Avoid Medicaid Penalties: Spend-Down Strategies for TennCare Choices

If you or a loved one need long-term nursing home care in Tennessee, navigating TennCare CHOICES (Tennessee’s Medicaid program for long-term care) can feel overwhelming—especially when it comes to the financial eligibility rules. One of the biggest hurdles is the asset limit—a strict $2,000 for individuals. If you have more than that, you’ll need a spend-down strategy to qualify. But don’t worry—this doesn’t mean throwing money away. It means using your assets wisely on things that benefit you or your spouse while staying within the rules.

Avoid Medicaid Penalties: Spend-Down Strategies for TennCare Choices, a blog by Sara Barnett

What Is a Spend-Down?

Medicaid spend-down is the process of legally reducing your countable assets to meet TennCare eligibility requirements. However, there’s a big catch: You can’t just give money away or transfer assets for less than fair market value. Doing so could trigger a penalty period where you’re ineligible for benefits. Instead, TennCare allows certain exempt purchases and investments that help protect your resources while still qualifying for Medicaid.

Smart & Legal Ways to Spend Down Assets

1. Home Improvements (If You or a Spouse Live in the Home)

   Your primary residence is exempt if you or your spouse continue living there. So, why not invest in home improvements that add value and enhance comfort? Acceptable expenses include:

✔️ Roof repairs or replacement

✔️ Window and siding upgrades

✔️ Heating & air conditioning systems

✔️ New flooring or carpets

✔️ Bathroom or kitchen upgrades (think walk-in showers, grab bars)

✔️ Accessibility modifications like wheelchair ramps

2. Personal & Household Purchases

   TennCare doesn’t count personal items as assets, making this a great opportunity to update things you’ll need:

✔️ New clothing, shoes, and accessories

✔️ Appliances (washer, dryer, fridge, stove, dishwasher)

✔️ Furniture and home furnishings

✔️ TV, computer, or other electronics

✔️ Prepaid cable, phone, or internet services

3. Medical & Mobility Equipment

   If you have health needs that aren’t fully covered by insurance, now is the time to invest:

✔️ Hearing aids, dentures, and eyeglasses

✔️ Walkers, wheelchairs, and lift chairs

✔️ Specialized beds or recliners

✔️ Safety modifications (handrails, wider doorways)

4. Prepaid Burial and Funeral Expenses

   TennCare allows irrevocable prepaid funeral and burial plans, including:

✔️ Burial plots and headstones

✔️ Caskets or cremation services

✔️ Funeral home services

Since these costs are unavoidable, prepaying ensures your family won’t be left with the financial burden later.

5. Buying or Upgrading a Vehicle

   If you or your spouse need a car for transportation, TennCare allows one vehicle to be exempt. This means you can:

✔️ Buy a newer, more reliable vehicle

✔️ Make repairs or modifications (such as wheelchair accessibility)

6. Paying Off Debt

   Eliminating outstanding debts can be a great use of excess assets before applying for Medicaid. This includes:

✔️ Mortgage payments

✔️ Credit card balances

✔️ Medical bills

What NOT to Do: Avoid Costly Mistakes

Making mistakes in the medicaid spend-down process can have serious consequences, potentially delaying TennCare approval and leaving you responsible for costly nursing home bills. Many people unknowingly make errors, like giving away money or selling assets too cheaply, without realizing these actions can trigger penalties. To avoid financial setbacks, it’s important to understand what not to do when reducing your assets.

🚫 Giving money away – TennCare imposes a 5-year lookback period on asset transfers. Gifts to family, even with good intentions, can create ineligibility penalties.

🚫 Selling property for less than market value – If you sell a house, car, or other assets below their fair value, TennCare sees this as an attempt to sidestep the rules.

🚫 Waiting until the last minute – Poor timing can leave you with excess assets and force you to pay out-of-pocket for nursing home care before Medicaid kicks in.

The Bottom Line: Plan Smart, Plan Early

A well-planned spend-down can mean the difference between preserving your hard-earned resources and facing financial hardship. Since Medicaid rules are complex, it’s always best to work with an elder law attorney who understands Tennessee’s specific regulations.

If you’re unsure how to proceed, contact our office today for guidance on the best spend-down strategies for your situation.

Disclaimer: This post is for educational purposes only and is not intended to be offered as legal advice.