FOR MARRIED COUPLES
WHEN ONE SPOUSE IS IN A NURSING HOME
Medicaid has rules and regulations for married couples that set forth the amount of income and resources the spouse of a Medicaid recipient in a nursing home can retain. These rules allow a well spouse, who has an ill spouse residing in a nursing home, to maintain income and resource levels that exceed standard Medicaid eligibility rules, but may require certain contributions towards the cost of the ill spouse’s care. The spouse who resides in the nursing home (let’s say it’s the husband) and is applying for Medicaid is referred to as the Institutional Spouse (“IS”), and the well spouse who remains at home (let’s say it’s the wife) is referred to as the Community Spouse (“CS”).
RESOURCES AND THE CSRA
The first step in Medicaid planning for married couples is to reduce the IS’s resources1 to less than the Medicaid eligibility limit.2 Since transfers between spouses are exempt, and therefore will not cause a period of ineligibility for Medicaid, it is typically advised that the IS transfer his assets to the CS.
Medicaid also regulates the Community Spouse Resource Allowance (“CSRA”), which is the amount of assets the CS is allowed before she is required to contribute towards the cost of the IS’s care. The CSRA is a minimum of $74,8203 in 2020.
Medicaid requires that bank statements for all accounts bearing either spouse’s name be included in the Medicaid application. If the CS has resources in excess of the CSRA, she may sign a “Spousal Refusal,” under which she declares that she will not make her income or assets available for the care of her spouse. In effect, when there is a Spousal Refusal, Medicaid considers only the IS’s resources when determining his Medicaid eligibility. Medicaid cannot be denied on the ground that the CS’s resources exceed the CSRA.
However, Medicaid reserves the right to demand reimbursement from the CS once services have been provided. Medicaid will take a snapshot of the CS’s assets in excess of the CSRA at the time the Medicaid application is submitted, and can ultimately seek reimbursement for expenditures up to that amount.
Since a transfer of assets outside of the marital unit will result in a period of Medicaid ineligibility for the IS, the CS is advised not to transfer any excess resources until the IS’s Medicaid application has been approved. Since it can take several months for the application to be approved once it is submitted, Medicaid will typically demand that the CS reimburse Medicaid for the IS’s care during the period that the application was pending. Though this may sound daunting, the upside is that the CS does not have to pay out of pocket at the private pay rate during this time, and the eventual reimbursement will be at the significantly discounted Medicaid rate, typically saving many thousands of dollars. Often we can negotiate with Medicaid to discount this amount even further.
Once the IS’s Medicaid application is approved, we recommend that the CS begin doing her own estate and long-term care planning, by transferring any assets in excess of the CSRA to an irrevocable trust. While the transfer to an irrevocable trust does not do away with the CS’s obligation to reimburse Medicaid, it puts her in a much better position to negotiate with Medicaid and proceed with protecting her assets for her own benefit down the line.
Typically, Medicaid will not demand reimbursement for any additional expenditures once a trust is made irrevocable, because it is a long-standing custom that the CS can do her own estate planning once the IS is approved for Medicaid, and any transfers by the IS are subject to Medicaid’s “look back” and penalty rules. However, under current law, Medicaid has the right to request reimbursement from the CS for expenditures made on the IS’s behalf up to the amount in excess of the CSRA at the time the original Medicaid application was submitted. We have consistently, and successfully, made the argument that assets held in an irrevocable trust should not be considered available for reimbursement.
INCOME AND THE MMMNA
Next, Medicaid will look at the combined monthly income of both spouses. Medicaid regulations allow the CS a Minimum Monthly Maintenance Needs Allowance (“MMMNA”), which is $3,216 of income per month in 2020.4
If the CS’s monthly income is less than the MMMNA, then the IS’s income can be given to the CS in order to bring her monthly income up to the MMMNA. Medicaid allows the IS to pay his medical insurance premiums and keep $50 per month as a personal needs allowance. The rest of the IS’s income must be paid to the nursing home.
If the CS’s monthly income exceeds the MMMNA, Medicaid will first allow her to pay her medical insurance premiums first, and then she will be required to contribute 25% of her income in excess of the MMMNA. Again, the IS’s income will go to the nursing home, less his supplemental health insurance premiums and $50 allowance.
The CS’s income contribution will need to be recalculated each year since the MMMNA is expected to increase and her monthly income may change.
These rules are complicated, to say the least. If your spouse or a loved one is entering a nursing home you should not hesitate to contact your Elder Law attorney. You may be able to protect more of your assets and income than you thought possible.