Part 6 of this Medicaid blog series discussed the traditional method for a married individual to qualify for long-term care Medicaid.
In some circumstances, a non-traditional method, called Spousal Refusal, can be implemented. Typically, the healthy spouse (known as the “community spouse”) can protect more assets with the Spousal Refusal method than with the traditional eligibility method.
Spousal refusal is a planning option that occurs when almost all the assets are titled in the community spouse’s name. This option works best when the assets are already owned by the community spouse rather than transferring all assets to the community spouse just before a Medicaid application is filed.
Under Ohio law, spouses have a duty to provide life necessities, including medical care, to the other spouse. To implement a Spousal Refusal, the community spouse will refuse to use his or her assets to pay for medical care for the institutionalized spouse (the spouse seeking Medicaid eligibility). By doing so, the State of Ohio steps into the spouse’s shoes to pay for medical assistance to the institutionalized spouse through the Medicaid program.
When spousal refusal is implemented, the county caseworker will evaluate the assets titled only in the institutionalized spouse’s name. The institutionalized spouse will be treated as a single individual for Medicaid purposes. So long as the institutionalized individual has less than $2,000 in countable resources, he or she can qualify for long-term care Medicaid.
The community spouse is not completely off the hook, however. Because the community spouse has an obligation to support the other spouse, the State of Ohio could make a claim against community spouse in the future for medical expenses paid on the institutionalized spouse’s behalf. Recovery by the State is limited by the spousal impoverishment laws. The State can only recover assets in excess of the community spouse’s CSRA (see Part 6).
Here’s an example of spousal refusal:
John and Sue are married. Sue had a stroke and is in the nursing home for the foreseeable future. John is concerned about protecting his assets from being spent on Sue’s nursing home care.
Because John and Sue are both in their second marriage, they have chosen to keep their assets mostly separate. Sue has a checking account with a value of $12,000, and John has other significant assets. He has a checking account with a value of $25,000, a money market account with a value of $150,000, and an IRA worth $500,000. They own their home jointly.
Sue’s checking account is spent down by purchasing an irrevocable prepaid funeral plan, which will be an exempt resource for Medicaid purposes. After this purchase, her checking account value is $1,700.
When Sue applies for Medicaid, John signs a statement refusing to share his assets with Sue for Medicaid purposes. As a result, only Sue’s assets are evaluated. Because her assets are less than the individual asset limit of $2,000, she is eligible for long-term care Medicaid and her nursing home cost will be covered by the Medicaid program. John gets to keep all $675,000 of his assets.
If John and Sue pursued traditional Medicaid eligibility, John’s CSRA would have been the maximum, $123,600. Sue would have been entitled to $2,000. Before Sue could qualify for Medicaid under the traditional eligibility rules, the couple would be required to spend down their assets to less than $125,600.
By implementing Spousal Refusal, John was able to protect a much greater amount of his assets.
If the State were to seek recovery against John after Sue’s death, John would be entitled to keep his CSRA, or $123,600. Any assets John owns in excess of $123,600 are subject to recovery by the State to the extent it paid medical expenses on Sue’s behalf.
Benefits to Spousal Refusal
The major benefit to Spousal Refusal is the community spouse’s ability to protect more of his or her assets from the costs of the institutionalized spouse’s long-term care.
In addition, even if the State of Ohio pursues the community spouse for the amount paid on the institutionalized spouse’s benefit, the total amount paid for the care will be less. Each in-home care provider or long-term care facility has a set Medicaid reimbursement rate. This rate is usually less than the private pay rate for the same care. As a result, any amount recovered by the State after the institutionalized spouse’s death will likely still be less than the couple would have paid out-of-pocket for the same care.
In addition, a Spousal Refusal Medicaid application may result in a quicker eligibility determination because only the institutionalized spouse’s assets are evaluated rather than the assets of both spouses.
Spousal refusal can occur when spouses are amicable and cooperate in the Medicaid application process. The community spouse may sign a voluntary statement that he or she refuses to share assets for Medicaid eligibility purposes.
Spousal refusal can also occur when spouses are estranged or separated and the community spouse ignores requests to provide information during the Medicaid process.
Many times, spouses think the best course of action for Medicaid eligibility is a divorce. Divorce is drastic and can be emotional for both spouses. Spousal Refusal may be another option for the couple.
As mentioned at the beginning of this post, Spousal Refusal works best when the situation occurs naturally. We do not advise transferring all assets to the healthy spouse and then applying for Medicaid. In addition, not all spouses stand to benefit from a Spousal Refusal situation. You should seek advice from an elder law attorney before transferring assets or qualifying for Medicaid.