Medicaid Eligibility and Spousal Refusal

This article is not intended to provide you with legal advice. Should you seek legal advice, please consult an attorney. KTS would gladly recommend an attorney should you need one. It’s important to have an attorney take appropriate actions on your behalf and to avoid issues that may be discussed in this article.

One of the best ways to gain peace of mind as you grow old is to be prepared to weather the financial and health challenges during those twilight years. But not everyone has the luxury of having enough resources put away to maintain quality of life, especially when home and community based health care may be needed. 

Medicaid may be the answer but eligibility for benefits may be denied or restricted due to excess income that exceeds the limit. Excess income is more likely to occur when both your and your spouse’s income are taken into consideration. Here’s what to know about Medicaid eligibility and how a Spousal Refusal works to help you when excess income and resources are problematic.

How Medicaid helps the elderly.

Millions of Americans depend on Medicaid for their health care coverage, a joint Federal and State program offered at low cost or free. Medicaid provides health and long-term care coverage for low-income individuals including disabled and elderly persons who need community or home care. It may also cover to a greater extent than Medicare, things like durable medical equipment, medicines, immunizations, therapy, mental health care services, lab tests/x-rays, and eye and dental health services. 

Qualifying for Medicaid

Not to be confused with Medicare, the Medicaid program is not available to everyone. The program is available to low-income individuals, disabled people, elderly adults, children, and those receiving Supplemental Security Income (SSI). In addition, an applicant must be one of the following: a U.S. citizen, national, permanent U.S. resident, or legal alien. 

Qualifying for Medicaid eligibility also takes into consideration an applicant’s income and resources as the program is designed to provide healthcare coverage to individuals and families whose resources and income are within certain limits. The maximum income and asset limits are generally updated every year on the first of January and can vary by state.

Since Medicaid is a program for those with very limited income, many people are not eligible. For example, a married couple may have too much monthly income and/or combined resources. However, there are strategies to help people qualify if their income levels are above the limits required to help them become eligible for Medicaid benefits.

What is Spousal Refusal?

Spousal Refusal, a federal Medicaid law, is one way to help married couples seeking Medicaid eligibility. It allows for the protection of a partner from becoming poverty stricken due to income limits imposed by the program when their partner receives Medicaid. Just as it sounds, Spousal Refusal allows the spouse to refuse that their individual income be considered when evaluating the required limits needed to qualify for Medicaid long-term care benefits. 

In other words, if one spouse, often known as the institutionalized spouse, needs long-term home care, the other spouse living in the community, often called the community spouse, will not be required to spend down his or her income to pay for their spouse’s care and become impoverished as a result. 

How does a spousal refusal affect Medicaid eligibility?

Medicaid establishes certain income limits to qualify for benefits. Although a federal Medicaid law, only three states, New York, Florida, and Ohio currently allow spouse refusal. This legal strategy is designed to stay within the required eligibility limits by not including the non-applicant’s income in the calculations and not paying for their applicant spouse’s medical bills. 

Fortunately, in New York, if a Medicaid applicant needs nursing home or community homecare services and his or her spouse is residing within the community, spousal refusal allows certain exemptions, particularly when the spouse relies on their joint income to pay the bills.

Steps to use the spousal refusal strategy:

Refusing to pay an ill spouse’s bills requires more than just saying “no.” There are a few steps needed to implement this Medicaid eligibility strategy. Here’s a list to consider:

1. Check to be sure your state allows this type of Medicaid planning strategy. Currently, only three states including New York allow this tool. 
2. Assets exceeding what Medicaid allows for eligibility will need to be transferred to the spouse who is not applying for Medicaid. Fortunately, such transfers of assets are done without imposing a penalty.
3. A written notice of Spousal Refusal must be signed and submitted to Medicaid by the non-applying spouse, so their income won’t be calculated in the payment of their spouse’s (Medicaid applicant) bills. It should include a statement that absolves him or her of financial responsibility relative to their ill spouse’s care.
4. The spouse who is seeking benefits must also complete and submit a Spousal Refusal form in addition to applying for Medicaid. Note: This form turns over responsibility for paying for the Medicare applicant’s care to the state who can then sue for payment from the non-applicant spouse to recover the costs.
5. It’s also recommended that you seek help from an elder law attorney specializing in elderly care law and Medicaid planning strategies to explore other options to help in Medicaid eligibility including a pooled trust, spend-down options, funeral trusts, and others.

About the author, Carlos Nath:

Carlos Nath is the Senior Trust Advisor with KTS Pooled Trust. As a seasoned professional with over four years of experience in the New York pooled trust space, Carlos has helped thousands to enroll and set up their accounts with KTS. He is proficient in understanding the Medicare process and provides assistance in clarifying what clients may need. Previously, Carlos worked with a Medicaid consulting firm as an advisor who helped clients who were seeking Medicaid assistance.