Washington, D.C. — Nursing home care costs over $111,000 a year for a semiprivate room. The average American retiree has about $200,000 saved. Do the math, and you’ll see why millions of families are turning to a strategy that sounds radical at first: intentionally spending a loved one into poverty.
It’s called a Medicaid spend-down — and it’s completely legal. But experts are warning families not to try it on their own.
Why Medicare Won’t Save You
Here’s the gap most families don’t discover until it’s too late: Medicare, the main health insurance program for older Americans, generally doesn’t pay for ongoing nursing home or assisted living care. It covers short-term skilled nursing stays after a hospital discharge — and that’s about it. Long-term support, the kind a person needs when they can no longer bathe or dress themselves, falls almost entirely outside Medicare’s reach.
Medicaid does cover that care. But it’s a program built for the poor. In most states, an individual can hold no more than $2,000 in assets to qualify — and their monthly income can’t exceed roughly $2,800 to $3,000. For middle-class families, those numbers feel impossibly low.
That’s where the spend-down strategy comes in. Rather than watch a lifetime of savings disappear into nursing home bills — and then qualify for Medicaid anyway — families are choosing to burn through assets on allowable expenses first. The financial pressures facing nursing home residents and their families have never been more urgent, with costs up roughly 25% since 2019 alone.
What Counts — and What Can Get You Disqualified
Using assets the right way matters enormously. Families can pay down a mortgage, cover outstanding medical bills, prepay funeral arrangements, or buy a burial plot. These expenditures reduce assets in ways Medicaid reviewers accept.
What they can’t do is simply hand money to a relative or shift assets into someone else’s bank account to make an applicant look poor on paper. Medicaid applications typically include a five-year “look-back” period — examiners review every asset transfer made in the five years before the application. Improper transfers can trigger a penalty period, during which Medicaid won’t pay for care even after a person qualifies on paper.
“People shouldn’t be doing ‘do it yourself’ financial planning in these matters. It can create significant problems with a person’s estate,” said Eric Carlson, director of long-term services and supports advocacy with Justice in Aging. “You don’t want to wait until the day nursing care is absolutely necessary to make these sorts of decisions.”
The Numbers Behind the Crisis
The scale of the problem is hard to overstate. More than half of Americans over 65 will need some form of long-term care assistance, according to federal health officials — and some researchers put that figure closer to two-thirds. Yet only 3% to 4% of Americans over 50 carry an active long-term care insurance policy, according to AHIP, the health insurance trade group.
That gap is what’s driving families toward Medicaid planning. A home health aide costs roughly $78,000 a year on average. A semiprivate nursing home room runs about $111,000. The median retirement savings for a household aged 65 to 74 is $200,000. Without deliberate planning, two years of nursing home care can wipe out decades of savings — leaving families in the same place anyway, but without a strategy.
Start Early, Get Help
Carlson recommends consulting eldercare specialists well before a crisis hits. State-level Medicaid liaisons, nonprofits like Justice in Aging, and the Kaiser Family Foundation all offer resources to help families navigate eligibility.
In New York, residents with income above Medicaid limits can still qualify through an “excess income” or spend-down program, subtracting medical expenses until they hit eligibility thresholds. More than 30 states run similar “medically needy” programs.
The bottom line: the spend-down approach isn’t a loophole — it’s a planning tool. But like any financial strategy, it’s only effective when it’s done correctly, early, and with guidance from people who know the rules.
