Expenses that qualify for Medicaid spend down pay fair market value for something the applicant receives or for property Medicaid already treats as exempt. That includes paying the applicant's own credit cards, mortgages, taxes, and medical collections; funding an irrevocable prepaid funeral contract; repairing the exempt primary home; buying a replacement exempt vehicle within state limits; and purchasing medical equipment the applicant uses. You cannot spend down by paying a relative's bills, giving cash gifts, or buying luxury items for heirs. Keep invoices, payoff letters, and bank proof for every payment.
County workers do not publish a single shopping list titled "approved Medicaid expenses." They apply one filter. Did countable cash leave the applicant's control in exchange for fair market value that benefits the applicant or land in an exempt category?
Federal transfer rules in 42 CFR 433.308 penalize disposals for less than fair value during the look-back window. Paying your own hospital bill at the amount billed is fair value. Handing $8,000 to a grandson with no goods in return is not.
Asset spend-down for nursing-home Medicaid differs from medically needy income spend-down. The first drains savings below the resource cap. The second stacks unpaid medical bills against monthly income over the limit. Our Medicaid spend down strategies guide maps both pathways so you pick the right worksheet.
DeShawn, 52, in Memphis learned this rule when his mother Gloria needed TennCare CHOICES nursing-facility coverage in April 2026. Gloria held $24,300 in a First Horizon checking account against Tennessee's $2,000 cap. DeShawn asked whether he could "just say" Mom owed him for years of caregiving. Shelby County TennCare staff said undocumented family loans count as gifts unless a real note and repayment history existed before the crisis.
Common mistake:Families often treat Venmo transfers to relatives as spend-down. Medicaid classifies those payments as gifts unless a contract and applicant benefit are documented at fair market rates.
Paying legitimate debts in the applicant's name is among the safest spend-down channels. Credit cards, auto loans, personal loans, medical collections, property taxes, income taxes, and utility arrears reduce countable cash when checks clear to named creditors.
Medicaid does not net debt against assets on the worksheet. Gloria's $24,300 account with $6,100 on a Chase card still counted as $24,300 until DeShawn mailed the payoff. Read paying debt for Medicaid spend down for credit-card itemization rules when family members shared the card.
Prepaying three years of cable or insurance in one lump sum draws scrutiny in Pennsylvania and Texas. Paying an existing invoice with a contract number is clearer. DeShawn paid $4,200 toward Gloria's past-due Memphis Light, Gas and Water balance and $3,800 on a solo Visa after he highlighted only Mom's pharmacy charges on itemized statements.
Joint debt with a community spouse needs allocation memos. A $9,400 joint auto note may require a worksheet showing how much of each payment retired the applicant's share of the obligation.
| Expense | Qualifies for asset spend-down? | Typical proof |
|---|---|---|
| Applicant credit card payoff | Yes, when charges benefited applicant | Itemized history, zero-balance letter |
| Mortgage on primary home | Yes | Lender payoff quote, wire confirmation |
| Applicant medical collection | Yes | Hospital invoice, receipt with account number |
| Back property or income taxes | Yes | County or IRS receipt tied to applicant |
| Adult child student loan | No | Treated as gift to child |
| Informal loan to nephew | Risky | Written note and repayment history required |
| Prepaid 36 months of utilities | Risky | Oversized prepayment may look like gift |
| Nursing home private-pay balance owed by applicant | Yes | Facility invoice in applicant name |
Irrevocable prepaid funeral contracts move countable cash into exempt funeral value. The applicant cannot cancel the contract for cash. Most states accept fair-market goods-and-services lists that match the funeral home price file.
Federal SSI rules pair burial spaces, designated burial funds up to $1,500 in many states, and separate irrevocable contract lines. Florida allows a higher designated burial fund in some manuals. New York uses mandatory irrevocable disclosure language on funeral-home agreements.
Revocable preneed plans stay countable until spent or converted. DeShawn almost funded a "flexible" plan at a Midtown Memphis funeral home until the director admitted Gloria could demand a refund. Shelby County would have counted the full deposit.
Contracts priced for catering, travel for guests, or cash gifts to heirs trigger transfer reviews. Pair funeral planning with prepaid funeral Medicaid spend down and the Medicaid exempt assets guide for burial fund caps separate from large irrevocable trusts.
Repairs on the applicant's exempt primary residence convert countable cash into home equity Medicaid already excludes when occupancy or intent-to-return tests pass. Roof work, HVAC replacement, plumbing, electrical panels, and accessibility ramps usually pass review with licensed contractor invoices.
Household goods and personal effects are exempt under federal SSI resource rules regardless of replacement cost. Buying a new mattress or replacing a broken refrigerator for the homestead is allowed, but caseworkers still want proof you paid fair value to a store or vendor, not cash to a relative.
DeShawn spent $11,600 on a heat pump and $6,400 on a bathroom grab-bar package at Gloria's Binghampton bungalow before filing TennCare. He kept the HVAC contract, city permit, paid invoices, and Regions Bank wire confirmations in one PDF. Workers matched each dollar to the deed Gloria still owned.
Equity caps can flip math when no spouse or protected child lives in the house. Tennessee long-term care materials follow the federal $713,000 equity interest ceiling in 2026. A paid-off Memphis home near that line needs equity math before a large renovation. See home improvements for Medicaid spend down for cap examples in Ohio, Florida, and New York.
Past-due medical bills in the applicant's name belong on the allowed list. Hospital collections, physician groups, ambulance invoices, dental work, hearing aids, eyeglasses, dentures, and durable medical equipment the applicant uses all reduce countable cash when documented.
Private-pay nursing home or assisted living balances the applicant owes directly to the facility count as spend-down when paid before the resource snapshot. Gloria owed $7,900 for two weeks of private pay at a Shelby County skilled nursing center. DeShawn paid the invoice from Gloria's checking account and kept the facility ledger printout.
Income spend-down uses unpaid medical bills differently. Pennsylvania Medical Assistance Spend Down Program applicants stack incurred medical expenses against monthly income over the limit without draining $2,000 in assets first. Our incurred medical expenses spend-down post explains why the same receipt cannot satisfy both pathways.
Health savings account withdrawals may create tax issues and transfer questions. Talk with a tax advisor before you drain an HSA to fund spend-down.
Common mistake:Paying a medical bill that Medicare or TennCare already covered does not create spend-down credit. Workers match claim numbers and will deny duplicate payments.
One automobile used for transportation is exempt in SSI-linked Medicaid states. Replacing a broken car with a modest used vehicle can be lawful spend-down when the applicant titles the car in their name and the purchase price reflects fair market value.
A second car, boat, or RV counts as a resource. Buying a luxury SUV for a grandchild fails the test even if Mom signs the check.
Term life insurance with no cash value is often excluded. Whole life policies with cash surrender value above burial exclusions may count as assets. Paying annual premiums on an exempt term policy is different from buying a new cash-value policy to hide savings.
DeShawn replaced Gloria's 2009 sedan with a $9,200 used Toyota titled solely to Gloria before application. He kept the bill of sale and canceled check. TennCare excluded one vehicle while counting Gloria's old brokerage CD until he liquidated it for allowed bills.
Long-term care insurance premiums the applicant pays for their own policy may qualify in some states when the policy meets Medicaid partnership rules. Confirm with TennCare or your state manual before you treat premiums as spend-down.
Cash gifts to children, grandchildren, churches, or friends are not qualifying expenses. Neither are loans to relatives with no repayment history, paying someone else's rent, or buying jewelry for heirs.
Annuities and promissory notes sold as spend-down shortcuts fail when contracts do not meet Deficit Reduction Act rules. Caseworkers treat non-compliant products as countable assets or penalizable transfers.
DeShawn's cousin in Nashville suggested prepaying five years of rent on an apartment DeShawn would share with Gloria. TennCare would have counted the wire as a gift to DeShawn because Gloria would not occupy the unit alone.
Read transferring assets to family for Medicaid before you move money sideways. Returning improper transfers before filing may reduce penalty months in some states, but calling a gift an "expense" does not fix the worksheet.
Start with debts that are easiest to defend: applicant-only medical collections, tax liens, and solo credit cards after you review itemized charges. Follow with irrevocable funeral funding and homestead repairs that have signed contracts.
Large mortgage payoffs pair with home equity math and community spouse planning. Coordinate timing with nursing home Medicaid spend down so you keep enough cash for private-pay room-and-board while the application is pending.
DeShawn cleared Gloria's gap over six weeks: $7,900 facility balance, $6,100 credit card, $4,200 utilities, $10,800 irrevocable funeral contract, $9,200 vehicle replacement, and $11,600 HVAC work. He stayed above $2,000 until the final HVAC wire cleared, then printed March 1 bank statements for Shelby County.
Cross-check every line against Medicaid countable assets so you know what still sits on the worksheet after spending stops.
Tennessee TennCare CHOICES and nursing-facility Medicaid use a $2,000 individual resource standard in 2026 for Gloria's pathway in Shelby County. Memphis applicants with moderate savings need several documented expense channels before the worksheet clears.
Pennsylvania County Assistance Offices enforce a $2,000 applicant cap on many nursing-home cases while running a separate Medical Assistance Spend Down Program for income over the limit. A Philadelphia family might pay past-due bills from assets in one case and submit unpaid invoices on an income worksheet in another. Use the Pennsylvania Medicaid spend down calculator for the asset side.
New York Chronic Care raised the individual resource ceiling to $33,038 in 2026. Erie or Kings County applicants can keep more liquid savings than Memphis families before spend-down begins, but OTDA still rejects gifts disguised as expenses. The New York calculator models that higher cap.
Texas HHSC MEPD applicants face the same $2,000 resource test as Tennessee for many nursing-home cases. Harris County workers scrutinize large payoffs to relatives' creditors even when the applicant's name is absent from the loan. The Texas Medicaid spend down calculator helps when adult children compare Mom's Memphis totals to Dad's Houston accounts.
Common mistake:Applying New York's $33,038 cushion to a Tennessee application overstates how much Gloria could keep by more than $31,000. Match the worksheet to the state where the applicant will file.
Qualifying expenses only matter after you know how far countable assets sit above the cap. Enter bank balances, retirement accounts, and non-exempt property in Spend Down Calculator, then subtract exempt categories before you schedule payoffs.
DeShawn ran Gloria's totals on the Texas page when his father in Houston needed parallel planning, then switched to Tennessee rules for Gloria's Shelby County case. Pennsylvania and New York pages cover the $2,000 CAO cap, income spend-down fields, and the $33,038 Chronic Care ceiling.
Return to the spend down strategies guide when you need a full channel list beyond this expense FAQ.
Qualifying expenses pay fair market value for goods or services the applicant receives or for categories Medicaid exempts. Common examples include the applicant's credit cards, mortgages, taxes, medical collections, nursing home private-pay balances, irrevocable funeral contracts, homestead repairs, and one replacement vehicle titled to the applicant. Gifts to family members do not qualify.
Yes when the card is in the parent's name and itemized charges show the parent benefited. Caseworkers in Tennessee, Pennsylvania, and New York reject payoffs when statements show purchases for adult children. Keep zero-balance letters and highlighted charge histories.
An irrevocable prepaid funeral contract at fair market value usually counts because cash becomes exempt funeral value the applicant cannot revoke. Revocable preneed deposits stay countable until converted. Burial space deeds and designated burial funds follow separate dollar rules in each state manual.
Repairs on the applicant's exempt primary residence typically qualify when licensed contractors bill fair market rates and you keep contracts, permits, and paid invoices. Improvements on a relative's property do not qualify. Large projects can raise home equity toward state caps when no protected resident lives in the house.
No in most asset spend-down cases. The debt must belong to the applicant. Paying a child's student loan, rent, or car note benefits the child and is treated as an uncompensated transfer subject to penalty months during the 60-month look-back unless a rare local exception applies.
Asset spend-down lowers countable savings below the resource cap, often $2,000 in Tennessee and Pennsylvania nursing-home cases. Medical or income spend-down lets medically needy applicants use unpaid medical bills to offset monthly income over the limit without spending down every dollar of savings first. The same paid receipt usually cannot satisfy both worksheets.
Shelby County and other Tennessee offices typically want creditor or vendor name, amount, payment date, and proof of zero balance after payment. Acceptable files include payoff letters, canceled checks, ACH confirmations, facility ledgers, funeral irrevocable assignments, and contractor invoices with proof of payment. Organize by expense type before you submit the packet.
