Texas uses an income spend-down process under its Medically Needy Medicaid program, but that option is generally limited to pregnant women and children under 19. For long-term-care Medicaid, Texas does not offer an income spend-down. Texas is an income-cap state, so if your income is over the cap, you typically qualify by using a Qualified Income Trust (Miller Trust) instead.
At The Law Office of Whitney L. Thompson, Houston Medicaid planning attorney Whitney L. Thompson helps families understand Texas Medicaid eligibility, whether you’re exploring the Medically Needy spend-down or planning for long-term care under Texas’s income-cap rules. Our Medicaid planning lawyers in Houston can explain your options. Call (281) 214-0173 to speak with an estate planning attorney in Houston.
What Is Spend Down Medicaid?
Spend-down is a way to qualify for Medicaid when your income is too high. You qualify by showing enough unpaid medical bills to cover the amount you are over the limit for that month.
In Texas, income spend-down is used under the Medically Needy program for pregnant women and children under 19. For example, if a pregnant applicant is told she is $400 over the limit, she can qualify for that month by submitting $400 in unpaid medical bills.
Other adults who need long-term care follow a different rule. Texas generally uses an income-cap system for long-term care Medicaid. For example, if an adult needs nursing home care and their income is over the cap, they cannot use spend-down. Instead, they may qualify by using a Qualified Income Trust (Miller Trust) to handle income over the limit under program rules.
If you’re not sure whether spend-down applies to your household, a Medicaid planning attorney can help you avoid mistakes.
How Does the Spend-Down Process Work?
If you are in a group that can use spend-down in Texas, it works like a monthly deductible. If your income is over the Medically Needy limit, you must show that your medical bills are enough to bring you down to the limit for that month.
Example:
You are pregnant and earn too much to qualify for Medicaid right away. Texas Health and Human Services tells you that your income is $400 over the monthly limit for the Medically Needy program.
To use spend-down, you collect unpaid medical bills, such as:
- $150 for prenatal doctor visits
- $90 for prescription vitamins
- $110 for ultrasound tests
- $50 for lab work
You submit these unpaid bills for review. Because your bills add up to $400, you meet the spend-down amount and qualify for coverage for that month.
Key Takeaway: Spend-down is usually calculated in coverage periods (often monthly), and you generally must show enough qualifying unpaid bills for the period you want covered.
What Expenses Qualify for Medicaid Spend Down?
If you are using spend-down under the Texas Medically Needy program, your medical bills are reviewed by the Texas Medicaid and Healthcare Partnership (TMHP) Medically Needy Clearinghouse. You submit your bills to the Clearinghouse, and it reviews them to decide which expenses can be counted toward your spend-down amount under program rules.
In general, bills used for spend-down are medical and health care bills you incurred, including bills from the month you apply. In some cases, bills from up to three months before your application month may also be used if you are asking for coverage for those earlier months.
Medical and Healthcare Expenses
These are common types of bills people submit for spend-down review:
- Doctor visits and clinic care
- Hospital care
- Lab work and imaging
- Prescriptions and pharmacy bills
- Other medically necessary services billed by a health care provider
Submit itemized statements and keep proof of what you owe and what you’ve paid. Some costs (like certain transportation) may be reviewed, but approval depends on program rules and documentation.
Care-Related Expenses
If you are using spend-down for pregnancy or a child, the bills you submit often include care tied to that medical need, such as:
- Prenatal and maternity care
- Pediatric care for a child
- In-home health services billed by a licensed provider, when medically necessary
Some people also ask about home safety items or changes. Only submit these if they are medically necessary and well-documented, because the Clearinghouse must decide if they can be applied to spend-down.
Documentation Requirements
Keep all bills, receipts, and itemized statements. You must be able to prove the charges you want counted. Use the Medical Bills Transmittal form (Form H1120) when submitting bills to the Clearinghouse.
Tip: A simple log (date, provider, amount, purpose, paid/unpaid) can make it easier to track what you’ve submitted and respond to follow-up requests.
Medicaid Planning Lawyer in Houston – The Law Office of Whitney L. Thompson
Whitney L. Thompson
Whitney L. Thompson is a Houston estate planning attorney and the founding owner of The Law Office of Whitney L. Thompson. Drawing on years of courtroom experience in probate, guardianship, child support, and divorce, Whitney helps families plan ahead so they can avoid costly disputes later, especially when long-term care and Medicaid are on the horizon. Since her days advocating in the Thurgood Marshall School of Law clinics, she’s been driven by a simple idea: clear, compassionate guidance today prevents chaos tomorrow.
As a first-generation college graduate and entrepreneur, Whitney understands how overwhelming it can feel to protect what you’ve built. She crafts Medicaid eligibility and asset-protection strategies that fit real lives, coordinating estate plans, special needs planning, and powers of attorney so your wishes are honored and your benefits are preserved. Have questions about nursing home costs, spend-down rules, or protecting the family home? No question is too small. Call (281) 214-0173 or email the Houston office to schedule a consultation.
Why Doesn’t Texas Use Spend-Down for Long-Term-Care Medicaid?
Texas doesn’t use income “spend-down” for long-term-care Medicaid because Texas runs long-term-care eligibility under an income-cap system, not the Medically Needy spend-down system. Income-cap means there is a set monthly income limit for long-term care. If your income is at or below the cap, you meet the income rule. If it’s over the cap, you usually can’t qualify by turning in medical bills. The cap is the special income limit (300% of the SSI federal benefit rate), which is $2,901 per month in 2025 for an individual. These limits change each year, so confirm the current cap before applying.
If someone’s income is over that cap, Texas typically doesn’t let them qualify by “spending down” income with medical bills. Instead, Texas allows a Qualified Income Trust (QIT), also called a Miller Trust, which can hold the income above the cap so the person can still qualify under program rules (as long as the trust is set up correctly and is irrevocable).
What About Asset Limits for Long-Term-Care Medicaid in Texas?
Many people who ask about spend-down are really trying to qualify for nursing home Medicaid, and that program has both income and asset rules.
For long-term-care Medicaid in Texas, most applicants must also meet an asset test. In general, Texas counts “countable assets” like cash, bank accounts, and many investments, but does not count certain “exempt assets” like a primary home (within limits), one vehicle, and basic personal belongings. The countable asset limit is often $2,000 for an individual, and Texas also applies a 5-year look-back on transfers for many long-term-care programs.
Below are common examples of exempt assets (rules can vary by situation).
| Asset Type | Exemption Details | Important Conditions |
| Primary Home (Homestead) | Up to $730,000 in equity | Must be your principal residence, or you may need an Intent to Return statement if you’re in a facility. Home equity limits generally don’t apply if a spouse, a child under 21, or a blind/disabled child (any age) lives in the home. |
| Vehicle | One vehicle – unlimited value | No equity or value cap; any value car qualifies |
| Household Goods and Personal Effects | Unlimited | Furniture, appliances, clothing, jewelry (including wedding/engagement rings), items of personal care, recreational equipment, musical instruments, hobby items |
| Burial Spaces | Unlimited | Burial plots, caskets, urns, vaults, grave markers (must be in an irrevocable contract) |
| Irrevocable Burial Trust | No limit set by Texas | Must be irrevocable; covers funeral services and burial costs |
| Designated Burial Funds | Up to $1,500 per person | Must be kept in a separate, designated account; reduces if you have life insurance cash value or other burial funds |
| Life Insurance | Up to $1,500 total cash value | Policies with cash value above $1,500 count as assets |
| Term Life Insurance | Unlimited | No cash value, so fully exempt |
| Non-marketable / Inaccessible Property | Unlimited | Assets that you can’t legally sell or access (e.g., restricted business interests) may be treated as unavailable in some situations. |
What Are the Rules for Married Couples in Texas Long-Term-Care Medicaid?
When one spouse needs long-term-care Medicaid (like nursing home Medicaid), special “spousal impoverishment” rules help protect the community spouse (the spouse still living at home). These rules are meant to keep the healthy spouse from becoming broke while the other spouse gets care.
In 2025, the community spouse may be able to keep a protected amount of countable assets (the Community Spouse Resource Allowance, or CSRA) and may also be allowed to keep enough monthly income to meet basic needs (the Monthly Maintenance Needs Allowance, or MMNA/MMMNA). The 2025 federal standards include a CSRA minimum of $31,584, a CSRA maximum of $157,920, and a maximum MMNA of $3,948 per month. Check the current annual cap before applying.
Key takeaway: Married-couple Medicaid rules can protect a significant amount of assets and income for the spouse at home, but the exact result depends on your finances and how Texas applies the rules in your case.
What Is the Five-Year Look-Back Period?
This rule applies to long-term-care Medicaid (like nursing home Medicaid and many waiver programs). It is not the same as the Medically Needy income spend-down.
When you apply for long-term-care Medicaid in Texas, the state reviews many asset transfers made in the last five years (60 months). If you gave away assets or sold them for less than fair market value, Texas can impose a penalty period, a time when Medicaid will not pay for care, even if you otherwise qualify. Texas calculates the penalty by dividing the amount transferred by the daily penalty divisor. For case actions disposed on or after September 1, 2025, Texas uses $262.37 per day. Make sure to double-check the current limit before you apply.
Example: $75,000 ÷ $262.37 = about 285 days of ineligibility.
Some transfers may be allowed under the rules (for example, certain transfers of a home to a spouse or to a child under 21 or a disabled child in specific situations).
How Can You Spend Down Assets to Qualify?
This section is about asset spend-down for long-term-care Medicaid. It is not about the Medically Needy income spend-down (which uses medical bills).
For long-term-care Medicaid in Texas, many applicants must reduce countable assets to meet the program’s asset limit. “Asset spend-down” means using your money on approved, fair-value expenses that benefit the applicant (and often the spouse), instead of giving money away.
Common, often-approved asset spend-down steps include:
- Home repairs and accessibility upgrades (ramps, bathroom safety changes, major repairs)
- Paying off debt (mortgage, credit cards, medical bills, car loan)
- Medical items not covered by insurance (wheelchair, dentures, hearing aids)
- Vehicle purchase or repairs (the primary vehicle is often treated favorably under the rules)
- Prepaid burial/funeral arrangements set up in a Medicaid-compliant way
- Caregiver agreements (must be written, reasonable, and well-documented)
- Certain annuities, but only if structured correctly under Medicaid rules
Key takeaway: Asset spend-down must be well-documented and should avoid anything that looks like a gift. Keep receipts, contracts, and proof that you paid fair value.
| Category | Income Limit (Monthly) | Asset Limit / Notes |
|---|---|---|
| Medically Needy (Spend Down) | No fixed cap; must spend down excess income with medical bills (only for pregnant women and children under 19) | No separate asset limit; standard Medicaid category rules apply |
| Long-Term Care Medicaid | $2,901 for an individual | $2,000 countable assets; home equity up to $730,000 exempt; 5-year look-back applies |
| Qualified Income Trust (Miller Trust) | Income above $2,901 may qualify if placed in a Miller Trust | Same asset rules as long-term care Medicaid |
| Regular Medicaid (Children, Pregnant Women) | Varies by household size and category | No asset test for these groups |
| Married Couples – Community Spouse | Non-applicant spouse may keep up to $3,948/month | Protected asset allowance ranges from $31,584 to $157,920 |
Why Should You Work with a Houston Medicaid Planning Lawyer?
A Medicaid planning lawyer can help you figure out whether your issue is Medically Needy spend-down or long-term-care Medicaid, and then build the right plan. This often includes setting up a Qualified Income Trust (Miller Trust) when income is over the cap, planning a legal asset spend-down, and responding to HHSC requests without delays or mistakes.
Houston-Specific Knowledge
Houston Medicaid planning attorneys know local resources. They understand where to file applications, which nursing homes in Harris County accept Medicaid, and local care costs.
Skilled attorneys have relationships with facilities like Houston Methodist’s skilled nursing facilities and understand the costs at different levels of care. This helps with accurate planning.
They know the HHSC offices in Houston, including the Scott Street and Telephone Road locations, and can help you navigate the local system efficiently.
Key Takeaway: A Houston Medicaid planning attorney knows Texas law, local resources, and proper documentation requirements. Professional help protects your assets and increases approval chances.
Experienced Assistance from a Houston Medicaid Planning Attorney
Medicaid rules can be confusing, especially in Texas, where income spend-down applies only in limited cases under the Medically Needy program, and long-term-care Medicaid follows different rules, like the income cap and, when needed, a Qualified Income Trust (Miller Trust). The right planning can help you avoid delays, prevent penalties, and protect what you’ve worked hard to build.
Houston Medicaid planning attorney Whitney L. Thompson helps families across Harris County and throughout Texas understand their options, gather the right documents, and choose the correct path, whether you’re trying to use Medically Needy spend-down for a pregnancy or child, or planning for nursing home Medicaid with income and asset rules. Call (281) 214-0173 to speak with an estate planning attorney in Houston and schedule a consultation.
