How do you spend down the money to keep eligible for Medicaid?

Is the house already sold? If so I would place the proceeds from the sale either in the elder's bank account OR perhaps a new account with only those funds in it.

If it is not sold yet & if you or others has spent ANY money on the property, then if you want to be reimbursed for those expenses you need to basically file a claim against the sale to be paid for your costs. You need to have documentation of what your paid & what for too. But then you get a check for that from the proceeds of the sale. Kinda like the Realtor getting paid their commission for the sale. All this done before check to the seller. Then balance goes into the bank.

I would suggest that then you send either a fax or a registered letter to your state's Medicaid program and with a return receipt (the green card @ the NH) stating that the sale has happened and how to handle the proceeds under your state's program. Faxes and registered mail are legal, a phone call is not and you don't want Medicaid tell you that you were not in compliance….Once the letter is sent, I'd wait a couple of days and contact the caseworker for follow-up. Now my experience is that the NH have specific caseworker so If you don't know who to reach, I'd just ask @ the NH for the info.

Now if the elder does not already have a prepaid NCV (no cash value) funeral & burial policy, you can probably divert some of the money from the house to pay for that - so by all means call around to get estimate on those costs & asap. If the elder could possibly need new hearing aids, glasses, wheelchair, then you probably can divert funds to pay for all this. Dental too. All of these are either not covered by Medicaid or minimally covered. In theory they can spend for anything for their care or their needs, so they could go and get lots of clothes from Target but the caseworker is going to have to question a big receipt from Target, if they need clothes I'd order them from someplace on-line that is clothing for the handicapped (velcro, bibs, special snaps, etc) so that it is obviously for a NH resident. Ask this ? specifically to the caseworker if allowed within your state's program (I'd fax it too). But whatever you need to get it all paid & processed through the bank asap so that there is a finite balance to the money. Depending on your state's program (Medicaid is run by each state under it;s own rules so what works for TX may not be the same as for CA - yeah totally loco but whatever) - they may require that the elder private pay for their care each month till they are once again at the required impoverishment level OR they may require the reimbursement of all paid to date and then private pay till impoverished again.
You just want to always do a cover your butt on all this so sending faxes or registered letters does this. Good luck & great you sold the house!

As soon as the cash comes in, the Medicaid will stop until it is spent down. Talk to your caseworker and better yet, a lawyer.

I believe that money should be spent on the care of the person, if a person is married then, half of the value of the house belongs to the spouse or if the person has a child who is disabled or less than 21 years of age still living in the house, then the house is not counted. The rules on getting long term care services according to infolongtermcare.org, for medicaid qualification is quite strict, so before doing anything, it is best to talk with an elder care lawyer first so you can avoid being penalized by medicaid.