The Michigan Medicaid spend down is a pathway to coverage for people whose income is above the standard Medicaid limit. Formally called Group 2 or Medically Needy coverage, it works like the deductible on a private insurance plan: each month you pay medical costs up to a set dollar amount, and Medicaid covers the rest of that month once you hit it.
Who Qualifies
Two tests apply: assets and income.
Your countable assets cannot exceed $2,000 as an individual or $3,000 as a married couple.1Michigan Department of Health & Human Services. BEM 400 – Group 2 Asset Standards Countable assets include bank accounts, cash, stocks, bonds, and other investments that can be turned into cash.
Income is measured against the Protected Income Level (PIL). As of April 2026, the PIL is $1,330 per month for an individual and $1,804 per month for a couple. Income below the PIL may qualify you for standard Medicaid with no deductible. Income above it makes you a Group 2 candidate, and the amount above the PIL becomes your monthly deductible.
Assets That Don’t Count
The $2,000 limit sounds strict, but a lot of what you own is excluded.2Michigan Department of Health & Human Services. BEM 400 – Asset Exclusions Your primary residence is exempt, even during a hospital or long-term care stay, as long as you intend to return or a spouse or close relative still lives there. One vehicle is exempt; if you own more than one, the one with the highest equity is protected. Household goods, furniture, appliances, clothing, and wedding rings do not count. Burial funds up to $1,500 per person, plus interest, are excluded, and burial plots and prepaid irrevocable funeral contracts are fully excluded. Life insurance with a combined face value of $1,500 or less on the same insured person is excluded, and term policies with no cash value never count. Funds in a Michigan MiABLE account, including interest and matching deposits, are disregarded entirely.
People close to the asset limit should walk through the full exclusion list before assuming they have to spend savings down.
How the Monthly Deductible Is Calculated
Your caseworker takes your countable monthly income, subtracts the PIL for your household size, and the remainder is your deductible for that month.3Michigan Department of Health & Human Services. BEM 545 – MA Group 2 Income Eligibility Each calendar month is its own deductible period. The math resets on the first.
Say your monthly income is $1,900 and the PIL is $1,330. Your deductible is $570. You need to show $570 in medical expenses before Medicaid activates for the rest of that month. If your income shifts month to month, so does the deductible.
Medical Expenses That Count
Michigan accepts a broad range of healthcare costs. Major categories include hospital and physician charges (inpatient stays, outpatient visits, ER bills, lab work); prescription medications, plus certain non-legend supplies like insulin, syringes, and ostomy supplies; dental, orthodontic, and vision bills; mental health and substance abuse services; medical equipment such as wheelchairs, walkers, prosthetics, orthopedic shoes, and oxygen equipment; health insurance premiums, including Medicare Part B; ambulance and other medical transportation; and physical, occupational, and speech therapy.4Michigan Department of Health & Human Services. BEM 545 – MA Group 2 Income Eligibility – Exhibit I
Both paid and unpaid bills count. This detail trips people up. You do not need to have paid a bill for it to apply toward your deductible; an unpaid bill is a legal obligation and counts the same way a paid one does.
Old Medical Bills
Unpaid bills from earlier months, when you had no Medicaid coverage, can also be applied to your current deductible. The state divides the total value of qualifying old bills by your monthly excess income to determine how many months of deductible those bills can cover.5Michigan Department of Health & Human Services. BEM 545 – MA Group 2 Income Eligibility – Old Bills The bills must still be unpaid, the debt must still legally exist, and no third party (such as another insurer) can be expected to pay them. Accumulated medical debt can actually speed up qualification.
Submitting Bills, and Why Order Matters
Submit proof of each medical bill within 10 days of being charged. Once MDHHS determines your eligibility for a given month, that determination cannot be recalculated. Sit on a bill too long and you can end up paying out of pocket for something Medicaid would have covered.
The order you submit bills also matters. Coverage begins the day your submitted expenses reach the deductible, so submitting cheaper bills first and saving a large bill for last often means Medicaid activates in time to cover the expensive one. Submit the large bill first and you’ll owe more of it yourself.
You have three ways to submit:
- Upload through MI Bridges at newmibridges.michigan.gov.6MI Bridges – State of Michigan. Document Upload
- Mail or fax physical copies to your local MDHHS county office.
- Drop off documents in person at your local office.
The initial application is Form MDHHS-1171, available online or at any county MDHHS office.7Michigan Department of Health and Human Services. Assistance Application (MDHHS-1171) After initial approval, each month’s process is about submitting bills to prove you’ve met that month’s deductible.
When Coverage Actually Begins
Coverage does not start on the first of the month. It starts on the specific date your submitted expenses equal or exceed your deductible.3Michigan Department of Health & Human Services. BEM 545 – MA Group 2 Income Eligibility From that date through the end of the calendar month, Medicaid covers your care. Costs incurred before that date, up to your deductible, are yours.
If a single bill pushes you past the deductible, Medicaid may cover the excess. With a $570 deductible and an $800 hospital bill on May 15 (no prior expenses submitted that month), you owe $570 and Medicaid picks up the remaining $230, with full coverage through May 31.
Miss the deductible in a given month and you simply have no Medicaid coverage that month. Nothing carries over automatically, though unpaid bills from that month may qualify as old bills later.
Tell your providers directly when your deductible is met. They are not notified automatically, but they can verify your status through the state’s Eligibility Verification System.
Retroactive Coverage
Michigan still allows retroactive coverage. When you apply, the state can look back up to three months before your application date. If you would have qualified during any of those months — meaning your expenses for that month would have hit the deductible — Medicaid can cover qualifying costs from that period. This matters most when you’ve delayed applying while running up bills from a hospitalization or emergency.
The Five-Year Look-Back Before You Give Assets Away
If you transferred assets for less than fair market value in the five years before applying — gifting money to family, selling property below market, or moving assets out of your name without compensation — the state can flag the transaction and impose a penalty period during which Medicaid will not pay for your care, even if you otherwise qualify.8Michigan Department of Health & Human Services. BEM 405 – MA Divestment There is no cap on the penalty; a large enough transfer can produce months or years of ineligibility.
The rule bites hardest for people entering long-term care, but it applies to Group 2 applicants too. Gifting money to children or grandchildren to slip under the $2,000 asset limit is exactly what the state looks for. If you’re thinking about restructuring assets before applying, talk to an elder law attorney first.