Allowable expenses for Medicaid are the medical costs you can use to reduce your income or assets to qualify for coverage, primarily through what’s called a “spend-down” process. If your income is too high for Medicaid but you have significant medical costs, most states let you subtract qualifying expenses until you meet the eligibility threshold. The specific expenses that count vary by state, but the core categories are consistent nationwide.
How the Spend-Down Process Works
Medicaid sets income limits based on the federal poverty level. For 2025, that’s $15,650 per year for an individual and $21,150 for a household of two at 100% of the poverty line. Many states use 138% of these figures (roughly $21,597 for one person) as their Medicaid cutoff. If your income exceeds your state’s limit, a spend-down lets you subtract medical expenses from your countable income until you fall below the threshold.
States handle this differently. Some give you a one-month spend-down period, while others allow up to six months. During that window, you accumulate qualifying medical bills. Once your remaining income (after subtracting those bills) drops below the Medicaid limit, you become eligible for coverage. Not every state offers a spend-down program, and some restrict eligibility to people who are 65 or older, have a disability, or are blind.
Medical Bills That Count
The broadest category of allowable expenses is straightforward medical care. This includes doctor visits (both regular checkups and specialists), hospital stays (inpatient and outpatient), emergency room visits, and surgical center fees. Mental health treatment, substance use disorder services, and rehabilitative services all qualify. So do lab work, X-rays, and diagnostic tests.
Prescription drugs count toward your spend-down amount. Over-the-counter medications can also qualify, but only when a physician has prescribed them. Dental expenses, including dentures and other dental work, are allowable. Physical therapy, home health care, nursing services, and hospice care all apply.
Medical equipment and supplies round out this category: prosthetic devices, hearing aids, eyeglasses, crutches, artificial limbs, and other durable medical equipment. Organ transplant expenses are also included in states that list them.
Insurance Premiums, Deductibles, and Copays
This is one of the most useful categories and one that people often overlook. Health insurance premiums you pay out of pocket count as allowable expenses. That includes private health insurance premiums, Medicare Part B premiums, Medicare supplement premiums, and any other health coverage you’re paying for.
Beyond premiums, your deductibles, copayments, and coinsurance charges also count. If you’re on Medicare and paying coinsurance for doctor visits or hospital stays, those amounts reduce your countable income for Medicaid purposes. This is particularly relevant for people who are dual-eligible or trying to become eligible for both Medicare and Medicaid.
Home and Community-Based Care
Nursing home costs are among the largest allowable expenses, and they’re one of the most common reasons people go through the spend-down process in the first place. Nursing facility charges, whether for a short-term rehabilitation stay or long-term care, count in full.
Home health agency services qualify as well. This includes skilled nursing visits, home health aide services, and personal care assistance provided in your home. Many states also operate home and community-based services waivers that cover care for specific populations: older adults, people with developmental disabilities, physically disabled adults, medically fragile children, children with autism spectrum disorder, and adults with traumatic brain injuries. The costs associated with these waiver services are allowable.
Transportation to Medical Appointments
Getting to and from medical care can be expensive, and many of these costs count toward your spend-down. Ambulance fees for non-emergency transport, wheelchair van services, taxi or rideshare costs to appointments, bus fare, and even gas money for driving yourself all potentially qualify. Some states will even cover meals and lodging when you need to travel to another city for medical care, particularly for children.
In Texas, for example, Medicaid can reimburse a relative, friend, or neighbor who drives you to appointments if they register as an Individual Transportation Participant. The specifics of what transportation costs count vary by state, so check with your local Medicaid office.
What Doesn’t Count
Not every health-related cost qualifies. Cosmetic procedures that aren’t medically necessary are typically excluded. Gym memberships, vitamins, and supplements (unless prescribed) generally don’t count. Non-medical personal expenses like food, rent, and utilities cannot be applied toward a spend-down, even if they affect your health. The expense must be for a medical service, supply, or insurance cost.
Spousal Protections for Married Couples
When one spouse needs Medicaid (usually for nursing home care) and the other remains at home, federal rules protect the at-home spouse from impoverishment. For 2025, the community spouse can keep between $31,584 and $157,920 in countable assets, depending on the state. The at-home spouse is also entitled to a minimum monthly maintenance needs allowance of $2,643.75, increasing to $3,303.75 effective July 2025. These figures are set by the Centers for Medicare and Medicaid Services and updated annually.
Assets and income up to these protected amounts are excluded from the Medicaid applicant’s eligibility calculation. Anything above the spousal allowance may need to be spent down on allowable expenses before the applicant qualifies.
Documenting Your Expenses
Keeping thorough records is essential. You’ll need to present proof of every expense you’re claiming toward your spend-down. Acceptable documentation typically includes itemized medical bills, pharmacy receipts, insurance premium statements, and explanation-of-benefits forms from your insurer.
Timing matters. In Ohio, for instance, documentation of spend-down expenses must be submitted within 365 days of the date of service. If you miss that window, the expense may not count, even if it was legitimate. Other states have their own deadlines. Keep copies of every bill, receipt, and payment record organized by date, because retroactive eligibility can hinge on whether you can prove your expenses were real and timely.
State Variations Make a Big Difference
Medicaid is a joint federal-state program, which means the rules differ significantly depending on where you live. Some states have medically needy programs with generous spend-down provisions. Others don’t offer spend-down at all and instead use strict income cutoffs. The spend-down period, the specific list of qualifying expenses, the asset limits, and the documentation requirements are all set at the state level within broad federal guidelines.
Your state Medicaid agency or a local benefits counselor can confirm exactly which expenses qualify in your situation. Organizations like the State Health Insurance Assistance Program (SHIP) offer free counseling for people navigating Medicaid and Medicare eligibility, and they’re familiar with the specific rules in your state.