The spousal refusal option is an important Medicaid planning strategy that allows the non-applicant spouse of a long-term care Medicaid applicant to preserve assets by refusing to make the assets available for use toward the cost of the spouse’s nursing home care. While spouses are legally obligated to financially support one another, the law also recognizes that there are many reasons that a community spouse would prefer not to spend their assets on care costs and allow them to keep those assets instead. The spousal refusal option accomplishes this by providing discretion to the Medicaid agency to honor or reject the request based on their own determination. This eliminates the need to engage in expensive litigation and allows elderly couples to retain dignity and avoid stressful court appearances.
Spousal refusal is particularly useful in cases where a couple’s assets are close to or above the Medicaid asset limit but the spouse who will require long-term care is otherwise eligible for Medicaid benefits. The average monthly rate of a private pay nursing home in New York is significantly higher than the Medicaid rate and will quickly deplete a significant amount of assets. Spousal refusal is an excellent option in these circumstances since the community spouse can protect their savings by simply refusing to make those assets available for care costs and still be able to obtain a qualified long-term care insurance policy on a pre-existing basis.
In addition to spousal refusal, there are several other strategies that can be used to help people who need long-term care and want to save some of their assets. These include paying down debt, purchasing funeral expenses in advance, setting up an irrevocable funeral trust, and transferring assets to family members. Some couples even choose to get a “Medicaid divorce” in order to save some of their assets.
Despite the fact that spousal refusal is not available in all states, New York State remains one of the most popular places to utilize this strategy for long-term care planning. However, it is important to consult with a qualified elder law attorney when considering any of these strategies in order to be certain that the application is filed properly and to determine if a spousal refusal might actually be a good choice.
In a year when New York Governor appointed a task force to cut $2.5 billion from the state’s budget, many advocates were concerned that the spousal refusal policy would be eliminated. Fortunately, the initial proposal was rejected and this Medicaid planning tool will remain in place for 2018. This is great news for middle-class families who are struggling with soaring healthcare costs. It will also prevent many couples from having to exhaust their savings and give away assets in order to qualify for long-term care benefits and will make it unnecessary for some couples to consider divorce just to protect their assets.
Over the years, many elderly couples have used spousal refusal to help protect their assets while the other spouse receives long-term care. New York state law allows one spouse to refuse to pay for the other’s nursing home care, instead redirecting the cost to Medicaid. This strategy has been so popular that it has created an entire area of elder law practice. However, it appears that the time may have come to make changes to the Medicaid law in New York that could impact this planning option for many people.
Overview of New York's Spousal Refusal
In general, when an elderly couple applies for Medicaid to pay for the spouse’s home care or nursing home care, their income and assets are subject to a ceiling. The amount of assets that can be kept by the “community spouse” (the spouse at home) is about $38,000 per year and $120,000 in total value. The other spouse, known as the “institutionalized spouse,” can keep only about $150,000 in assets or “resources.” This amount is reduced if both parties own a home that is not being used for long-term care.
For this reason, it is common for many couples to transfer their excess assets into the name of the non-applying spouse prior to applying for Medicaid benefits. This is allowed by New York state law and is not subject to the five-year look-back period. But the legality of this technique was called into question in a recent First Department case.
The issue in this case was that the community spouse had transferred her excess assets prior to filing for nursing home care. When the county Department of Social Services (“DSS”) found out that she had done so, they filed for recovery of the funds from her based on an implied contract theory. The court found in favor of DSS, but this case is important because it shows that there are legal issues with using this planning tool in certain situations.
The DSS case also highlights how county Medicaid agencies have become more aggressive in pursuing recovery against spousal refusal cases for home care. While spousal refusal still works for many cases, it is crucial to carefully counsel clients on the benefits and drawbacks of this planning method. Clients should also consider alternatives, such as long-term care insurance and Medicaid asset protection trusts, to ensure that they can plan for their own long-term care needs without the risk of losing their hard-earned assets. To learn more about the specifics of how spousal refusal works in New York, speak with a qualified elder law attorney.
Spousal refusal is a legal Medicaid planning strategy in which the spouse who is living at home (the “community spouse”) refuses to contribute any of their income or assets to help pay for their spouse’s long-term care costs. It allows the community spouse to remain well within Medicaid’s asset and income limits, without having to spend down their own savings or risk the cost of their spouse’s nursing home care.
The law allows the community spouse to do this because it recognizes that, while a spouse is legally obligated to financially support their spouse, the cost of long-term care can deplete a person’s entire estate. Prior to the passage of the Medicare Catastrophic Coverage Act of 1988 (“MCCA”), many well-to-do community spouses found themselves impoverished after paying for their ill spouse’s long-term care. The MCCA allowed states to budget couples on home and community-based services and prohibit them from spending all of their combined income and assets on long-term care.
However, even with this important change in the law, local Departments of Social Services still retain the right to sue the community spouse for reimbursement of funds expended on the ill spouse’s care. Fortunately, such lawsuits are rare and often settled for substantially less than what is owed.
Spousal Refusal is a very effective tool for those who wish to preserve their own assets and limit healthcare costs. However, it is crucial to understand the risks involved with spousal refusal and seek the guidance of an experienced New York Elder Law attorney.
Using this strategy can be complicated because, in order for the non-applicant spouse to qualify for Medicaid, they must sign a written statement that absolves them of their financial responsibility for their spouse’s long-term care expenses. It also must be submitted to the Medicaid office along with the MLTC application.
Once this has been done, and if the MLTC applicant is below the spend-down limit, the MLTC applicant should submit the eligibility code 06 when enrolling in MLTC. This will prevent the MLTC program from denying benefits because of the community spouse’s refusal to contribute to their spouse’s care. This can save thousands of dollars in uncovered expenses. To find out more about how to navigate the process of spousal refusal, contact our office today. We are equipped to provide tailored advice to your specific situation. We will discuss your options, including spousal refusal, to protect your assets and secure quality long-term care for you and your spouse.
Schlessel Law PLLC | Long Island Elder Law Attorney
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(516) 574-9630