The Medical or Remedial Expense Deduction

When working with a client on a Medicaid plan, the focus is often on eligibility—spending down to the asset limit—and preserving as many resources as possible. But there comes a time when you must explain how the finances work after the Medicaid application is finally approved. The institutionalized client will have less than $2,000 and still have to pay nearly all his income to the facility, in many cases. At this point, the client naturally asks: But then, how am I going to pay X?

X might be prescriptions, an old medical bill, a long-overdue nursing home bill, over-the-counter medical supplies, an ambulance bill, dental care, or something else related to the client’s medical condition. If so, the medical or remedial expense deduction is the answer. (If the concern is paying a phone bill, real estate expenses, a life insurance premium, etc.—also common—the options are more limited and not the subject of this guide.)

The medical/remedial expense deduction is intended to ensure Medicaid enrollees can pay for any remaining out-of-pocket expenses related to their health. It is often an imperfect solution, but a useful one.

CLE Seminar

The Medical or Remedial Expense Deduction Made Easy was presented by webinar Tuesday, January 20, 2026 at 12:00 p.m. You can watch the recorded video below on-demand—if you want CLE credit for watching on-demand, you must still click here to register so I have a record of your attendance. 1.0 CLE pending approval, both live and on-demand.

↓ Download PDF of CLE Materials

References

Medicaid Eligibility Handbook, Release 25-04 (Wis. DHS Dec. 10, 2025)

• § 15.7.3, Medical/Remedial Expenses
• § 20.3.6, Mandatory Verification Items: Medical or Remedial Expenses
• § 27.7.7, Intitutional Long-Term Care: Cost of Care Calculation: Medical or Remedial Expenses
• § 28.6.3.5, Home and Community-Based Waivers LTC: Groups and Cost Sharing: Medical/Remedial Expenses

Wis. Admin. Code § DHS 103.07(1)(d) (Jan. 2026), Special Situations of Institutionalized Persons: Computing Income Available Towards Cost of Care

Wis. Stat. § 49.455 (2023-24)

• § 49.455(4)(a) [Order of deductions from income]
• § 49.455(8)(d)3. [Mentions medical/remedial expenses in requiring IS to give all available income to CS before using a fair hearing to increase CSRA]

IRIS Policy Manual §§ 2.1A.1.1 & 2.1A.2.1, Medical/Remedial Expenses (Wis. DHS Oct. 2025)

42 C.F.R. §§ 435.726, 435.832 (2026), Post-eligibility treatment of income of individuals: Application of patient income to cost of care

42 U.S.C. § 1396a(r) (2026), Disregarding payments for certain medical expenses by institutionalized individuals

Explanation

The medical or remedial expense deduction is used when calculating patient liability or cost share—the amount of monthly income an enrollee must pay towards her cost of care—for persons enrolled in Institutional MA or Community Waivers long-term care programs (Family Care and IRIS, mainly). (It can also factor into MAPP eligibility and premium calculations and meeting a Medicaid deductible, but those issues are not commonly addressed by Wisconsin elder law attorneys.) Essentially, if your client has a patient liability or cost share and also has an out-of-pocket medical bill, the State will reduce her patient liability or cost share so she can pay it.

What is a medical expense? A medical expense is nearly any item or service provided or prescribed by a licensed medical practitioner “for the diagnosis, cure, treatment, or prevention of disease or for treatment affecting any part of the body.” Medicaid Eligibility Handbook (MEH) § 15.7.3. Common examples are doctor’s bills, hospital bills, prescriptions, and over-the-counter medical supplies. Also note that medical expenses include the services of any licensed “medical practitioner,” which could arguably include services such as chiropractors, massage therapists, and acupuncturists.

Health insurance premiums are technically medical expenses, but Wisconsin generally treats them separately.

What is a remedial expense? A remedial expense is nearly any out-of-pocket expense “for services or goods provided for the purpose of relieving, remedying, or reducing a medical or health condition.” MEH § 15.7.3. Common examples include day care, home modifications for accessibility, respite care, and medical transportation. This can also include “program costs” charged by a CBRF, AFH, or RCAC other than room and board.

• DHA Case No. MGE 211383 is an example of how difficult it is to pay even minimal expenses on the personal needs allowance (then $45/month). The ALJ in that case noted, by way of trying to help, that new shoes could perhaps qualify as a remedial expense if prescribed or needed to relieve a health condition.
• In DHA Case No. FCP 155113, the cost of overnight supervision—which was not a covered benefit under Family Care—was counted as a remedial expense. The main issue in this case was an important DHS policy: any item or service that could be covered by Family Care but is not included in the individual’s care plan is not an allowable remedial expense, even if the individual chooses to buy it out-of-pocket.

Any medical or remedial expense must be:

• Out-of-pocket, not reimbursable by any other source;
• Owed by the member, not anyone else; and
• For the member, not for anyone else (even if the member is legally responsible for it).

See MEH § 27.7.7. For example, in DHA Case No. MGE 162960, health insurance provided through the community spouse’s employer and paid by the community spouse was not a deductible expense. It was out-of-pocket and for the member, but it was owed by the member’s spouse only.

Additionally, the medical or remedial expense must be an expense that the member “has incurred, is actually paying, and is legally obligated to pay.” MEH § 27.7.7. In some cases, the State has used this language to insist that a member not only have a bill for the expense but also a signed repayment agreement for a specific monthly amount and a specific repayment period. (See below for further discussion of repayment agreements.)

The following expenses are specifically not allowed as medical/remedial expenses:

• Unpaid patient liability or cost share. MEH § 27.7.7.2. For example, in DHA Case No. MGE 217939 the petitioner owed a whopping $22,504 to a nursing home in unpaid patient liability, due entirely to his brother/POA’s mismanagement (charitably) or perhaps theft. Despite the sympathetic circumstances, the ALJ could not make an exception to allow the petitioner to pay this outstanding bill from his income. The nursing home presumably went unpaid.
• Any expense incurred as a result of a divestment penalty period. See Example 6 in MEH § 27.7.7.2, in which a nursing home bill incurred during a divestment penalty period could not be used as a medical/remedial expense.
• Any expense that has previously been deducted as a medical/remedial expense. MEH § 27.7.7.2. In other words, you get one shot to actually pay the expense with your reduced patient liability or cost share. This means it is essential that the client follows through on actually paying the expense. For an example of how this can go wrong, see DHA Case No. MGE 216220, where the petitioner failed to actually pay an $11,000 bill owed to a nursing home that was used to reduce her patient liability.
• Life insurance premiums (except premiums for a long-term care rider). See Wis. DHS Form F-00295, Medical and Remedial Expenses Checklist.
• Vehicle-related costs such as loan payments; insurance; gasoline; maintenance and repair; registration, license, and title fees; etc. (except a disability-related vehicle modification may count as a remedial expense). See Wis. DHS Form F-00295, Medical and Remedial Expenses Checklist.
• Housing and food costs (except for accessibility home modifications and exceptional energy or food costs incurred due to the member’s medical condition). See Wis. DHS Form F-00295, Medical and Remedial Expenses Checklist.
• Expenses for items or services that only promote general health or wellbeing, or that were incurred for non-medical or non-remedial reasons. See Wis. DHS Form F-00295, Medical and Remedial Expenses Checklist.
• Expenses for which there is “neither evidence nor a reasonable basis for concluding the remedial effect will occur.” See Wis. DHS Form F-00295, Medical and Remedial Expenses Checklist.
• Donations, including when dining with a group. See Wis. DHS Form F-00295, Medical and Remedial Expenses Checklist.
• Medicaid overpayments (currently, DHS has stopped pursuing overpayments altogether, so this is not likely to be an issue; but see DHA Case No. MGE 210319 for an example of how tricky it can be to actually pay an overpayment while maintaining Medicaid eligibility). MEH § 15.7.3.

Medical or remedial expenses must be verified to get the deduction, though the agency may not deny or terminate eligibility for a failure to verify them. MEH § 20.3.6. To verify a medical or remedial expense, you must document:

1. The amount of the expense,
2. The amount of any third party’s liability, and
3. The date of the service.

MEH § 20.3.6. For Community Waivers programs, the care manager, ADRC staff, or IRIS consultant agency (ICA) may verify and calculate the expense instead of Income Maintenance (IM). Id. These programs use DHS Form F-00295, Medical and Remedial Expenses Checklist, which is a useful reference for a detailed list of allowable and unallowable expenses. It is also worth noting that IRIS Consultant Agencies (ICAs) now have an ongoing responsibility to monitor and report a member’s medical and remedial expenses. See DHA Case No. MGE 211474 for an example of this responsibility and how it can affect IRIS members.

In some cases, the agency may also require a signed repayment agreement to verify that the applicant or member “has incurred, is actually paying, and is legally obligated to pay” the expense. MEH § 27.7.7. The agency is most likely to insist on a repayment agreement if the expense is a large overdue bill from a facility. The agreement should be signed by the facility and the member, state the total amount owed, list the dates of service, state that the member owes it, provide a monthly payment amount, and provide a definite term for repayment.

• To learn vicariously about the need for a repayment agreement, see a series of fair hearing decisions I like to call The Repayment Agreement Saga:
  • In DHA Case No. MGE 207353 (March 28, 2023), the petitioner verified an outstanding balance of $7,252 with the nursing home, but the agency refused to allow a medical expense deduction without a signed repayment agreement showing a monthly payment amount and a starting and ending month for payments. Despite the argument that the consortium enforced this requirement irregularly and arbitrarily, the ALJ concluded it was reasonable for the agency to question whether a payment would actually be made and require evidence that an enforceable payment agreement actually exists.
  • The petitioner’s attorney then asked for a rehearing and argued that requiring a repayment agreement violated federal law. In DHA Case No. MGE 207353 (June 21, 2023), the ALJ rejected these arguments and again found it reasonable for the agency to require verification “that the expense is being actually paid, not just owed.”
  • Then, in DHA Case No. MGE 208326 (Jul. 18, 2023), the petitioner got a repayment agreement wherein the facility agreed to “accept a Medicaid Liability Diversion” but provided for no specific payments or payment period. Importantly, the agreement included no commitment by the petitioner to make any payment, in any amount or at any time. “The written agreement contains no reference to any action to be taken by the petitioner.” Unsurprisingly, this didn’t fly.
  • Why was this such an issue? I think it was a chicken-and-egg problem: How can you promise actual payment to a nursing home before the agency grants the deduction you need to actually pay it? As an attorney, I understand the hesitancy to sign the client up for liability. And some facilities can get pretty unpleasant about collections.
  • The solution, I think, is a repayment agreement that promises payment only if and when the medical/remedial expense is granted. This should satisfy all requirements without risking more than the client actually gets.
• Hospitals will routinely allow individuals to establish repayment plans. See DHA Case No. MGE 207580 for a minor example of a $100/month repayment plan with a hospital being used to reduce patient liability.

Finally, note that medical or remedial expenses are the lowest-priority income deduction, after the personal needs allowance, any income allocation to the community spouse, court-ordered guardianship costs, and any of the other, less common deductions. See MEH §§ 27.7.1 (institutionalized) & 28.6.3 (Community Waivers) for the full order of deductions. See also Wis. Stat. § 49.455(4)(a), which gives any spousal income allocation priority over medical/remedial expenses. In practical terms, this means the medical/remedial expense deduction is only useful if the Medicaid member still owes a patient liability or cost share after all other available deductions. In some cases, the member will be able to allocate all of his or her income to the community spouse; in others, the member may not have a patient liability or cost share due to other deductions or qualifying for Group A. The medical or remedial expense deduction is not useful for those members.

How to use the medical/remedial expense deduction

The medical/remedial expense deduction is generally useful if:

1. Your client owes—or you expect your client to owe—a patient liability or cost share after all other income deductions and any income allocation for the community spouse; and
2. Your client has an allowable medical or remedial expense. Some of the most common expenses are: overdue facility bills (not incurred during a divestment penalty); bills for doctors, hospital stays, and ambulance rides; dentist and optometrist bills; prescriptions not covered by Medicaid or other insurance; incontinence supplies; and other medical supplies.

If the above conditions are met, I recommend following this checklist:

What is an allowable medical or remedial expense

Any medical or remedial expense must be (a) out-of-pocket, not reimbursable by insurance or any other source; (b) owed by the member, not anyone else; and (c) for the member, not for anyone else.

In general, a medical expense is any item or service provided or prescribed by a licensed medical practitioner for the diagnosis, cure, treatment, or prevention of disease or for treatment affecting any part of the body.

In general, a remedial expense is any item or service provided for the purpose of relieving, remedying, or reducing a medical or health condition.

Specific examples:

Health insurance, including premiums, deductibles, copayments, coinsurance, and long-term care riders on life insurance
Dental care, except for services only intended to approve appearance
Vision care, including eye exams, prescription glasses/sunglasses, contact lenses, and contact lens cleaning supplies
Prescription drugs, including prescribed over-the-counter drugs and supplements, not covered by Medicaid, other health insurance, or any other third party
Over-the-counter medical supplies, disposable or reusable, including incontinence supplies, skin care products, rubbing alcohol, antiseptics, bandages, enema apparatus and kits, hydrogen peroxide, lemon or glycerin swabs, lubricating jellies, tinctures of benzoin, cotton balls and applicators, gloves, catheters, syringes and needles, irrigation solutions, stoma care products, tracheotomy care components, tube feeding components, tongue depressors, bedpans, thermometers, rubber pants, etc.
Program costs charged by a CBRF, AFH, or RCAC, other than room and board
Case management services
Day care and respite care services
Supportive home care services needed to meet daily living needs, ensure adequate functioning in the home, and safely access the community, including assistance with ADLs, attendant care and supervision, reporting changes in the member’s condition, assistance with medication and self-administered medical procedures, extension of therapy services, ambulation and exercise, and essential household chores (lawn care, snow removal, cleaning, changing storm or screen windows, etc.)
Home modifications for accessibility needed because of a medical condition or disability, but only to the extent the cost exceeds any increase in the home’s value
Vehicle modifications needed because of a medical condition or disability
Medical and community transportation, except transportation that is purely for recreational or diversional purposes
Nutritional products needed because of a medical condition or functional limitation
Exceptional food costs incurred because of a medical condition, but only to the extent they exceed the cost of a normal diet
Exceptional energy costs incurred because of a medical condition, but only to the extent they exceed typical energy costs and only to the extent the member’s calculated maintenance needs allowance exceeds the maximum permitted
Phone and electronics, including equipment and service, needed for the operation of a personal emergency response system, medication monitoring device, or other remote monitoring technologies, but only to the extent not in prior use or for personal use
Housing and board costs of a live-in attendant paid out-of-pocket, but housing costs only to the extent the member’s calculated maintenance needs allowance exceeds the maximum permitted

Specific exclusions:

Any expense incurred as a result of a divestment penalty period
Any unpaid patient liability or cost share
Any expense that has previously been deducted as a medical/remedial expense (you get only one shot)
Any unverified expense
Any expense that was previously used to meet a Medicaid deductible
Medicaid overpayments

Also note

• The federal law that requires states to deduct medical or remedial expenses allows them to impose “reasonable limits … on amounts of these expenses.” 42 U.S.C. § 1396a(r) (2026), 42 C.F.R. §§ 435.726, 435.832 (2026). Wisconsin has no official policy imposing any limits to date. Whether the State could impose limits on a case-by-case basis is, to my knowledge, an open question.
• If enrolled in a Community Waivers program (Family Care, IRIS, Partnership, or PACE) and the service or item is potentially coverable by the program, you must first receive a denial of coverage from the program before using it as a medical/remedial expense. See Wis. DHS Form F-00295, Medical and Remedial Expenses Checklist; DHA Case No. FCP 155113 (Wis. Div. of Hearings and Appeals May 14, 2014) (DHS).
• For IRIS participants, the IRIS Policy Manual notes a difference in what is an allowable medical/remedial expense for Group B and Group B Plus.
  • Group B: “When determining the person’s monthly total amount of medical/remedial expenses for Group B financial eligibility, only those allowable expenses that are both incurred and paid by the applicant can be counted. Items or services that were bought for someone else (a spouse, child, etc.) or paid for by another person, or by the IRIS program, the Medicaid card, a private health plan or any other program are not counted. This differs from expenses allowed for Group B+ financial eligibility calculations … .”
  • Group B+: “Allowable medical/remedial expenses for Group B+ include out-of-pocket medical/remedial expenses, as defined in Group B above, and may also include the costs of any planned services that would otherwise be funded by the IRIS program.”
  • I believe this means Group B+ members can use the medical/remedial expense deduction for future, planned services while Group B members cannot. But the exact difference is not clear to me from the language in the policy manual. See IRIS Policy Manual §§ 2.1A.1.1 & 2.1A.2.1, Medical/Remedial Expenses (Wis. DHS Oct. 2025).
• When seeking to increase the community spouse resource allowance through a fair hearing under Wis. Stat. § 49.455(8)(d) (to compensate for the community spouse’s income being below the minimum monthly maintenance needs allowance), Wis. Stat § 49.455(8)(d)3. imposes a condition: the institutionalized spouse must first allocate as much as possible of his or her income to the community spouse, except for amounts equal to the personal needs allowance, any family allowances, and any medical or remedial expenses.