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Yes it does. I went to an Elder Law attourney with my Dad when Mom was ill and this was one of the ways she advised us to spend down.
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Yes - you want to spend it on anything they will need later on. If they are still living in their home, you can advance pay on the utilities, cable. Pay insurance for the next 12 months - they usually won't do it beyond that.

If they don't have a burial and funeral you want to get that too. It needs to be non-transferrable and without equity (so it cannot ever be converted into cash). Glasses, hearing aids, Hugo walkers are also good - as the good ones are never covered under Medicaid. Dental care too - you can get a gift card for this at some dental offices. Dental is expensive and not covered by Medicaid unless it's from a fall or accident. We did a preventative/flouride capping on my mom's teeth (it's a solution painted on the teeth, not cosmetic at all, it's usually used for kids before they get braces) and 3 prepaid annual visits and cleanings.

Remember ALL amounts spent over $ 500 might need to be verified and will need documentation like a cancelled check &/or receipt. So I'd avoid getting a big gift card from Target.
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