For many married couples of advancing age, their greatest fear is that they may be forced to deplete virtually all of their assets if one or both requires long-term care. Given that the private pay rate for nursing home costs in the Hudson Valley averages over $12,000 per month, and 24-hour home care runs upwards of $250 per day, that fear is not unfounded.

 

In 2018, the spouse applying for Medicaid will be eligible if his or her non-exempt resources do not exceed $15,150. The spouse of the Medicaid applicant, the “well spouse” (also known as the “community spouse”), may retain their residence and other “non-exempt” resources in the maximum amount of $123,600 (the community spouse resource allowance [CSRA]).

Because there are no Medicaid penalties imposed for transferring assets from one spouse to another, rendering the ill spouse Medicaid-eligible is often as simple as putting nearly all of the couple’s assets in the community spouse’s name.

Besides the resource allowance, in 2018 the community spouse’s income allowance (the minimum monthly maintenance needs allowance [MMMNA]) is $3,090 per month. If the community spouse’s own income is below the MMMNA amount, a portion of the institutionalized spouse’s income will be “budgeted” to the community spouse so that he or she will be entitled to receive enough of the institutionalized spouse’s income to bring the community spouse’s total monthly income up to $3,090.

EXAMPLE: If the community spouse has monthly pension and Social Security income totaling $2,090 and her husband in the nursing home has monthly income of $2,000, then $1,000 of the husband’s income will be allocated to the wife to bring her total monthly income to $3,090.Approximately $950 of the husband’s remaining monthly income will pay for his care (the husband may use his income to pay his monthly Medicare and Medicaid premiums and retain $50 in a personal needs account). On the other hand, if the community spouse’s own income is over the MMMNA, he or she may not receive any portion of the institutionalized spouse’s monthly income, which will be payable towards the institutionalized spouse’s cost of care (less the $50 personal needs allowance and payments for the institutionalized spouse’s monthly Medicare and Medicaid premiums).

 

If the community spouse’s resources and/or income exceed the CSRA and MMMNA exemptions, in most states the community spouse would be required to “spend down” such excess amounts towards the cost of the other spouse’s care. Faced with such a scenario, some community spouses may decide that their best option is to divorce the ill spouse to preserve as much of the couples’ assets as possible. Under New York law, however, divorce should be rarely contemplated, since a community spouse may submit with their spouse’s Medicaid Application a “spousal refusal.”A spousal refusal provides that the community spouse refuses to make his or her income and/or resources available towards the cost of care for the ill spouse.  Upon filing a spousal refusal, the Department of Social Services (DSS) must consider only the resources and income of the applicant spouse in determining that spouse’s Medicaid eligibility, regardless of the community spouse’s net worth at the time the Medicaid application is filed.

However, submitting a spousal refusal doesn’t necessarily let the community spouse off the hook financially. In such a case, DSS retains the right to sue in New York Supreme or Family Court to seek support from the community spouse towards the cost of the other spouse’s care. Historically some counties have been more aggressive than others in seeking recovery against a refusing spouse, but even when recovery is sought, the community spouse’s obligation to reimburse the County is at the Medicaid rate, which is considerably less (often 40-50% less) than the private pay rate.

For community spouses with resources significantly above the CSRA level (often the case after the couple’s assets have been transferred solely to the name of the community spouse), one planning technique is for the community spouse to consider using a portion of their excess resources to purchase an immediate annuity. This effectively converts the excess resources into a stream of income.

EXAMPLE: Assume a community spouse with total excess resources of $300,000 uses those funds to purchase an immediate annuity that pays her $1,500 a year per life (the actual income stream will be determined by the community spouse’s age at the time the annuity is purchased and the prevailing interest rate). If the community spouse’s other income was $2,000 per month, the additional annuity income will bring her recurring income to $3,500 per month. Although that sum is over the MMMNA amount of $3,090, DSS will request a spousal contribution of only 25% of the community spouse’s income above the MMMNA level.

 

In the above example, the spousal contribution would be only $102.50 per month (or 25% of the difference between the community spouse’s monthly income of $3,500 and the $3,090 MMMNA amount). Although in using this technique the community spouse may forfeit the right to receive any of the ill spouse’s income, the community spouse would also remove any threat that they can be sued for having excess resources, which may be of paramount importance.

Used appropriately, spousal refusal can help a couple preserve a significant amount of their hard-earned assets. Consultation with an experienced elder law attorney is advised whenever long-term care needs arise.

Spousal Refusal: a planning technique where the community spouse refuses to make his or her income and/or resources available towards the cost of care for the ill spouse

2018 MEDICAID “BY THE NUMBERS”: Nursing Home Care

Institutional/Nursing Home Care	Applicant	Community Spouse*(or well spouse)
Resource Allowance	MAX: $15,150	MAX: $123,600 +  Residence (known as the community spouse resource allowance [CSRA])
Income Allowance(or the minimum monthly maintenance needs allowance [MMMNA])	$50	$3,090

*With a properly executed Spousal Refusal, a Community Spouse can typically retain assets in excess of these limits.

Source: NYS Department of Health; all figures effective January 1, 2018