The Nursing Home Quoted $9,800 a Month. Her Father’s $140,000 in Savings Was About to Disqualify Him.

8 min read · Last updated October 28, 2026

A Medicaid spend down for a single long-term care applicant in Texas means countable resources above $2,000 have to be spent, converted into an exempt asset, or used to pay for care directly, in that order, before the program’s five-year look-back period can turn a well-meant mistake into a penalty.

In this article

• What counts against the $2,000 limit, and what doesn’t
• The order that avoids the five-year look-back penalty
• What a Medicaid-compliant annuity actually does for a single applicant
• Hector’s $140,000 Medicaid spend down, step by step
• The mistake that starts the five-year clock over
• What to do in the first week

Say your father’s nursing home sends a cost quote the same week his bank statement shows six figures. That was the gap Carmen had to close for her father, Hector, after his assisted living facility in Fort Worth said he needed a higher level of care, and handed her a quote for a Medicaid-certified nursing home: $9,800 a month, private pay, until Medicaid took over.

What counts against the $2,000 limit, and what doesn’t

Cash, checking and savings balances, CDs, stocks, and a second vehicle not used for daily transportation all count toward the limit. The Texas Health and Human Services Commission’s (HHSC) own Medicaid for the Elderly and People with Disabilities handbook sets that countable-resource limit at $2,000 for a single applicant, matching the federal Supplemental Security Income (SSI) resource standard that hasn’t changed since it stepped up to $2,000 on January 1, 1989.

A short list of things does not count, regardless of Hector’s total savings:

• One vehicle, regardless of its value, if it’s used for transportation. The Social Security Administration’s (SSA) own rules exclude it entirely, with no dollar cap, under POMS SI 01130.200.
• The home he lives in, while he’s living in it or intends to return to it. The equity-limit rules that apply once he’s no longer living there are a separate, deeper topic covered in Medicaid’s look-back and transfer penalty rules for a parent’s house.
• Up to $1,500 set aside specifically for burial expenses, and separately, burial space items (a plot, vault, casket, or headstone) bought outright, which carry no dollar limit at all.
• Personal effects and household goods at ordinary value.

Everything else in Hector’s name is countable until it’s spent, converted, or used.

The order that avoids the five-year look-back penalty

Under federal law, 42 U.S.C. § 1396p(c)(1)(A) and (c)(1)(B)(i), Medicaid looks back 60 months, five years, from the application date for any asset disposed of for less than fair market value. If it finds one, it calculates a penalty: the gifted amount divided by the average monthly private-pay nursing facility cost in the state, under 42 U.S.C. § 1396p(c)(1)(E)(i). That penalty is a period of ineligibility for long-term care, counted in months, not a fine.

The rule only penalizes a gap between what left Hector’s accounts and what he received back in value. It does not penalize spending his own money on his own needs at full value. That distinction is the entire order of moves:

1. Pay off real debts first. A car loan, a credit card balance, an unpaid medical bill. Paying a debt at its actual balance isn’t a gift. Nothing of value left Hector’s estate without something of equal value coming back: the debt itself disappearing.
2. Buy burial space items outright, with no cap. A plot, vault, casket, and headstone purchased now are fully excluded resources, not a future funeral-home credit.
3. Set aside the $1,500 burial fund. This is a separate exclusion from the burial-space purchases above, meant for funeral services rather than physical items.
4. Spend on Hector’s own uncovered needs. Hearing aids, dental work insurance won’t pay for, a walk-in shower conversion, a wheelchair ramp. Real goods and services at real prices, received by the person whose resources they come from.
5. Only after that, get professional guidance on what’s left. Anything beyond debt payoff and exempt purchases moves into territory, like annuities and trusts, where a wrong structure still counts as a transfer.

What a Medicaid-compliant annuity actually does for a single applicant

Families often assume an annuity makes savings disappear from Medicaid’s view. For a married applicant with a spouse still living independently, a properly structured annuity can shift income to protect that spouse’s share, a real and separate strategy.

For Hector, who is widowed, it works differently. Federal law lets an annuity avoid being treated as a disqualifying transfer only if it meets conditions under 42 U.S.C. § 1396p(c)(1)(G): irrevocable, nonassignable, actuarially sound under Social Security Administration (SSA) life-expectancy tables, and paid out in equal installments with no deferral or balloon payment. Under 42 U.S.C. § 1396p(c)(1)(F), the state also has to be named as the first remainder beneficiary, entitled to recover up to the total Medicaid pays on Hector’s behalf.

The practical result: annuitizing Hector’s remaining savings converts a lump sum into a monthly income stream, which still counts toward what he owes the nursing home each month once he’s on Medicaid, aside from a small personal needs allowance. The money isn’t protected from his own cost of care, just paid out on a schedule instead of sitting in an account. For a single applicant with no community spouse, there typically isn’t a way around spending the remainder on real care and needs until the balance reaches $2,000.

Hector’s $140,000 Medicaid spend down, step by step

Move	Amount	Remaining countable
Starting balance	–	$140,000
Pay off car loan and medical bills	-$14,000	$126,000
Buy burial space items outright (plot, vault, casket, headstone)	-$11,000	$115,000
Set aside the $1,500 burial fund	-$1,500	$113,500
Hearing aids, dental work, walk-in shower conversion	-$6,500	$107,000
Remaining balance, must go to his own care until at or below $2,000	-$105,000	$2,000

The last $105,000 in this example isn’t a loophole waiting to be found. For Hector, it goes toward paying privately for his own nursing home care, at $9,800 a month, roughly 10.7 months at that rate before the account reaches $2,000 on its own, with no penalty attached because every dollar bought his own care.

The mistake that starts the five-year clock over

The costliest mistake families make isn’t failing to spend down, it’s spending down the wrong way. Writing a check to a grandchild for a wedding, forgiving a sibling’s loan, or adding an adult child as a joint owner on a bank account can all count as a disqualifying transfer, even when nobody meant it as “hiding money.” The caseworker calculates the penalty from the date Hector would otherwise have been eligible, not from the date of the transfer.

If Carmen is also being paid to provide hands-on care for her father, that arrangement needs its own written, dated, fair-market-value agreement signed before any money changes hands, not after. A caregiver agreement without that paperwork is exactly the kind of transfer Medicaid’s look-back is built to catch, even when the care was real.

What to do in the first week

1. Confirm who has legal authority to manage Hector’s accounts and sign the Medicaid application. If there’s no power of attorney in place and his capacity is in question, that window closes faster than most families expect, covered in what to do before a guardianship becomes the only option.
2. Pull 60 months of bank, brokerage, and retirement account statements. The caseworker will ask for them, and gaps slow the application down even when nothing improper happened.
3. Pay off real debts and buy the exempt items in the order above, keeping receipts for every purchase.
4. Apply for Medicaid once countable resources reach $2,000, rather than waiting for a “clean” number. Texas allows up to 45 days to process a standard application, and the clock doesn’t start until the application is filed.

Frequently asked questions

Does paying off Hector’s mortgage count as a transfer? No, as long as he owns the home and the payment goes to his own lender. He’s receiving equal value, a reduced debt on an asset that’s his. The home’s own equity limit and look-back rules are a separate question from the resource spend-down covered here.

What if Hector already gave money to a family member in the past five years? It doesn’t automatically disqualify him forever. The state calculates a specific penalty period based on the amount, divided by the average monthly private-pay nursing facility cost, and the clock only starts once he’s otherwise eligible.

Can Carmen just hold the money in her own name until the application is approved? No. Adding her name or transferring the funds to her is treated the same as any other gift for less than fair value, triggering the same five-year look-back penalty as giving it to anyone else.

Does Hector get to keep any of his income once he qualifies? Yes. Texas law sets its personal needs allowance at $75 a month for an individual, raised from $60 by a 2023 state law change, and Hector keeps that amount for personal expenses even while the rest of his income goes toward his cost of care.

What happens if Hector later moves near Carmen in a different state? Medicaid eligibility doesn’t transfer between states. He’d need a new application in the new state, and that state’s own processing window, up to 45 or 90 days, starts over from the filing date.