Retirees deplete savings waiting for Medicaid coverage of care

A New York couple drained retirement and savings accounts paying for health care before Medicaid would step in, a path that can push middle-class older Americans into financial distress long before they qualify for long-term care help.

In New York, the Medicaid Excess Income program, also called the spend-down or surplus income program, can bridge that gap for people whose income is above the Medicaid limit. Applicants may subtract certain medical bills from income, including doctor visits, prescription drugs, over-the-counter medications and insurance premiums, to become eligible. The process is not a simple do-it-yourself fix, especially for families already paying for care while trying to preserve what is left of their nest egg.

Medicaid is a joint federal and state program that helps cover medical costs for certain low-income people, including older adults. It pays for services Medicare often does not, including nursing home care and personal care services. Medicare has no yearly out-of-pocket maximum unless a beneficiary has supplemental coverage, such as Medigap, or joins a Medicare Advantage plan. That exposes retirees to open-ended bills for premiums, copays, deductibles and services that Medicare covers only partly. The Medicare Savings Programs help more than 10 million people pay Medicare premiums and cost-sharing, according to the Centers for Medicare & Medicaid Services, but those programs do not erase every expense that lands on older households.

In 2024, KFF found lack of affordability was among older Americans’ top health-care worries, and Commonwealth Fund research shows older adults in the United States face heavier out-of-pocket burdens than peers in other high-income countries. In New York, the spend-down pathway can keep people eligible for help. It can also force them to burn through the savings they spent decades building before that help begins.