What is the Medicaid “surplus” (spend-down) program?

What is the Medicaid “surplus” (spend-down) program?

Short answer: “Surplus” or “spend-down” programs let people whose income is above a state’s Medicaid limit qualify by using the extra income on medical costs.

Figures change periodically. Double-check current amounts before relying on them.

Some states call it the medically needy program, others the spend-down or surplus program. The idea is the same: if a person’s income is above the Medicaid limit, the amount over the limit (the surplus, spend-down or excess income) is treated like a deductible. Once the person has incurred medical bills equal to that amount for the month (or other period the state uses), Medicaid pays for covered care for the rest of the period.

Example. A state’s medically needy income level is $1,000 a month. A woman’s income is $1,800 a month, so her surplus is $800. If she has $800 in medical bills in a month, Medicaid covers her remaining costs that month.

For nursing home residents, the cost of care is usually so high that the surplus is met automatically. The resident pays income toward the nursing home, minus allowed deductions, and Medicaid pays the rest. For people living at home, meeting the surplus each month can be harder. Some states let people pay the surplus amount to the state directly or use a pooled trust to reduce countable income.

Not every state has a medically needy program, and those that do set their own income levels.

Getting help

Every situation is different, and small facts can change the answer. If this question affects a real decision, especially with a spouse at home, a home, gifts or a trust, a Certified Medicaid Planner can apply your state’s rules to your situation. As a rough guide, published fees for help with an application range from about $500 to $6,000, and hourly help from about $150 to $600.

Last updated for 2026. General information only, not legal or financial advice. Medicaid Answers is a free educational resource published by Medicaid Answers Foundation.

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