The Medicaid program provides special eligibility rules where the applicant is married and requires care in a nursing home. In order to understand these rules, it is helpful to begin with an understanding of two traditions or principals that influence the availability of Medicaid nursing home benefits to married persons.
The first principal is that spouses are financially responsible for one another. The financial resources of the spouse who is not applying for Medicaid (the "well spouse" or the "community spouse") are viewed as available to the institutionalized spouse to help pay for his or her care before Medicaid will pay.
The second principal is that the first principal should not be carried too far. Holding the community spouse totally financially responsible for the institutionalized spouse would (and under older versions of Medicaid, did) lead to severe impoverishment of many community spouses. Concern about this phenomenon is acute in nursing home cases, where the cost of care can consume the couple’s entire life savings in a matter of months.
The Medicaid program attempts to prevent total impoverishment of community spouses, while continuing to hold them financially responsible for their institutionalized spouses. The result is a set of modest protections that avoids total (but not partial) impoverishment for community spouses.
The starting point in the treatment of assets for married couples is that all assets owned by either spouse are considered available to the institutionalized spouse for purposes of Medicaid eligibility. Some assets, such as a principal residence occupied by the community spouse, are not actually counted, based upon the same rules for Countable and Non-Countable Assets that are applied to unmarried applicants. But assets cannot be left out of the picture on grounds that they belong exclusively to the spouse who is not applying for Medicaid.
After adding together all countable marital assets, the state Medicaid agency then determines what share of those assets the community spouse will be allowed to keep while the other receives Medicaid nursing home benefits. This figure, which is based upon a combination of federal and state laws, is called the Community Spouse Resource Allowance, or CSRA.
The effect of the CSRA is to reduce the assets that are considered available to the institutionalized spouse:
Suppose a couple has a combined total of $50,000 of countable assets. If they live in a state that allows the community spouse to keep the first $50,000, all of the assets will be attributed to the community spouse. No assets, therefore, will be attributed to the institutionalized spouse. He or she immediately will qualify for Medicaid as an applicant having less than $2,000 in resources.
Not all states would allow the community spouse to keep the first $50,000 as a CSRA. The exact rules for attributing a couple’s assets vary from state to state, some being more generous than others.
There are, however, a federal minimum and maximum CSRA to which all states must adhere. The community spouse always keeps the first few thousand dollars. As of 1996 this amount was $15,348. Barring unusual circumstances (explained below), there is also a federal maximum. As of 1996 this amount was $76,740.
Between the minimum and the maximum figures, states can use a variety of methods to allocate assets. Some states allow the community spouse to keep all countable assets up to the federal maximum. Only assets above that amount are attributed to the institutionalized spouse.
Other states use more complicated formulas. Many states, for example, do not increase the community spouse’s share above the minimum amount until an equal amount has been attributed to the institutionalized spouse. If the couple has more than double the minimum CSRA, additional assets are divided equally between the spouses until the maximum CSRA has been attributed to the community spouse. All assets in excess of this total are attributed to the institutionalized spouse.
Assets attributed to the institutionalized spouse under any of the formulas used by the states must be spent on nursing home care before Medicaid will be approved. When all but $2,000 has been spent, the institutionalized spouse will qualify for Medicaid.
Assets that are not countable, such as the home, do not count toward the CSRA either. For example, if the couple in the example above also owns a home worth $80,000, the community spouse can keep the home in addition to the $50,000.
The state Medicaid agency must provide anyone who is institutionalized with an "assessment" of eligibility, if requested by the individual or spouse.
An assessment does two things. First, it makes sure that all assets are counted as of the date of admission to the nursing home, not the date of the Medicaid application.
The reason it is important to count all assets as of the date of admission to the nursing home is to be sure that the community spouse gets his or her full CSRA. The couple usually begins spending assets after the ill spouse is admitted to the nursing home. Couples with a modest amount of assets often pay privately for a while before considering Medicaid. Such delays would create problems if assets were assessed as of the date of the application instead of the date of admission to the nursing home.
For example, if a couple’s assets were assessed one year after admission, the amount would be thousands of dollars less than it was on the date of admission. The couple might already have spent part of the community spouse’s CSRA on the nursing home by that time. If that happened, it would be very difficult and administratively costly for them to get the money back.
In order to make sure that the CSRA is not spent before Medicaid is applied for, the state agency must look at the number of assets on the date of admission to the nursing home, not the amount that is left when the couple actually applies for Medicaid. For this reason, the assessment often is referred to as a "snapshot" of the couple’s assets on the date of admission to the nursing home.
The other purpose of the assessment is to tell the couple exactly what amount of assets the agency considers available to the institutionalized spouse to pay for care. These are considered "excess assets." Excess assets must be spent before the institutionalized spouse will become eligible for Medicaid.
If the couple does not request an assessment separately, the assessment will be done at the time they apply for Medicaid. Again, the purpose of doing the assessment as a separate procedure is twofold. First, It determines the number of assets as of the date of admission to the facility instead of the date of application for Medicaid. Second, it informs a couple of the number of excess assets (if any) that must be spent before the institutionalized spouse becomes eligible for Medicaid.
Once the couple can show that they have spent all excess assets, the individual should qualify for Medical. Income or new assets received by the community spouse after Medicaid is approved will not affect eligibility. If the institutionalized spouse receives new assets, however, eligibility will be affected. The assets may have to be spent, or the couple can request a revised (increased) CSRA, which is explained below.
The institutionalized spouse has 90 days after obtaining eligibility to transfer to the community spouse enough assets to satisfy her CSRA. These transfers incur no penalty.
Income is treated quite differently from assets for married couples. Unlike assets, the income of the community spouse is not considered available to the institutionalized spouse. As explained below, there are provisions for using income of the institutionalized spouse to support the community spouse, but not vice versa. The separate income of the community spouse always his or hers to keep.
As a general rule the income of the institutionalized spouse must go to the nursing home as a "patient paid amount", or "PPA." There are, however, a few exceptions, which are calculated as deductions from the PPA. A small amount per month may be set aside as a "personal needs allowance" ("PNA"). This amount ranges from $30 to $75 per month, depending upon what state you live in.
In addition, income may be given to the community spouse or to dependent children, if their separate income is not considered sufficient to meet their needs. In the case of dependent children, each child may receive an amount determined as one half of the Federal Poverty Level for a single adult. As of 1997 this amount is $441.66 per month.
The income deduction for the community spouse is more complicated, as explained below.
Medicaid establishes a minimum income standard for the community spouse, called the "minimum monthly maintenance needs allowance," or "MMMNA." This provision is set at one-and-one-half times the Federal Poverty Level for a single person living alone. As of 1997 it is $1,295 per month.
By requiring the MMMNA to be determined, and by using this as a minimum income level for the community spouse, Medicaid prevents impoverishment in cases where the community spouse’s separate income is less than the MMMNA:
Suppose, for example, that the husband has income of $1,500 per month and the wife has separate income of only $700 per month. Together they live on $2,200 per month. If he is institutionalized, and all of his income had to go to the nursing home in order for him to receive Medicaid, her income would drop to $700 per month, a loss of nearly 70% of their former income. The MMMNA prevents this by stating that she is allowed to have at least $1,295 per month — still a drastic loss, but significantly better than under previous Medicaid rules.
The amount of the MMMNA can be increased if the community spouse can show at a hearing that his or her shelter expenses are more than 30% of the minimum allowance. Thus, if the original home mortgage and current taxes cost $700 per month, and the minimum allowance is the 1997 figure of $1,295, the community spouse may be able to increase his or her MMMNA to $1,606.50:
Revised MMMNA = $1,295 + $700 - ( $1,295 x 30%)
...............................= $1,295 + $700 - $388.50
Finding funds to increase the income for the community spouse up to his or her MMMNA (or revised MMMNA) is somewhat complicated. There are two ways to go about providing the needed income: increase the CSRA, or let the community spouse use income of the institutionalized spouse instead of requiring it all to go to the nursing home.
Increasing the CSRA is called the "revised CSRA." Using income of the institutionalized spouse is called the "community spouse maintenance needs allowance," or "CSMIA." Both are provided for in the federal Medicaid statute, as explained below.
Upon learning the amount of the MMMNA, the couple may be allowed to increase the community spouse’s CSRA if his or her income is less than the MMMNA:
Suppose the couple has lifetime savings of $160,000 and the husband is institutionalized. As of 1997, the wife would be allowed to keep about $80,000, plus the $2,000 her husband is allowed to keep, for a total of $82,000. The remaining $78,000 would be excess assets that must be spent on nursing home care before the husband becomes eligible for Medicaid.
But suppose the wife’s MMMNA is $1,405.50, and she has separate income of only $1,080.50 per month. Her shortfall is $325 per month. If assets earn 5% annual interest, the wife would need all of the excess assets in order to make up the shortfall:
$78,000 x 5% = $3,900 ÷ 12 = $325/month
Depending upon local state rules, the community spouse may be able to retain excess assets as a revised CSRA, based upon calculations similar to the above formula. Each state uses its own interest rate, and some states now deny a revised CSRA if the institutionalized spouse has income that can be used to supplement the community spouse’s income. But the community spouse may be able to benefit from the revised CSRA procedure under appropriate circumstances.
A revised CSRA requires that one of the spouses request a "fair hearing," or appeal, when Medicaid is denied on the basis of excess assets. The federal Medicaid statute requires notice of the right to request such a hearing to be stated in the notice of denial of benefits. The notice also must explain the method used to calculate the CSRA and the right to request a hearing to review the amount of the MMMNA.
After the institutionalized spouse has been determined to be eligible for Medicaid, some or all of his or her income may be used to bring the community spouse’s income up to her MMMNA. This is called the community spouse maintenance needs allowance, or "CSMIA." Here is how it works:
In the example above, suppose there were no excess assets, but the husband has income of $1,500 per month. His PPA normally would be $1,440 per month ($1,500 minus his $60 PNA). But since the wife has a shortfall of $325 between her separate income and the amount of the MMMNA allowed for her, the husband can deduct $325 from his PPA and give this to the wife each month. His PPA, therefore, will be reduced to $1,115, and the wife will receive her full MMMNA of $1,405.50 each month.
The CSMIA does not require a fair hearing, but it cannot be determined until after the institutionalized spouse is found eligible for Medicaid.
A community spouse may be entitled to both a revised CSRA and a CSMIA:
In the example above, if the couple had only $100,000, and they lived in a state that allowed the wife the maximum CSRA, there would be only $18,000 in excess assets. If she was allowed a revised CSRA, this added income would provide only $75 per month (assuming the same 5% annual interest rate), leaving her with a continuing shortfall of $250 between her separate income and her MMMNA. The husband then would be entitled to deduct $250 per month from his PPA and to give her this income to make up the rest of her shortfall.
The above example works only if the revised CSRA is allowed before the husband’s income is used. If the husband’s income is used first, the entire shortfall in the wife’s MMMNA will be satisfied without allowing any additional assets to be retained by her. In that case, the couple would still have to spend the $18,000 in excess assets, even though the wife’s separate income was less than her MMMNA. This is known as the "income-first" rule, which has been adopted in some states.
The income-first rule saves money for the Medicaid program by requiring couples to spend more assets than they would if the revised CSRA were allowed first in cases where the community spouse has low income.
The drawback of the income-first rule is that some or all of the income of the institutionalized spouse may be lost when he or she dies. If the community spouse is forced to depend upon that income in order to avoid poverty, he or she will fall into poverty when the income is lost.
Unfortunately, the income-first rule does not allow the community spouse to go back and recover assets that were spent on the nursing home after the institutionalized spouse dies. Only by allowing the community spouse a revised CSRA before using income of the institutionalized spouse can those assets be preserved as permanent protection for the community spouse.
There has been a considerable amount of litigation over the income-first rule, with mixed results. Ohio found that the income-first rule violates the federal Medicaid statute. Massachusetts found that the federal statute allows the income-first rule, but the state legislature stopped the Medicaid agency in Massachusetts from using the income-first rule. This issue probably will remain unsettled, unless and until Congress clarifies the federal statute, or a case reaches the U.S. Supreme Court.
The most important concern for those couples with low incomes who need Medicaid nursing home benefits is to find out their local state rules and to learn their rights under both federal and local regulations. A lawyer knowledgeable in Medicaid issues may be indispensable in these circumstances, particularly in states where notices and other information provided by the state Medicaid agency may be inadequate or faulty.
To learn more about the rules in your state, check with your local agency. If you don’t have contact information for your state, find it at the State Medicaid Toll-Free Lines page of the Health Care Financing Administration website.