Medical Expenses and Spenddown
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Medical Expenses and Spenddown

Revised March 25, 2011

Incurred Medical Expenses

Before medical expenses can be used to reduce or meet spenddown, the client must have incurred the legal obligation. This means that the client must have received the medical service or product and have a legal obligation for the cost.The medical expenses used to meet spenddown are the clients’ obligation and cannot be billed to Medicaid.

For an expense to be allowed towards spenddown, the expense must have been prescribed by a licensed provider.  The following Charts give some guidance on expenses that can be allowed towards a spenddown liability.

Allowable Medical Expenses Chart  

Allowable Providers Chart

Premiums for private medical insurance are treated as income deductions and are not applied to Spenddown. The Department allows insurance premiums as an income deduction and reduces income prior to comparing income to the MNIL standard. In many cases, a client may become eligible for MN coverage without spenddown using this methodology. 

When the client meets spenddown, the department determines if it is cost effective to pay the premiums to ensure the coverage continues. If it is cost effective and the client meets spenddown, the Department pays the premium. If the client does not meet spenddown, the department does not pay the premiums. 

For more information on the Premium Payment programs through the Medicaid Purchasing Administration, see the Premium Payment  section.


The client’s spenddown is $600 and the insurance premium is $100 a month. Since the base period is 6-months, the client meets spenddown and becomes eligible for Medicaid. The department determines if it is cost effective to pay the insurance premium. If it is, then the department begins paying the insurance premiums.


In the above example, if the department didn’t use the insurance premium since the department had been paying it in the previous base period, then the client will not meet spenddown. If the client does not meet spenddown, the department does not pay the insurance premium. Then the worker allows the monthly premiums for the base period which makes the client eligible for benefits. Once eligible, the department begins paying the premiums.

What about expenses that have been paid using a credit card?

Expenses that have been paid using a credit card are considered a paid expense.  They are allowed as an paid expense within either the retroactive base period or the current base period in which they paid the bill with the credit card.  They are no longer considered an unpaid expense as the provider has been paid and the client has received the medical item or service.  Current credit card payments on a bill that was paid prior to any period of eligibility are no longer considered a valid medical expense. 

What about medical bills that have been sent to a collection agency?  

Medical expenses that are still owed and have not been written off or discharged by the collection agency are allowed as a medical expense and can be considered an unpaid bill for spenddown.  Confirm that the debt is still valid.  Do not allow any interest or fees charged by the Agency.  Allow the amount of the original unpaid debt and use the original date of service for the expense when coding it into ACES.


Modification Date: March 25, 2011