Medicaid Spend Down
Meurer & Potter Law Office, Denver, Colorado
If you or a loved one needs nursing home care in Colorado but has too many assets to qualify for Medicaid, you are facing what’s known as a Medicaid spend down. This does not mean you have to drain your life savings to qualify. It means you need a legal strategy that converts countable assets into non-countable or exempt assets—preserving as much wealth as possible while meeting Colorado’s eligibility requirements.
At Meurer & Potter, P.C., our Denver elder law attorneys have been helping Colorado families navigate Medicaid spend down strategies since 1991. We know the rules because we work with them every day—more than 200,000 regulations govern Medicaid eligibility, and one mistake on the application can cost a family tens of thousands of dollars.
What Is a Medicaid Spend Down?
A Medicaid spend down is the process of reducing your countable assets to meet Colorado’s Medicaid eligibility threshold. For a single applicant, countable resources generally must be below $2,000. For married couples, the community spouse (the spouse not entering the nursing home) may retain a portion of the couple’s combined assets under the Community Spouse Resource Allowance (CSRA), but the rules governing this calculation are complex and change periodically.
The critical distinction is between countable and non-countable assets. Non-countable (exempt) assets under Colorado Medicaid rules include your primary residence (with equity limits), one motor vehicle regardless of value (with conditions), household goods and personal effects, an irrevocable pre-paid funeral and burial plan, life insurance with a face value of $1,500 or less, and certain other categories defined by Colorado HCPF regulations.
Spend Down Strategies We Use
A proper spend down is not about wasting money. It’s about legally converting countable assets into exempt assets or permissible expenses. Our attorneys use strategies including paying off legitimate debts (mortgages, auto loans, credit cards, taxes), making home improvements and repairs that increase the value of the exempt residence, purchasing a new vehicle (exempt regardless of value with conditions), purchasing an irrevocable pre-paid funeral plan for the applicant and spouse, purchasing Medicaid-compliant annuities that convert countable lump sums into an income stream for the community spouse, and establishing a Miller Trust (income trust) when the applicant’s income exceeds Colorado’s initial Medicaid cap of $2,901 per month but falls below the cost of care.
We also coordinate spend-down strategies with Medicaid Asset Protection Trusts (MAPTs) when planning begins early enough to clear the five-year look-back period. An MAPT, if established before the look-back window, can protect assets—including the family home—from both Medicaid eligibility counting and Colorado’s estate recovery program.
The Five-Year Look-Back Period
Colorado enforces a five-year (60-month) look-back period for Medicaid long-term care eligibility. Any asset transfers or gifts made within five years of your Medicaid application may be treated as disqualifying transfers, triggering a penalty period during which Medicaid will not pay for your care. The penalty period is calculated by dividing the total value of the transfers by the average monthly cost of nursing home care in your region.
This is why timing matters. Spend down strategies that involve transferring assets—such as gifting to family members or funding an irrevocable trust—must be planned well in advance. If a health crisis has already begun and care is needed immediately, we focus on permissible spend-down techniques that do not trigger the look-back penalty.
Frequently Asked Questions About Medicaid Spend Down
Insights to help you make informed decisions
Our FAQs offer practical guidance on Medicaid Spend Down in Colorado.
A Medicaid spend down is the process of legally reducing your countable assets to meet Colorado’s Medicaid eligibility threshold, currently $2,000 for individuals. This involves converting countable assets into exempt assets or permissible expenses—not simply giving money away, which can trigger look-back penalties.
Exempt assets generally include your primary residence (with equity limits), one motor vehicle, household goods, personal effects, an irrevocable pre-paid funeral plan, and life insurance with a face value of $1,500 or less. Everything else—cash, investments, second homes, IRAs—is countable.
You can, but any gifts made within five years of your Medicaid application will trigger a penalty period. The penalty is calculated based on the value of the gifts divided by the average cost of care. This is why working with an experienced attorney who understands the look-back rules is essential before making any transfers.
The spend down itself can be completed relatively quickly—often within weeks—once a strategy is in place. However, the Medicaid application process can take 45 to 90 days or longer. If planning includes trust strategies that must clear the five-year look-back, that timeline extends significantly.
Yes. Medicaid spend down planning is legal in all 50 states, including Colorado. The strategies used—paying debts, purchasing exempt assets, funding compliant annuities—are all permitted under federal and state Medicaid rules. The key is executing them properly and with proper documentation.