Income Spend-Down (Share of Cost)

In some states, a person whose income is too high for Medicaid can still qualify by using their income to pay medical bills. This is the income spend-down, also called a share of cost, a surplus or a medically needy deductible, depending on the state. It works like an insurance deductible: once the person’s medical expenses reach a set amount in a budget period, Medicaid covers the rest. This guide explains how it works, what counts, and how it differs from the asset spend-down.

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

Where it applies

The income spend-down is part of a state’s medically needy program. Not every state has one, and not every state that has one uses it for long-term care. Other states use a hard income cap (the special income limit of $2,982 a month in 2026) and require a Qualified Income Trust for people above it. Some states use both for different programs. See The medically needy pathway and Income limits by state.

How the amount is figured

1. Start with countable income, after any deductions the state allows.
2. Subtract the medically needy income level (MNIL), the amount the state lets the person keep. Federal rules cap it at 133 1/3% of the state’s old AFDC payment level, so it is usually modest.
3. The difference is the spend-down for each month.
4. Multiply by the number of months in the state’s budget period, which can be one to six months.

Example: Income is $1,800 a month. The MNIL is $1,000 (an example figure). The monthly spend-down is $800. With a one-month budget period, the person must incur $800 of medical expenses each month before Medicaid pays. With a six-month period, they would need to incur $4,800 over six months.

What counts toward the spend-down

Generally:

• health insurance premiums, including Medicare Part B ($202.90 a month standard in 2026), Part D and Medigap;
• doctor, hospital, lab and pharmacy bills not paid by insurance;
• Medicare deductibles and coinsurance;
• nursing home, assisted living care and home care costs;
• medical equipment and supplies;
• transportation to medical care, in some states;
• in many states, unpaid medical bills from earlier periods that the person still owes.

Expenses must be the person’s responsibility. Bills paid by insurance, Medicaid or another program do not count. Some states allow certain paid bills from the past few months.

Order matters

States usually apply expenses in a set order: first health insurance premiums and cost-sharing, then expenses for services not covered by Medicaid, then services Medicaid would cover. Once the spend-down is met, Medicaid pays for covered services for the rest of the budget period. The person remains responsible for the bills used to meet the spend-down.

Nursing home residents

For a nursing home resident, the monthly cost of care is much larger than the spend-down amount, so the spend-down is met every month. In practice:

• the person pays most of their income to the nursing home, after a personal needs allowance and any spousal allowance;
• Medicaid pays the rest.

This is essentially the same as the patient liability for people who qualify under the income cap. The spend-down mainly decides whether a person with higher income can qualify.

People living at home

The income spend-down is harder to manage at home, because medical expenses vary month to month.

Example: Frank lives at home in a medically needy state with a one-month budget period. His income is $1,600, his MNIL is $1,000, and his monthly spend-down is $600.

• In March, he has $250 in premiums and $450 in prescriptions and aide costs. That is $700, so he meets the spend-down on the day his expenses reach $600, and Medicaid pays for covered care for the rest of March.
• In April, he has only $250 in premiums and $200 in other bills. He does not meet the spend-down, and Medicaid pays nothing for April.

Some states offer a pay-in option: the person pays the spend-down amount to the state each month and has steady coverage. Others let people use a longer budget period to smooth costs.

Tracking and submitting bills

To get credit:

• keep every medical bill and receipt;
• keep premium statements;
• submit them to the state agency by its deadline;
• keep copies and a log.

The state will issue a notice when the spend-down is met for the period.

Income spend-down vs. asset spend-down

A person may need to do both: spend down savings to the asset limit once, and meet an income spend-down every period.

Common questions

Do I have to pay the bills to meet the spend-down? Generally, you only need to incur them. You remain responsible for paying them.

What if my income changes? Report it. The spend-down will be recalculated.

Can my spouse’s income affect my spend-down? For people in a nursing home, the spouse at home’s income usually does not count. For people at home, some states count a spouse’s income for regular Medicaid. Check the rules for the program.

Does the spend-down apply to Medicare Savings Programs? No. MSPs have their own income limits.

What if I have a Qualified Income Trust? QITs are used in income cap states. In a medically needy state, a QIT usually is not needed.

A worked example: couple

Mary is in a nursing home in a medically needy state. Her husband Ed lives at home.

• Mary’s income: $2,600 a month.
• Mary meets the spend-down every month because of her nursing home bill.
• Ed’s own income: $1,100 a month. His MMMNA is $2,705 (from July 1, 2026), so part of Mary’s income can be paid to him.
• After Mary’s personal needs allowance and the allowance for Ed, the rest of her income goes to the nursing home.

The spend-down lets Mary qualify, and the spousal rules protect Ed.

Mistakes to avoid

• Missing submission deadlines for bills.
• Forgetting premiums, which are often the easiest expenses to document.
• Letting unspent income build up in a bank account and push assets over the limit.
• Confusing the spend-down with gifts. Paying a relative’s medical bills does not count.

Steps to take

1. Check whether your state uses a medically needy spend-down for the program you need. See the state guide.
2. Total gross income and compare with the state’s MNIL.
3. Gather premium statements and medical bills.
4. For home care, ask about a pay-in option or budget period choice.
5. Talk with a Certified Medicaid Planner (CMP) about the best pathway for your situation.

Budget periods compared

The state sets the budget period, and some let the person choose among options. For someone with a large one-time bill, such as a hospital stay, a longer period can mean Medicaid covers the rest of that period after the bill is counted.

Using old bills

Many states let unpaid medical bills from before the application count toward the spend-down, as long as the person still owes them and they were not used to meet an earlier spend-down. This can help a person qualify sooner. Gather any unpaid bills, including ones in collections, and request the look-back period for unpaid bills in writing.

Why the income limit is so low

The medically needy income level is often far below what an older person needs to live on at home. That is because federal rules tie it to old cash assistance levels. For nursing home residents, this does not matter much, because the nursing home covers housing and food. For people at home, it means a large share of income goes to medical costs each month before Medicaid helps, which is why home and community-based waivers in many states use the higher special income limit instead.

Keep in mind

Meeting the spend-down does not protect assets. Savings must still be under the limit.

Related guides

• The medically needy pathway
• How the spend-down works
• Income limits by state
• Patient liability

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