Medically Needy Pathway

What Is the Medically Needy Pathway in Medicaid?

The Medically Needy Pathway is a Medicaid eligibility option for individuals whose income is too high for standard Medicaid, yet have significant medical expenses. This “spend down” strategy allows income above the limit to be used toward medical costs, bringing the applicant under the threshold. Not all states offer this option, and its availability varies by Medicaid group and state policy.

Who Can Benefit from This Program?

Medicaid categorizes applicants into groups such as children, pregnant women, adults under 65, individuals with disabilities, and seniors. While some are automatically eligible (such as SSI recipients), others may qualify through optional pathways like this one. Seniors may benefit if their state includes them in the Medically Needy option, either for Regular Medicaid (ABD), Nursing Home Medicaid, or Home and Community-Based Services (HCBS).

How Does the Spend Down Process Work?

Applicants “spend down” excess income on approved medical expenses until they reach their state’s Medically Needy Income Limit (MNIL). Once reached, they qualify for Medicaid coverage for a specified period (usually 1 to 6 months).

Spend Down Example 1 (Florida)

MNIL = $180/month; Income = $690/month; Spend Down = $690 – $180 = $510. The applicant must incur $510 in medical bills in one month to become eligible.

Spend Down Example 2 (West Virginia)

MNIL = $200/month; Income = $810/month; 6-month period. Spend Down = ($810 – $200) x 6 = $3,660.

What Is a Pay-In Spend Down?

In states like Illinois, Missouri, and New York, applicants may simply pay the spend down amount directly to the Medicaid office, rather than tracking individual expenses.

Which States Offer the Medically Needy Pathway?

More than 30 states offer this option to seniors, including New York, Florida, California, and Illinois. However, states like Texas, Tennessee, Nevada, and Ohio do not offer this pathway for seniors.

What Counts as Medical Expenses?

Allowable spend down expenses include:

• Medicare/insurance premiums
• Hospital and doctor visits
• Dental work and prescriptions
• Home health care and nursing home services
• Medical equipment and supplies
• Transportation to medical appointments

Receipts, invoices, and other documentation must be submitted as proof. Sometimes, expenses paid by others (like a child) can count, and a spouse’s medical bills may also apply.

How Much Income Is Allowed? (2025 Selected States)

MNILs are typically low, so applicants must show high medical bills. Here are a few examples:

What Are the Asset Limits?

Each state sets its own limits on assets (also called resources). Most states cap assets at $2,000 for individuals and $3,000–$6,000 for couples. A few states, such as California, have eliminated asset tests for many Medicaid groups.

Applicants for long-term care Medicaid (like nursing homes or HCBS Waivers) are also subject to a 5-year Look-Back Period that penalizes asset transfers made for less than fair market value.

Examples of 2025 Asset Limits:

What If Your State Doesn’t Offer This Pathway?

In states where the Medically Needy Pathway is unavailable, seniors may still qualify for Nursing Home Medicaid or HCBS Waivers through a Miller Trust (also known as a Qualified Income Trust). These trusts allow income over the limit to be legally diverted and excluded from eligibility calculations.

Need Help Navigating Medicaid Eligibility?

Medicaid rules can be complex and vary by state. If you’re unsure which options are available in your location, consider consulting a Medicaid planner or elder law attorney familiar with your state’s laws.