Medi-Cal Spend Down California: Rules and Approved Strategies

Your parent has $200,000 in savings and needs long-term care. The 2026 Medi-Cal asset limit is $130,000 for an individual — so you need to reduce countable assets by $70,000 before applying. Giving the money to family members would trigger a transfer penalty under the reinstated look-back rules. The right approach converts countable cash into exempt assets that the county doesn't count.

Here are the approved spend-down methods and the rules around each one.

What Counts and What's Exempt

Before spending down, understand the categories. Countable assets include bank accounts, CDs, mutual funds, brokerage holdings, secondary real estate, and extra vehicles. Exempt assets — excluded from the $130,000 limit regardless of value — include the primary home, one vehicle, household goods, irrevocable burial plans, and retirement accounts in active payout.

A spend-down converts countable assets into exempt ones. It's not giving money away — it's converting cash into forms that Medi-Cal doesn't count.

Approved Spend-Down Methods

Pay off the mortgage. If your parent owes $80,000 on their home, paying it off converts $80,000 in countable savings into the exempt primary residence. The home is already exempt, but reducing the loan balance transfers cash from the countable column to the exempt column.

Fund an irrevocable prepaid burial plan. California exempts irrevocable burial contracts of any value. A comprehensive prepaid funeral plan covering casket, burial plot, headstone, service costs, and perpetual care for the applicant and immediate family members can absorb a significant amount of countable cash.

Make home improvements. Wheelchair ramps, walk-in showers, grab bars, a new roof, updated electrical or plumbing, a generator for medical equipment — any improvement to the exempt primary residence converts countable cash into exempt property. Keep all receipts for county documentation.

Replace the vehicle. One vehicle is exempt. If your parent drives a 15-year-old car, purchasing a newer, safer vehicle converts countable assets into the exempt vehicle allowance.

Pay medical and dental expenses. Hearing aids, dentures, dental implants, new glasses, deferred surgeries, physical therapy — any out-of-pocket medical expense reduces countable assets through legitimate health spending. These expenses also improve your parent's quality of life.

Eliminate personal debt. Credit card balances, personal loans, auto loans, outstanding tax liabilities — paying off any legitimate debt is a compliant use of countable assets.

What to Avoid

Cash gifts to children or relatives. Any uncompensated transfer after January 1, 2026, can trigger a penalty period. The penalty divides the gift amount by $14,440 (the 2026 Average Private Pay Rate) — so a $72,200 gift creates a 5-month period where Medi-Cal won't cover nursing home care. Your parent pays the full private rate during the penalty.

"Hiding" assets. Transferring funds to a child's bank account, understating asset values, or omitting accounts from the application creates fraud liability and delays or denies eligibility.

Spending on non-exempt assets. Buying a vacation home, expensive jewelry, or a second vehicle doesn't help — these are countable assets that replace the cash without reducing the total.

The Spousal Spend-Down Advantage

Married couples have more room. The community spouse keeps up to $162,660, and the institutionalized spouse keeps up to $130,000 — a combined $292,660. If the couple's combined countable assets are below this threshold, no spend-down is needed.

If assets exceed $292,660, the same strategies apply: pay off the home mortgage, fund burial plans for both spouses, make home improvements. The community spouse's retirement accounts (IRAs, 401ks, pensions) are exempt regardless of value and payout status.

Timing the Spend-Down

Complete all spend-down transactions before filing the Medi-Cal application. The county evaluates assets as of the application date. Document every conversion with receipts, contracts, and bank statements showing the before-and-after balances.

Our California Medicaid Long-Term Care & Asset Protection Guide includes the asset inventory worksheet and step-by-step spend-down calculator to plan the conversion before your parent's application.

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