Most of what a Colorado Springs, Colorado family has been told about Medicaid spend-down is wrong, and the wrong beliefs are expensive in specific, predictable ways – a house given away too late, a policy surrendered for a fraction of its value, three months of private-pay bills that a trust would have covered. This page takes the eight beliefs we hear most in El Paso County and puts the actual rule next to each one.
The programme is Health First Colorado, Colorado’s Medicaid programme, administered by the Department of Health Care Policy and Financing, with long-term services and supports delivered partly through the Home and Community Based Services waiver for elderly, blind and disabled adults. Colorado Springs is the county seat of El Paso County, Colorado, and the office that takes the application is the El Paso County Department of Human Services in Colorado Springs, with online filing through Colorado PEAK. Functional eligibility is assessed separately by a Case Management Agency serving El Paso County – Colorado consolidated its previous Single Entry Point and Community Centered Board case management into Case Management Agencies in 2024, so guidance written before then names agencies that no longer exist under those titles. Options counselling comes from the Pikes Peak Area Agency on Aging in Colorado Springs, and free unbiased insurance counselling from Colorado’s State Health Insurance Assistance Program, housed in the Colorado Division of Insurance. Nothing below is legal or eligibility advice.
In This Article
- Myth one: “We have to be broke before Medicaid will help”
- Myth two: “They’ll take the house”
- Myth three: “Give the house to the kids five years early and you’re fine”
- Myth four: “You can spend the money on anything”
- Myth five: “Medicare covers nursing home care”
- Myth six: “Dad’s income is too high, so he can’t qualify”
- Myth seven: “Cash in the life insurance, that’s the only option”
- Myth eight: “Military retirees don’t need to worry about this”
- What is actually true: the numbers and the phone calls
- Frequently Asked Questions
Myth one: “We have to be broke before Medicaid will help”
Not broke – under the limit, which is a different and much more manageable thing. The countable asset limit for a single applicant is $2,000 as of 2026 (verify with El Paso County), but a long list of assets is not counted at all: the primary residence subject to conditions and the federal home equity cap, one vehicle regardless of value, household goods and personal effects, and properly structured burial arrangements.
The distinction matters because it changes the arithmetic completely. A widow with a paid-off Colorado Springs house worth $470,000, a car, and $19,000 in savings is over the limit by $17,000 – not by $489,000. Seventeen thousand dollars of legitimate spend-down is a few weeks of work, not a liquidation.
And “spend-down” does not mean waste. Paying the applicant’s own overdue medical, dental, vision and hearing costs, paying off the applicant’s debts, funding necessary repairs to the applicant’s home, buying equipment Medicare will not cover, and prepaying funeral arrangements irrevocably all reduce countable assets while the applicant receives full value. What does not work is giving money away, which is myth three.
The general mechanics are on nursing home Medicaid spend-down, and current-year figures on Colorado Medicaid asset and income limits.
Myth two: “They’ll take the house”
Two different questions get collapsed into one here, and the answers differ.
For eligibility: the primary residence is generally excluded while the applicant intends to return home, or while a spouse or dependent relative lives there, subject to the federal home equity interest cap – an indexed figure in the neighbourhood of $1.1 to $1.2 million as of 2026, which is not a practical constraint in El Paso County. Nobody has to sell the house to qualify. Document the intent to return, because it is the hinge of the exclusion.
After death: Colorado’s Department of Health Care Policy and Financing pursues estate recovery to recoup what Medicaid paid for long-term care, and Colorado may also record a lien in certain circumstances. So the house is usually safe for qualifying and is not automatically safe from recovery. That is not the same as “they take the house,” and it is not nothing either.
What the myth causes: families sell a house they did not need to sell, converting an excluded asset into countable cash and creating a spend-down problem where none existed. Or they panic-transfer it, which is myth three. Before doing anything with the deed, get an El Paso County-based Colorado elder law attorney to look at it, and factor in the carrying cost – taxes, insurance, utilities and maintenance on an empty Colorado Springs house is a real annual number the family will be paying while the applicant’s income goes to care.
Myth three: “Give the house to the kids five years early and you’re fine”
The kernel of truth here is why the myth survives: Colorado applies a 60-month look-back, and a transfer completed more than five years before an application is generally outside it. The problem is that almost nobody executes on that timeline, and the version families actually attempt is catastrophic.
A gift or below-market sale inside the look-back creates a penalty period – a span of ineligibility calculated from the amount transferred, which begins when the applicant is otherwise eligible and already in a facility. That timing is the point. The penalty arrives when the money is gone and the bill is $10,000 a month, and no amount of subsequent spending cures it.
What families try, and why each fails: quit-claiming the house after a diagnosis (inside the look-back); adding a child as joint tenant (a partial transfer, plus creditor and divorce exposure for the child, plus a capital gains problem later); selling to a child for a token amount (a below-market transfer, and the recorded consideration is public); putting the house in a revocable living trust (no protection at all, because the assets remain available).
Narrow exceptions do exist for a transfer to a spouse, to a child who is under 21, blind or disabled, to a qualifying caretaker child who lived in the home and provided care that kept the parent out of a facility for at least two years, and to a qualifying sibling with an equity interest who lived there for at least a year. Each requires contemporaneous documentation, which is why the caretaker child exception is usually discovered too late to prove.
Myth four: “You can spend the money on anything”
You can spend it on almost anything for the applicant. You cannot transfer it to anyone else, and the difference is the whole rule.
Works: the applicant’s own medical, dental, vision, hearing and podiatry costs; the applicant’s debts, including a mortgage or credit cards; repairs and safety modifications to the applicant’s home; a replacement vehicle where one vehicle is excluded; durable medical equipment; and an irrevocable pre-need funeral arrangement with a licensed Colorado funeral establishment.
Does not work: paying a grandchild’s tuition; a wedding; a car for a child; a “loan” to a family member with no note and no repayment; forgiving an existing family loan; or paying a child for past caregiving without a written agreement that existed at the time.
The grey area worth naming: paying an adult child for ongoing care is legitimate if – and only if – there is a written personal services agreement at a reasonable market rate, executed before the services are provided, with records kept and income reported. Agreements drafted after the fact routinely fail. In a city with as many multigenerational military families as Colorado Springs, this comes up constantly and it is worth doing properly with an attorney.
| The myth | What the rule actually is (2026) | What the myth costs | Verify with |
|---|---|---|---|
| You must be broke | Countable assets under $2,000; the home, one vehicle, personal effects and proper burial arrangements are excluded | Unnecessary liquidation of excluded assets | El Paso County Department of Human Services |
| They’ll take the house | Generally excluded for eligibility with intent to return or a spouse in residence; estate recovery is a separate, later question | Selling a house that did not need selling, creating countable cash | A Colorado elder law attorney; HCPF on estate recovery |
| Give it to the kids | 60-month look-back; transfers inside it create a penalty period that cannot be spent down away | Ineligibility at the exact moment the money is gone | A Colorado elder law attorney |
| Spend it on anything | Spending on the applicant works; transferring to anyone else does not | A gift reclassified as a penalised transfer | El Paso County caseworker |
| Medicare covers nursing homes | Part A covers a limited post-hospital skilled stay with coinsurance, not long-term custodial care | A budget built on coverage that ends in weeks | The facility business office, in writing |
| Income too high to qualify | Colorado is an income-cap state; an income trust funded every month solves it, but not retroactively | Roughly $10,000 of private-pay care per uncovered month | El Paso County; a Colorado elder law attorney |
| Cash in the life insurance | Four options exist: surrender, reduced paid-up, a regulated life settlement, or assignment to an irrevocable funeral arrangement | The gap between surrender value and market value, permanently | The carrier for an in-force illustration; a free policy review |
| Military retirees are covered | TRICARE For Life, VA care, state veterans homes and Aid and Attendance help but generally do not cover extended custodial care | A delayed Medicaid application and months of private pay | The VA; a veterans service officer |
Myth five: “Medicare covers nursing home care”
This is the single most consequential misunderstanding in long-term care, and it is not really about Medicaid at all.
Medicare Part A covers a limited skilled nursing stay after a qualifying hospital admission – up to 100 days per benefit period, with full coverage for a shorter initial span and a substantial daily coinsurance after that, and only while skilled care is required and the resident continues to meet the criteria. It is rehabilitation coverage, not long-term care coverage. It ends, often abruptly, and frequently sooner than the family was led to expect.
When it ends, the resident does not usually leave. The bill simply converts to private pay, therapy converts from covered to charged, and the family discovers the real number in month two. That is the moment most Colorado Springs families first look up Medicaid.
Medicare Advantage plans handle this transition under their own rules, which can differ. Ask the facility’s business office in writing which coverage basis applies, and ask to be notified before the Part A benefit period ends rather than after.
A related myth: “the hospital said Medicare would handle it.” Discharge planners work fast and speak in shorthand. Get the coverage question answered in writing, and see nursing home costs in Colorado Springs for what the private number actually is.
Myth six: “Dad’s income is too high, so he can’t qualify”
Half right, and the missing half is a document. Colorado is an income-cap state for long-term services and supports: gross monthly income above the cap – in the low $3,000s per month for an individual as of 2026, adjusted annually, verify with El Paso County – disqualifies the applicant outright rather than creating a partial share of cost. Military retired pay plus Social Security clears that cap easily, which is why this myth is especially common here.
The remedy is an income trust, commonly called a Miller trust. Excess income is deposited into the trust each month and is not counted against the cap. Three requirements, and the third costs families real money: it must be drafted to Colorado’s specifications with the state named as remainder beneficiary in the required position; it must have its own bank account with income genuinely flowing through it; and it must be funded every month and generally cannot be applied retroactively. A trust created in April does not fix February.
So the correct version of the belief is: high income does not disqualify, but high income without a properly drafted and funded trust does. If income is over the cap, establishing the trust is the most time-sensitive item on the list – each month without it is roughly $10,000 of private-pay care in this market.
Once eligible, a nursing facility resident’s income goes to the cost of care less a personal needs allowance, commonly cited near $105 per month in Colorado as of 2026 – higher than many states, and still not much.
Myth seven: “Cash in the life insurance, that’s the only option”
The most expensive myth on this page, because acting on it is irreversible.
First, the rule people are half-remembering. Medicaid tests life insurance on aggregate face value, not cash value: add the face amounts of every policy owned on the same insured, and if the total is at or under the threshold – $1,500 of total face value under the standard Colorado follows, as of 2026, confirm with El Paso County – the cash value is excluded entirely. One dollar over and the exclusion is gone, and the whole cash surrender value counts. A $90,000 policy holding $33,000 of cash value contributes $33,000 against a $2,000 limit. That part is true, and it is why caseworkers ask about the policy.
What is false is that surrender is the only response. There are four:
- Surrender for cash value – immediate, irreversible, and usually the lowest of the four numbers.
- A reduced paid-up election – cut the face amount to what existing cash value will support with no further premiums, which can bring aggregate face value down toward the threshold while keeping some death benefit.
- A life settlement – a regulated sale of the policy to a licensed institutional buyer, frequently for a multiple of cash surrender value. Colorado licenses viatical and life settlement providers and brokers through the Colorado Division of Insurance; verify a licence before signing.
- Assignment into an irrevocable funeral arrangement – the policy stops being countable and starts funding a cost the family will otherwise pay.
Compare the first two on surrendering versus selling a policy, and see how life insurance counts as a Medicaid asset for treatment by policy type. Pine Lake Life Solutions does not purchase policies; we provide a free policy review that puts all four numbers side by side. Tax treatment is on life settlement taxes in Colorado.
And the corrective to the opposite myth – that selling is always better: it frequently is not. Selling is the wrong answer where the face amount is small and already inside the threshold; where the policy is already assigned to an irrevocable funeral arrangement; where the insured is in good health, because settlement pricing rests on life expectancy underwriting and healthy insureds draw weak offers or none; where a surviving spouse depends on the death benefit; and where the policy sits in an irrevocable trust or carries a loan or collateral assignment that cannot be cleared. Term insurance with no cash value and no conversion right generally has nothing to monetise, which matters here because Servicemembers’ Group Life Insurance and its veteran successor are term products.
Myth eight: “Military retirees don’t need to worry about this”
El Paso County has one of the largest concentrations of military retirees in the United States – Fort Carson, Peterson and Schriever Space Force Bases, the Air Force Academy and decades of people who chose to stay. So this myth circulates widely here, and it is wrong in a specific way: military and veteran benefits are real and generous and they do not generally cover long-term custodial care.
What is true: TRICARE For Life coordinates with Medicare and is excellent health coverage. VA health care may include limited nursing home and community living centre care for eligible veterans, particularly those with service-connected conditions. Colorado operates State Veterans Community Living Centers, which are a genuine and often overlooked option. And VA Aid and Attendance can add a monthly benefit for a veteran or surviving spouse who needs help with daily activities – it uses its own asset and income test, which does not match Medicaid’s, so a household can qualify for one and not the other. See the VA Aid and Attendance asset test.
What is false: that any of this replaces Medicaid for extended custodial nursing home care for most retirees. It supplements, and for a family with a service history it should be checked first, before a dollar is spent down – but it rarely removes the eventual Medicaid question.
One more local wrinkle. A Survivor Benefit Plan annuity paid to a widow is her income, not the applicant’s, and needs documenting as such. And a household with military retired pay, Social Security, an SBP annuity and VA compensation will almost certainly be over Colorado’s income cap, which puts myth six back on the table.
What is actually true: the numbers and the phone calls
Cost-of-care figures for Colorado Springs and El Paso County, as of 2026 and given as ranges because published surveys of the Genworth type disagree by several hundred dollars a month: skilled nursing, semi-private, roughly $9,500-$11,000 per month; private room roughly $11,000-$12,500; all-in with ancillaries – pharmacy, therapy after Medicare Part A ends, supplies, equipment, separately billing physicians, transport, bed hold days – add 8-15 percent. Assisted living roughly $4,800-$5,800 per month, memory care commonly $1,200-$2,000 above that.
Against Colorado medians of roughly $10,000-$11,000 for semi-private skilled nursing and roughly $5,200-$5,900 for assisted living, Colorado Springs sits at or modestly below the state figures – Denver and Boulder pull the statewide numbers up. Typical Colorado Springs single-family home values run in roughly the $440,000-$505,000 range as of 2026, having risen sharply since 2020 and still well below the Front Range’s northern metros, and El Paso County’s population aged 65 and over is growing quickly as military retirees age in place.
Then the calls, in order: the Pikes Peak Area Agency on Aging for options counselling; Colorado’s State Health Insurance Assistance Program at the Division of Insurance for free unbiased insurance help; a Case Management Agency serving El Paso County to start the functional assessment, which runs on its own track; the VA if there is any service history, before spending down; a Colorado elder law attorney before any deed change, trust, annuity or transfer; the El Paso County Department of Human Services or Colorado PEAK for the application itself; and a free policy review on every in-force policy, with a carrier in-force illustration in hand, before anyone surrenders anything.
Frequently Asked Questions
Where does a Colorado Springs family apply for long-term care Medicaid?
At the El Paso County Department of Human Services in Colorado Springs, or online through Colorado PEAK. The programme is Health First Colorado, administered by the Department of Health Care Policy and Financing. Functional eligibility is assessed separately by a Case Management Agency serving El Paso County, following Colorado’s 2024 consolidation of its former Single Entry Point case management structure.
Do we have to sell the house to qualify?
Generally no. The primary residence is usually excluded while the applicant intends to return home or a spouse or dependent relative lives there, subject to a federal home equity cap that is not a practical constraint in El Paso County. Estate recovery after death is a separate question, and Colorado may record a lien in some circumstances. Discuss the deed with an attorney before acting.
Does Medicare pay for a nursing home?
Only for a limited skilled nursing stay after a qualifying hospital admission, up to 100 days per benefit period with substantial daily coinsurance after an initial span, and only while skilled care is required. It is rehabilitation coverage, not long-term care coverage. When it ends the resident usually stays and the bill converts to private pay, which is when most families first look at Medicaid.
Dad’s military retired pay puts him over the income limit. Is he disqualified?
Not necessarily. Colorado is an income-cap state, so gross income above the cap disqualifies outright rather than creating a share of cost, but an income trust, commonly called a Miller trust, receives the excess each month. It needs its own bank account, must be funded every month, and generally cannot be applied to months before it existed, so establish it promptly.
Is surrendering the life insurance policy the only way to deal with it?
No, and it is usually the worst of four options. You can surrender for cash value, elect reduced paid-up to cut the face amount with no further premiums, sell the policy through a regulated life settlement to a licensed institutional buyer for potentially several times surrender value, or assign it into an irrevocable funeral arrangement. Get the policy valued before doing anything irreversible.
How much does nursing home care cost in Colorado Springs in 2026?
Roughly $9,500 to $11,000 per month for a semi-private skilled nursing room as of 2026, and $11,000 to $12,500 for a private room, with all-in cost 8 to 15 percent higher once ancillaries are counted. Assisted living runs about $4,800 to $5,800. These are survey ranges sitting at or modestly below Colorado medians, which Denver and Boulder inflate.
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Related Reading
- Nursing Home Costs Colorado Springs Co
- Life Settlements Colorado Springs Co
- Colorado Medicaid Asset Income Limits
- Life Settlement Taxes Colorado
- Nursing Home Medicaid Spend Down
- Life Insurance Counts Medicaid Asset
- Veterans Aid Attendance Asset Test
- Surrender Vs Sell Policy
Pine Lake Life Solutions does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.