Abstract
About 43% of nursing home costs are paid by Medicaid for the poor and for those who spend-down assets to qualify for Medicaid. Costs and distributional impacts of changes in the Medicaid asset test and the effect on the number of people spending down to Medicaid eligibility levels is estimated. Increasing asset thresholds from $2,000 to $12,000 would cost less than $4 billion, reduce spend-down rates, and increase the proportion of people eligible for Medicaid on admission to a nursing home. Even after such a change, about 80% of Medicaid benefits accrue to inidividuals with incomes less than $10,000.