Protecting Your Assets When Your Spouse Goes on Medicaid

How Federal Guideline Prevent Spousal Impoverishment

Senior couple at home
Jovana Milanko/Stocksy United

As if it is not hard enough to watch your spouse grow ill, to see your spouse lose the ability to function independently, or to have your spouse move away from you, you also have to think about whether doing what's right for your husband or wife, i.e., putting them in a nursing home, will financially ruin you. 

Most seniors cannot afford nursing home care, not on their own. The average monthly cost for a shared room is $6,692 per month or $80,304 per year.

For a private room, it is even higher at $7,604 per month. That's a whopping $91,248 per year!

Since Medicare does not cover long-term nursing home care and few people can afford long-term care insurance, that leaves many Americans to turn to Medicaid. Eligibility for Medicaid, at least when it comes to nursing facility care or long-term home care, is based on your assets as a couple.

This is where Medicaid planning becomes essential. How can you have few enough assets for your spouse to qualify but still have enough resources for you to live in the community?

What It Means to Be the "Community Spouse"

When it comes to nursing home care, Medicaid looks at your assets, i.e., what you own, and income, i.e., what you earn, differently. Simply put, they look at your assets together as a couple but they look at your income separately as individuals.

Before legislation came to pass in 1988, the spouse who continued to live in the community took a financial hit.

In order to reach Medicaid eligibility, married couples would have to spend down their assets, often times wiping out their lifetime savings. This led to the community spouse being left with little resources to make ends meet.

There are now protections in place for the community spouse to protect against spousal impoverishment.

While each state establishes its own standards and limits, the federal government sets guidelines for these Medicaid protections. These will be outlined below. Please refer to your state Medicaid program for specifics relating to your state.

You must also keep in mind that the current GOP administration is looking to reform the Medicaid program. Would proposed changes affect these spousal protections or even eliminate them altogether?

Protecting Your Assets

Cash, 401Ks, 403Bs, annuities (cash value before they have been annuitized), brokerage accounts, bonds, certificates of deposit, checking accounts, insurance policies (cash value exceeding $1,500), investments, IRAs, Keogh plans, money market accounts, mutual funds, non-exempt real estate (more below), non-exempt vehicles, promissory notes, savings accounts, and stocks—all of these assets count towards your Medicaid eligibility.

In fact, most things you can convert into immediate cash count as assets. Even refundable deposits, like pre-paid rent and pre-paid utilities, may be included.

In 2017, your assets need to be equal to or less than $2,000 in order to qualify for long-term care through Medicaid.

Thankfully, the community spouse is allowed to hold onto more assets than that.

In fact, they can keep half the amount of available resources up to the amount set by their state's Community Spouse Resource Allowance (CSRA). This amount is calculated on the "snapshot" date, the date the impaired spouse is either hospitalized or initiates long-term care for at least 30 days.

Example 1: If a couple has $100,000 in qualifying assets on the "snapshot" date, the spouse going into long-term care is eligible when his/her assets are reduced to $2,000 and the community spouse to $50,000 (one-half of $100,000).

The actual CSRA is determined by each state, but the federal government sets the lower and upper limits every year, adjusting for inflation.

In 2017, the CSRA federal minimum is $24,180 and the federal maximum $120,900.

In the example above, if their state used the minimum CSRA, the community spouse would not be able to keep the full $50,000 amount. They would need to spend down their assets to $24,180. However, if they lived in a state that offered the maximum CSRA, they could keep the full $50,000 amount in assets, but no more.

Protecting Your Income

Income that counts towards Medicaid eligibility includes annuities, pensions, rental income, wages, and Social Security benefits. Unlike your assets, however, your personal income does not affect your spouse's eligibility and you will not be required to contribute your income towards their Medicaid expenses.

That does not mean your income does not come into play. After all, you may have been dependent on your spouse's income for day-to-day living. Once your spouse is on Medicaid and receiving long-term care, all of their income—minus a personal needs allowance at a $30 minimum (barely enough for clothes, a meal out, or to purchase a birthday gift) and the cost of any medical expenses they incur — is expected to go directly to the nursing home. Where does that leave you or family members dependent on that income?

The Minimum Monthly Maintenance Needs Allowance (MMMNA) is the minimum income your state determines is acceptable to meet a standard of living for the community spouse. Unfortunately, the allowance is founded on federal poverty levels and may not always be adequate to meet the needs of aging spouses.

If you earn less than the MMMNA, you are entitled to part of your spouse's income to reach that critical amount.

Example 2: A married couple has a joint income of $3,000 per month, $2,000 from the institutionalized spouse and $1,000 from the community spouse. With a state-set MMMNA of $2,200, Medicaid must allow $1,200 of the institutionalized spouse's income be allocated to the community spouse ($2,200 minus $1,000). This leaves the institutionalized spouse to pay the nursing home $770 per month ($2,000 minus $1,200 minus a $30 personal needs allowance).

For 2017, the MMMNA is set at $2,030 in all states except for Alaska and Hawaii where it is set at $2,536.25 and $2,333.75 respectively. The maximum is set at $3,022.50. Your state may choose to use any value in between.

Protecting Your Home

Medicaid does not include your home as part of your assets, at least not always. Instead, they use home equity limits to determine your eligibility.

A primary residence up to $560,000 equity is excluded from your countable assets. Some states raise that equity limit to $840,000. The catch is that the institutionalized spouse intends to return to the home in the future. Depending on the state you live in, the Medicaid program could put the burden of proof on you to show the actual likelihood that you will return home. If those qualifications are not met, they could put a lien on your home while you are in the nursing home. A lien, however, cannot be placed if a community spouse, a child younger than 21 years old, a blind or disabled child, or a sibling who has equity in the home lives there.

The equity limits are based on fair market value minus how much you own on the mortgage. If you share ownership of the property, your equity is half that amount.

Example 3: If you yourself own a home with a fair market value of $600,000 in a state with a $560,000 equity limit, then $40,000 will count towards your assets. If you owed $100,000 on your mortgage, your equity would be reduced to $500,000, and your home would not be counted towards your Medicaid eligibility.

Example 4: If you share ownership of a home with a fair market value of $600,000 in a state with a $560,000 equity limit, your home equity is actually $300,000, half the fair market value. Your home would not be counted towards your Medicaid eligibility since your share falls under the home equity limit.

As with most legislation, there are exceptions to the rule. If a community spouse or a child of the institutionalized spouse—specifically a child who is younger than 21 years old, who is blind, or who otherwise has a long-term disability—lives in the home, there are no home equity limits to consider. The residence is not counted towards your eligibility regardless of its value.

With the escalating costs of nursing home costs, it is no surprise that Medicaid seeks to recuperate costs through its Medicaid Estate Recovery Program. In the case that the institutionalized spouse passes away, Medicaid reserves the right to seek recovery of payments through their estate, but again, there are protections in place. States are not allowed to recover from the estates of beneficiaries when they are survived by a community spouse, a child under age 21, or a child with blindness or a long-standing disability.

A Word From Verywell

There is more to placing your spouse in a nursing home than applying for Medicaid. After all, your assets, not just those of your spouse, determine whether or not they are eligible. If you are dependent on your spouse's income, where does that leave you? Your financial future could be at stake. It is in your best interest to speak with a legal professional who specializes in Medicaid in your state and determine how to most effectively protect your assets.

Sources:

1396r–5. Treatment of Income and Resources for Certain Institutionalized Spouses. Government Publishing Office. https://www.gpo.gov/fdsys/pkg/USCODE-2010-title42/pdf/USCODE-2010-title42-chap7-subchapXIX-sec1396r-5.pdf. Published February 8, 1988.

2017 SSI and Spousal Impoverishment Standards. Medicaid.gov. https://www.medicaid.gov/medicaid/eligibility/downloads/spousal-impoverishment/2017-ssi-and-spousal-impoverishment-standards.pdf. Updated January 1, 2017.

Nursing Home Costs by State. SkilledNursingFacilities.org website. https://www.skillednursingfacilities.org/resources/nursing-home-costs/.

Spousal Impoverishment. Medicaid.gov. https://www.medicaid.gov/medicaid/eligibility/spousal-impoverishment/index.html.

Spouses of Medicaid Long-Term Care Recipients. Office of the Assistant Secretary for Planning and Evaluation; U.S. Department of Health and Human Services. https://aspe.hhs.gov/basic-report/spouses-medicaid-long-term-care-recipients.

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