CO-178 denial code
Patient has not met the required spend down requirements
How to fix it
Check spend down status; once met, the claim often becomes payable on resubmission.
How to prevent it
Check spend down at each visit for affected Medicaid patients. It changes monthly.
In practice
A Medicaid patient with a spend down obligation of $600 per month is seen on the fourth. They have incurred $180 in medical expense so far, and the claim returns CO-178.
Spend down works like a monthly deductible calculated against income. Until the patient accumulates enough medical expense to reach the threshold, the state is not liable, and coverage sits dormant despite active enrolment.
Hold rather than write off. As later claims in the same month push the patient past $600, this claim frequently becomes payable on resubmission, and a claim written off in week one is money the practice gave away in week three.
What sits behind it
The mechanics reward speed and accuracy in submission. Expenses count toward the threshold in the order they are incurred and reported, so a practice that submits promptly establishes its position in the sequence while one that batches monthly may find the threshold met by others.
Which expenses count varies by state and includes bills the patient has incurred but not paid, in most programs. That means a patient can meet spend down without any money changing hands, which surprises both patients and billing staff.
Because the amount recalculates monthly against income, the threshold is not stable. A patient meeting spend down in one month starts again in the next, which makes this a recurring check rather than a one-time verification.
Related codes
Terms used here — Eligibility Verification · Patient Responsibility · Denial
How we handle it — Eligibility Verification · AR Management · Patient Support
Primary sources
The rules behind CO-178, at the bodies that publish them.
- Medicare Secondary Payer Manual (opens in a new tab)
Centers for Medicare & Medicaid Services — When Medicare pays second, and to whom the claim goes first. Coordination-of-benefits denials are resolved here rather than with the patient.
- Medicare Coverage Database (LCD/NCD) (opens in a new tab)
Centers for Medicare & Medicaid Services — Searchable national and local coverage determinations. The direct answer to whether a diagnosis supports medical necessity for a given procedure.
- Claim Adjustment Reason Codes (CARC) (opens in a new tab)
X12 — The authoritative, maintained CARC list. Our denial code lookup explains these in plain English; X12 is where the canonical definitions live.
Looking for a different code? Search all 190 CARC and RARC codes
Questions about CO-178
No, it should be held. Later claims in the same month often push the patient past the threshold, at which point earlier denials become payable on resubmission. Writing off in the first week gives away money the account frequently recovers by month end.
In most state programs, yes — expenses count as incurred rather than as paid, so a patient can satisfy spend down without any money changing hands. The specifics vary by state, which is worth confirming for the programs you see most.
Monthly, recalculated against income. A patient who met the threshold last month starts again this month, so this is a per-visit check rather than something verified once and carried forward.
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