 or more months prior to your Medicaid activation and that your provider is still seeking payment of are called Viable Bills. While you can submit these bills to Medicaid to satisfy your spenddown, Medicaid will not pay these bills and you still owe the money to your provider.

You will want to submit paid or unpaid bills by the first week of the month during which you are requesting coverage. By meeting your surplus early in the month, you can receive Medicaid coverage for the remainder of the month with no out-of-pocket expense.

*If you do go into the hospital when you have not paid for six months of coverage, inpatient coverage can still be activated at that point.

What types of bills am I allowed to submit?

• Bills you submit must include your name, the date, description and cost of service, and if paid, the date paid.
• You may submit bills from both Medicaid and non-Medicaid providers.
• You can submit bills for services that Medicaid does not cover, such as services from a chiropractor or receipts for pharmacy items such as vitamins and ointments. While a bill for a non-Medicaid-covered service will help you meet your monthly spenddown, Medicaid will not cover the bill.
• You can submit bills from a Certified Home Health Agency (CHHA). CHHA providers may also submit bills directly to your LDSS for you.
• Medical expenses that are paid on your behalf by public programs (such as the AIDS Drug Assistance Program) can be used to cover your spenddown. These costs can be submitted to your LDSS directly by the public program.

Do I have an option to meet my spenddown and activate my Medicaid only during certain months when I need Medicaid services?

Yes. You can choose to meet your spenddown in the month you want your Medicaid turned on. For example, if you are due for your dental cleaning in June, you can meet your spenddown in June, and Medicaid would activate for that month.

Is it worth it for me to participate in the Spenddown Program?

Your participation in the Spenddown Program may depend on your health, medical needs, and the type of insurance you already have. Medicaid covers certain health services that many other insurance programs do not, such as vision, dental, and home care services. If you need these services, and they are not provided by any other insurance, it may be beneficial to participate in the Spenddown Program. But, if you have a high spenddown amount, have comprehensive Medicare coverage without significant cost-sharing, and you do not have significant dental, vision, and/or home care needs, it may not make sense for you to satisfy your spenddown in order to maintain your Medicaid coverage. Before making this decision, you may wish to consult with an advocate who can provide you with individual advice. 

Managed Long Term Care

How does a spenddown work when I have Managed Long Term Care (MLTC)?

When you have a MLTC plan, you owe your spenddown to your MLTC plan instead of the LDSS. Your MLTC plan can bill you directly for the amount of your spenddown. It is important to know that you meet your spenddown simply by receiving MLTC services and your Medicaid will remain active, even if you have not paid your bill.

Can I lose my MLTC services for not paying my spenddown?

No. Plans are not allowed to stop your MLTC services for not paying your spenddown. But your MLTC plan can end your enrollment in that particular plan if you do not pay your spenddown. Before your MLTC plan disenrolls you, it must follow several steps to make sure you receive notice of the intended disenrollment and information on how to appeal. If you have been disenrolled from your plan for failure to pay your spenddown, you will be transferred to another MLTC plan, and your services will continue. However, you may not be able to keep your home care agency and aides depending on the new plan’s contracts. A new MLTC plan may also eventually move to reduce or change your hours of care.

Supplemental Needs Trusts (SNT) and Medicaid Spenddown 

Can I use a SNT to meet my spenddown?

For some people, an SNT is a good option to avoid having a spenddown. An SNT requires monthly management and has yearly and monthly costs. An SNT works like a special kind of bank account where you deposit your spenddown amount into the SNT each month. An SNT eliminates your spenddown because the LDSS will not count any money you place in the trust when calculating your eligibility for Medicaid.

What are the requirements for SNT?

• You must be certified disabled by the Social Security Administration or by the New York State Office of Temporary and Disability Assistance.
• The money in the trust cannot be withdrawn as cash and must be used for your benefit only. You can direct the trust to pay for your regular expenses, such as rent to your landlord, directly from your trust account.
• The money that is left in the trust after you die must go to the State or to the charitable organization that established the trust; this is called the “payback requirement.”
• The trust must be irrevocable, meaning that once you establish the trust, you cannot later dissolve it. This means you cannot take all the money out of the trust if you change your mind. However, if you no longer wish to participate in an SNT, you can still spend the money already in the SNT on expenses for yourself and stop depositing money into the trust.

Where can I set up an SNT?

SNTs are maintained by organizations like nonprofits or community trusts. There a number of organizations that service the New York City area.

Are there drawbacks to using an SNT?

• Setting up and maintaining an SNT is not free. SNTs may have an enrollment fee and other maintenance fees.
• Any money left in the trust when the beneficiary dies goes back to the State or to the trust organization.
• Money in an SNT can create problems if you eventually need to enter a nursing home because Medicaid may consider these deposits a transfer of assets when determining your nursing home eligibility for Medicaid. This can delay Medicaid’s coverage for nursing home care if you should ever need it. You may wish to speak further with an elder lawyer or a trust and estates attorney about this.
• Additionally, keeping an SNT involves a lot of paperwork and organization.

Alternatives to the Spenddown Program

Medicaid Buy-in for Working People with Disabilities (MBI-WPD) Program 

If you are between the ages of 16-64, are certified disabled, and are doing any paid work, the MBI-WPD Program may help you qualify for Medicaid. This program allows individuals to qualify for Medicaid at higher income and resource limits. The work requirements for the MBI-WPD Program are relatively minimal but you are required to have proof of payment for your work.

Medicare Savings Program (MSP)

The Medicare Savings Program (MSP) is a Medicaid program that helps pay Medicare premiums for low-income individuals. Depending on your income, there are 3 different levels of MSP: QMB, SLMB, and QI-1. Each has a higher income eligibility limit than Medicaid, and there are no asset/resource tests. In order to be enrolled in the MSP, you must apply and recertify each year with your LDSS.

• The Qualified Medicare Beneficiary Program (QMB) is for people with income at or below 100% of the Federal Poverty Level. QMB covers virtually all Medicare cost-sharing obligations, and all deductibles and co-insurance. If you are enrolled in QMB, your Medicare providers cannot charge you Medicare deductibles or cost-sharing for Medicare-covered services. This means, Medicare providers cannot expect you to make up the balance on any bills that Medicare does not cover.
• SLMB and QI-1 will cover your Medicare Part B premiums only.

If you do not have a need for Medicaid covered services, such as vision, dental, or home care, enrolling in the QMB MSP and choosing not to meet your Medicaid spenddown each month may be a good option for you because you will not have to pay for any portion of your Medicare bills. However, if you do have a need for Medicaid covered services, you can enroll in the Medicaid Spenddown Program and the QMB MSP at the same time.

Enrolling in SLMB or QI-1 instead of Medicaid may be a good option if you do not have home care or extensive dental or vision needs, and your spenddown amount is higher than your out-of-pocket Medicare costs. For example, you may only spend $50 a month in out-of-pocket medical costs that Medicare does not cover. If your Medicaid spenddown is $100 a month, and you do not need dental, vision, or home care, you are likely better off with a MSP only, rather than paying your monthly spenddown to opt into Medicaid.

Medigap and Medicare Advantage

You may also consider a MSP in combination with a Medigap or Medicare Advantage plan.

Medigap policies cover some of the costs Original Medicare does not cover like copayments, coinsurance, and deductibles. You have to pay a separate premium for Medigap in addition to any Medicare Part A, B, and D premiums you pay. Medigap policies generally do not cover long-term care, vision or dental care, hearing aids, eyeglasses, or private-duty nursing. A Medigap plan may be a good option for you instead of Medicaid with a spenddown if 1) you have no home care or do not have many dental or vision needs, 2) you do not qualify for QMB, 3) you have high out-of-pocket costs for cost-sharing or Medicare-covered services, and 4) the costs associated with the Medigap plan are less than your spenddown amount.

Medicare Advantage is also known as Medicare Part C. It provides coverage for Medicare Parts A, B, and D through one plan. Some Medicare Advantage Plans may cover limited long-term care, dental and vision care, eyeglasses, and hearing aids. The premium and cost-sharing amounts differ among Medicare Advantage plans. A Medicare Advantage plan may be a good option for you instead of Medicaid with a spenddown if you have needs that are covered by the Medicare Advantage plan and if the out-of-pocket cost for your Medicare Advantage plan is less than your Medicaid spenddown amount. If you choose a Medicare Advantage plan, you can only see doctors who are in that plan’s network. If you stay in Original Medicare you can see any doctor who takes Original Medicare.

Is there anything I should know about my spenddown during the COVID-19 emergency?

Some local districts have put in place policies that allow for an extension of Medicaid coverage when Medicaid recipients meet their spend-down at least once during the public health emergency, or when they demonstrate they tried to submit documents to show they met their spenddown during the public health emergency. Please check with your LDSS for more details.

Disclaimer

The information in this document has been prepared by The Legal Aid Society for informational purposes only and is not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. You should not act upon any information without retaining professional legal counsel.