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Liability for spouse's nursing home care: What is spousal refusal?

September 04, 2012 | 12:39 PM
When an ill spouse applies for Medicaid reimbursement for nursing home care, the community spouse (spouse not in need of nursing home care) is entitled to keep assets of $113,640 and income of $2,849 per month. The resource limit is referred to as the community spouse resource allowance or CSRA. The income limit is called the minimum monthly maintenance needs allowance or MMMNA.

Often times, the community spouse has assets or income in excess of these limits. In that event, the community spouse can sign a "spousal refusal." The spousal refusal is a statement signed by the community spouse in which they essentially refuse to pay for the medical expenses of the institutionalized spouse. If the spousal refusal is filed timely, then the Medicaid agency will determine eligibility for the institutionalized spouse without considering the assets or income of the community spouse.

Even though the spousal refusal requires the Medicaid agency to disregard the community spouse's assets, the spouse cannot legally refuse to supply his or her financial information. The community spouse's failure to supply that information will result in a denial of Medicaid for the institutional spouse. However, there is one exception that applies — where the spouses were living separate and apart prior to the spouse being institutionalized, the separated spouse is not required to provide financial information or sign a spousal refusal.

Notwithstanding the spousal refusal, the community spouse is not completely relieved of any liability for the institutionalized spouse's care. Spousal liability exists in any case where the spouse has income or assets in excess of the Medicaid limits mentioned above. As the budget problems continue throughout the state, it has become more and more likely that the local Medicaid agencies will pursue collections against refusing spouses. Many agencies are creating special units devoted to recovery efforts against spouses.

This current trend makes it imperative that community spouses with assets or income in excess of the Medicaid limits continue their own planning after Medicaid has been approved for their spouse. The general rule is that if a Medicaid applicant or his spouse makes gifts during the five-year period before the applicant applies for nursing home Medicaid, there will be a period of ineligibility as a result of the transfer. However, one month after the Medicaid application is approved for the institutionalized spouse, the community spouse may transfer assets and complete his or her own planning. Any transfers made post eligibility will not affect the institutionalized spouse's Medicaid, but will be relevant to the community spouse's eligibility.

The local Medicaid agency can begin a recovery action against the community spouse for any amount of care paid on behalf of the institutionalized spouse. As a result, the action is usually commenced years later when the potential recovery will be much greater. This requires the community spouse to start their own planning as soon as possible.

For example, suppose a husband is in a nursing home and applies for Medicaid. His wife is in the community. The wife owns the home, which is an exempt resource (i.e., not counted) under the Medicaid rules. The home is valued at $175,000. The wife also has $175,000 in an annuity, a $100,000 CD and $13,000 in a savings account. Since she signed a spousal refusal, the Medicaid agency must ignore her assets when determining her husband's Medicaid eligibility. However, since she has approximately $175,000 in excess of the CSRA, the agency can sue her to contribute that excess amount for her husband's care.

In the above example, if the clients had placed their home in an irrevocable trust five years earlier, once the husband was applying for Medicaid, they could have taken the house out of the trust and put the excess liquid assets ($175,000 annuity) into the trust, without starting a five-year look back. The house and other assets would be under the CSRA and the annuity in the trust would be protected. There would be no need for spousal refusal and certainly no recovery action against the spouse.

Planning to reduce the community spouse's liability is an increasingly important issue as Medicaid agencies become more aggressive in their collection efforts. By the same token, planning early is equally important as illustrated.

Nancy Burner, Esq. has practiced elder law and estate planning for 15 years. The opinions of columnists are their own. They do not speak for the paper.

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