Medicaid Consulting: Spousal Impoverishment Myth

Article submitted by Michelle N. Urban, Medicaid Consultant.
For more information, she can be reached at 205-979-0341 or 205-960-1145 (cell), or by e-mail: murban@worldnet.att.net

During the course of my 20 plus years with the Alabama Medicaid Agency (the Agency) I heard many myths and misconceptions regarding Medicaid. One prominent myth is the Agency requires couples to impoverish themselves to be eligible for Medicaid. The Medicare Catastrophic Coverage Act (MCCA) of 1988 protects the income and resources for the maintenance needs of the community spouse while the spouse is in a medical institution or nursing facility. Spousal Impoverishment rules allow the community spouse (spouse remaining at home) to keep $25,000 or 1/2 the assets up to $95,100 (2005) whichever is greater. Note: $95,100 does not include the house where the community spouse resides and one vehicle. These items are excluded. In addition to the "protected amount" (up to $95,100), burial arrangements and other allowed spenddown might be used to reduce the assets of the couple. Allowed spenddown is payment of the nursing home bill, doctor and drug bills, clothing or furniture for the institutionalized spouse and possibly one half the value of items such as a new car or repairs on the existing home where the community spouse resides.

Additionally, the community spouse is allowed to keep a portion of the institutional spouse's income, if the community spouse's income does not exceed $1604. The community spouse's gross income is used to determine the amount he/she may keep.

When the couple has considerable assets, gifting/transfer of assets is an option. Give careful consideration to this option. Anything transferred by the community spouse affects the eligibility of the institutionalized spouse. If the stringent transfer rules are not followed, a penalty period (the number of months Medicaid refuses to pay the room and board charge at the nursing home) may result. Gifting/transfer of assets is best done under the supervision of a Medicaid consultant or Elder law professional.