The Special Rights of the Community Spouse Under Medicaid
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• Congress considered and rejected the proposition that our elders should be bankrupted by the cost of long term care.
• Congress gave the community spouse of the Medicaid nursing home patient special rights to preserve their money and property. A needy spouse may retain ALL savings and income.
• As with the income tax, the spouse must hire a professional advisor to secure all credits, deductions and exemptions that Medicaid allows.
Protection For Income and Assets
Congressional Protection
The Medicare Catastrophic Coverage Act of 1988 was enacted to protect the life savings and prevent complete financial ruin of families from catastrophic illness. Congress considered and rejected the proposition that our elders should be bankrupted by the cost of long term care. Congress gave the community spouse of the Medicaid nursing home patient special rights to preserve their money and property.
Common Mistake
A common perception is that the only way to protect savings from the high cost of nursing home bills is to give it away. People hear “I can give away $10,000 per year” and are informed that they should “give it all away so the government or the nursing home won’t get it.” This can cause serious Medicaid problems. Couples have no exemption from the “divestment” rules.
Divestment is beyond the scope of this article. We will briefly observe that President Bush signed into law significant changes to the Medicaid program on February 8, 2006. This law changes the divestment look-back from 3 years to 5 years. In addition the “penalty period,” during which time Medicaid will not pay the bills, begins only after the resident applies and is “otherwise eligible.” That means after spend down, when the money is gone, the application for Medicaid has been submitted and the nursing home has not been paid.
Medicaid Community Spouses have special rights and do not need to “give it all away.”
The Medicaid Community Spouse’s Special Rights to Asset Protection
The single person applying for Medicaid may have no more than $2,000, yet if he has a community spouse she may have up to $101,640. This amount is called the “Community Spouse Resource Allowance” (CSRA). While the CSRA is the foundation of the spousal protection, it is not the entirety. There is more. What special allowances does the community spouse have?
Congress provided that the Medicaid community spouse may provide for her future with the current assets. The spouse may take this protective action even after the nursing home entry. In fact, it is better to take the action after that date. In other words there is no “three year” look-back problem. That means spouses may freely and without penalty transfer assets between themselves. If the husband is in the nursing home the wife may transfer all bank accounts to her name alone. There will be no penalty. However, that will not effect eligibility. The community spouse must take the protective action. The Medicaid office will not tell her or do it for her.
Purchase a New Home
The community spouse may sell her home and purchase a newer more suitable and expensive home. The Medicaid applicant may not purchase a home and have it be exempt.
Court Order
The Michigan Medicaid community spouse may hire a lawyer and petition the probate court for an order awarding her a greater share of assets than the CSRA. The court process is written into the federal Medicaid law and therefore must be undertaken only when there is a Medicaid application. The Order must be presented to the Medicaid Department and the department may appeal the Order.
Annuity
The spouse could take the “excess” assets subject to spend down and purchase an annuity. She must cash in her investments, call her bank CDs and use the cash to buy the annuity. The annuity would be “immediate” and “irrevocable.” It would pay her a monthly income for a period of no longer than her life expectancy according to Medicaid tables. The down side to the annuity is that such payments will lessen her income support available from her spouse. See the Income section below.
Spousal Annuity Trust
In Michigan the Medicaid Community spouse could hire an elder law attorney , who knows the Medicaid rules, and have the attorney complete an “asset protection” trust specially drafted to comply with the Medicaid rules. The trust must provide that the spouse is the only beneficiary during her lifetime. She may choose who gets the funds should she die prematurely. The spend down amount may be transferred to the trust. Thereafter, those assets will be considered future income to the spouse. The trust must be presented to the Medicaid department with the application. It will be reviewed by the Medicaid legal bureau.
The special rights of spouses do not end with protection of assets. They also protect income.
The Spouse’s Special Rights to Income Protection
The income rules of Medicaid are in a way, the opposite of the asset rules. All the couple’s countable assets, including for example the community spouse’s IRA, are considered available to pay the nursing home. However, the spouse’s income is not.
The income of most spouses is not sufficient for their needs. This was addressed by Congress in the Medicare Catastrophic Coverage Act of 1988. The spouse has the right to a Minimum Monthly Maintenance Needs Allowance (MMMNA). In the Michigan Medicaid program this allowance is known as the Community Spouse Income Allowance (CSIA). It is calculated by the Medicaid department to allow the community spouse an income of $1,719 minimum to $2,550 maximum per month. It takes a hearing or a court order for anything more.
What if the community spouse does not have at least $1,719 in income? She is allowed to receive a supplement from the income of the nursing home spouse to reach the CSIA (i.e., up to at least $1,719). The nursing home spouse's remaining income goes to the nursing home. To illustrate, assume the at-home spouse receives $519 per month in Social Security. Also assume that her needs are calculated to be the minimum of $1,719. She is $1,200 short each month:
$1,719 at-home spouse's monthly needs (the minimum allowance)
($519.00) at-home spouse's pension and Social Security
$1,200.00 Short fall
In this case, the community spouse will receive $1,200 (the shortfall amount) per month from the nursing home spouse's income. Any remaining income, over the $60 personal needs allowance and funds to pay his health insurance premium, will go to the nursing home. He or his representative, must sign an “Intent to Contribute Income” for this allowance to be effective.
The Medicaid department will allow the community spouse an increase above the minimum - if there is sufficient resident income - by consideration of whether she needs an “excess shelter allowance.” Most spouses receive this allowance.
Increasing the Community Spouse Income Allowance
Court Order
What if the patient’s income is very substantial? A spouse can hire a lawyer and go to the probate court for an order that additional income be allowed to her. In fact, if the spouse can show need she may have the court order all of the income to her.
Annuity
The community spouse may purchase an annuity described above. She could take the “excess” assets subject to spend down and purchase an annuity to provide additional monthly income. The annuity may cause more of the patient’s income to go to the nursing home. Again, a court order could solve this problem.
Conclusion
The above shows that couples have very little reason to divest assets in contemplation of a long term stay in a nursing home. In fact the opposite is true. They may use their life-savings to avoid the nursing home by such means as compensation for caregivers, adult day program services, and residential assisted living facilities. When the nursing home becomes necessary the Medicaid community spouse's special rights will help him or her protect whatever they have.
These special rights do not guarantee spousal independence. As we have observed the rights are not self operating. In addition, a couple may not have enough income or savings for their needs. However, the special rights do offer couples the option of rational planning that will best use the resources that they have.
A couple must seek professional advice to avail themselves to all the protections Congress granted. With the advice of an elder law attorney a couple can have dignity and independence and not financial ruin.
