Medicaid Spend-Down for Nursing Homes and Memory Care

A plain-language guide to how Medicaid spend-down works for long-term dementia care, the five-year look-back on asset transfers, community-spouse protections, and Ohio's 60-month look-back rule.

By Jim Pavlish, Editor · Last updated: November 5, 2026 · Editorial policy

Short answer: Medicare does not pay for most long-term custodial nursing-home or in-home care. Medicaid can, for people who meet state income, asset and care-need rules. Families often must spend down—use savings on allowed costs until assets (and sometimes income) meet state limits. Giving assets away to qualify is risky: under Deficit Reduction Act rules, states look back 60 months (five years) for transfers below fair market value, and improper transfers can delay long-term care coverage. Ohio's look-back is also sixty months.

This page is general information, not legal or financial advice. Limits and programs change. Talk with your state Medicaid office and an elder-law attorney before moving money or property.

Why families hear about spend-down

Medicare covers doctors, hospitals, tests, short skilled-nursing stays in limited cases, and hospice. Medicare.gov states plainly that Medicare does not pay for long-term care (also called custodial care)—help with bathing, dressing and everyday tasks in a nursing home or in the community. You generally pay those costs yourself unless you have other coverage.

Medicaid is the main public program that does pay for nursing home care and, in many states, long-term services at home, according to Medicare.gov, the Alzheimer's Association and ACL's LongTermCare.gov. It is jointly funded by the federal government and the states. Eligibility and benefits vary by state.

Most people with Alzheimer's or another dementia will eventually need long-term care, and many will rely on Medicaid once their own money is used up, the Alzheimer's Association notes. That process of reducing countable resources (and sometimes income) to qualify is what families call a spend-down.

Two different kinds of "spend-down"

People use the same phrase for two related ideas:

1. Asset spend-down

State Medicaid programs set asset (resource) limits for long-term care eligibility. Countable assets often include bank accounts, stocks and other resources that can be turned into cash. Some items, such as a primary home within equity limits or a vehicle, may be treated differently—ask your state, because the lists differ.

If countable assets are too high, families typically use them on the person's own care and allowed expenses (nursing home bills, medical costs, certain home needs) until the remaining countable amount meets the state's limit. That is the everyday meaning of "spending down" savings for nursing home or memory-care costs. See also Choosing Memory Care or a Nursing Home and Financial Planning and Paying for Care.

2. Income spend-down (medically needy)

Medicare.gov explains that you might meet your state's resource limit but still have income that is too high. Some states let you "spend down" the income above the Medicaid limit by paying non-covered medical expenses and cost sharing (such as Medicare premiums and deductibles) until your income is lowered to a qualifying level. Not every state offers this pathway. Call your state Medicaid office to ask.

The five-year look-back (do not give assets away lightly)

The Alzheimer's Association warns that a person living with dementia should be very careful about giving away assets to family to qualify for Medicaid. Strict laws govern this area.

CMS's Deficit Reduction Act backgrounder on transfers of assets explains that when someone applies for Medicaid long-term care, states review whether the individual or spouse transferred assets for less than fair market value. The DRA lengthened the look-back period to 60 months (five years) before the application. Transfers below fair market value can trigger a penalty period that delays when Medicaid will pay for long-term care. Under the DRA, for transfers on or after February 8, 2006, that penalty generally starts on the later of the transfer date or the date the person enters a nursing home and would otherwise be eligible for institutional Medicaid coverage.

CMS also describes hardship waivers when a penalty would threaten health or life, or deprive someone of food, clothing or shelter.

Bottom line: spending your own money on your own care is different from giving assets away. Get legal advice before any gift, sale below market value, or complex transfer.

Ohio note

Ohio Administrative Code Rule 5160:1-6-06 implements federal transfer-of-asset rules for institutionalized individuals seeking Medicaid payment for long-term care. It states that when an institutionalized individual (or spouse) disposes of assets for less than fair market value on or after the look-back date, the transfer is presumed improper and can result in a restricted Medicaid coverage period. The rule sets the look-back date at sixty months (five years) before the individual's baseline date.

Ohio's dollar limits and nursing-facility level-of-care rules change. Contact Ohio Medicaid or your county Department of Job and Family Services for current figures, and consider an Ohio elder-law attorney. A dementia diagnosis alone does not automatically meet a nursing-facility level of care.

Protections for a spouse still living at home

Federal Medicaid rules include spousal impoverishment protections so a spouse at home is not left with nothing when the other spouse enters a nursing home or certain home-based programs. Exact resource and monthly income allowances change by year and state—ask your state Medicaid office what a community spouse may keep (Alzheimer's Association).

Practical steps for families

1. Learn your state's rules early—income and asset limits, look-back, and whether an income spend-down path exists (apply through a local state office; ACL).
2. Gather records: bank statements, deeds, investments, insurance, and several years of financial history for the look-back.
3. Do not gift or under-sell assets without an elder-law attorney reviewing look-back risk.
4. Ask nursing homes that accept Medicaid about application help (Alzheimer's Association).
5. Call free counselors: Eldercare Locator 800-677-1116; Alzheimer's Association 800-272-3900; your SHIP for Medicare questions.
6. Put legal papers in place (Legal Planning) so someone can apply and decide if the person cannot.

Some care costs may also affect taxes; see Tax Breaks for Dementia Caregivers: Deductions and Credits to Ask About.

Common questions

Does Medicare pay for a nursing home for dementia?

Generally only short-term skilled care under limited rules, not long-term custodial nursing home care. Medicare.gov says Medicare doesn't pay for most long-term care. Medicaid may, if the person qualifies in their state.

Can we give the house to the kids so Mom qualifies for Medicaid?

Not without serious risk. CMS describes a five-year look-back for transfers below fair market value, and improper transfers can delay long-term care coverage. The Alzheimer's Association says to check with a legal adviser before transferring property or money. Ohio's look-back is also sixty months.

What is an income spend-down?

Medicare.gov says some states let people whose income is above the Medicaid limit pay non-covered medical expenses and cost sharing until income falls to a qualifying level. Ask your state whether it offers this and how it works.

Who can help us apply?

Your state or county Medicaid office, many nursing homes that accept Medicaid, an elder-law attorney, and the Eldercare Locator (800-677-1116). You can designate a family member or attorney to apply for you (ACL).

The bottom line

Medicaid spend-down is how many families eventually pay for nursing home or in-home long-term dementia care after Medicare's limits. Use savings on allowed costs, protect a community spouse under the rules, and never treat gifts as a shortcut—the five-year look-back (sixty months in Ohio) can leave someone without coverage when they need it most. Get state-specific advice before you move money or apply.

Sources

1. Medicare.gov: Medicaid
2. Medicare.gov: Long-Term Care Coverage
3. Alzheimer's Association: Medicaid
4. CMS: Transfer of Assets in the Medicaid Program (Deficit Reduction Act backgrounder)
5. Ohio Administrative Code Rule 5160:1-6-06 (transfers of assets; 60-month look-back)
6. ACL LongTermCare.gov: Medicaid

Not medical advice. This article is general information, not a diagnosis or treatment plan for any individual. Talk with a doctor about your situation.

Related articles

• Medicare, Medicaid and Dementia Care
• Financial Planning and Paying for Care
• Choosing Memory Care or a Nursing Home
• Legal Planning
• Tax Breaks for Dementia Caregivers: Deductions and Credits to Ask About
• In-Home Care for Dementia: Types, Costs and How to Hire Help