How to Protect Your Spouse in Medicaid Planning
Federal and Pennsylvania rules to shelter assets from nursing home costs
on October 8, 2020
Updated on January 26, 2023
Full-time nursing home care is prohibitively expensive for many elderly Pennsylvanians. Medicaid can help pay for long-term care costs—but as you probably know, there are strings attached. Medicaid is a means-based healthcare program, so benefit eligibility is directly tied to the applicant’s income and asset levels.
For a single person, this may not be a problem. But what if the Medicaid applicant is part of a married couple? Will the spouse have to give up their home and other countable assets—or resources, as Medicaid terms them—just to ensure their loved one is able to afford nursing home care? “It certainly may,” acknowledges Garrett Gummer, an elder law attorney in Feasterville, “but there are ways to protect a lot of the spouse’s assets.”
How Anti-Spousal Impoverishment Rules Work
Medicaid itself is an enormously complex system involving a patchwork of federal and state regulations. Suffice to say, you should always consult with a qualified Pennsylvania elder law attorney if you have specific questions with respect to your personal situation. But to provide a brief overview, Pennsylvania Medicaid offers several programs to help eligible seniors defray the costs of nursing home care.
As noted above, eligibility is largely based on the applicant’s income and total resources available. The first step for couples who are trying to qualify, Gummer says, is to look at which resources are exempt from consideration. Some examples of exempt resources are a single vehicle, burial plots, irrevocable prepaid funerals, term life insurance and retirement accounts for the community spouse (the spouse who is not in a nursing home). “Some states count retirement accounts, but Pennsylvania doesn’t,” Gummer says. And, “your house is exempt as long as the community spouse is living in it or a disabled child is in it,” he adds.
With respect to income, only money directly earned by the applicant spouse counts towards their nursing home Medicaid limit. In other words, if you apply for nursing home Medicaid but your spouse does not, their Social Security or other income earned solely by them will not count towards your monthly limit. (Spousal income may still count towards regular, non-nursing care Medicaid eligibility limits.)
Now what about non-income resources? For 2020, a spouse in a nursing home is allowed to keep $2,400 or $8,000, depending on income. The non-applicant spouse can retain half of any resources owned jointly with the applicant spouse, up to a maximum limit of $128,640. After exemptions, any other resources can be counted towards that limit. So what happens if the couple has, for example, $400,000 after exemptions? After reserving the maximum allowed for each spouse, they would need to spend down.
“One way to spend it down is to pay the nursing home, but that’s not usually a very popular way,” Gummer says. The better option is to look at each spouse’s needs. “Because as long as you can spend the money on the needs of one of the spouses, then you’re in good shape,” he says.
Examples of legitimate purchases include replacing a vehicle, purchasing funerals, home repairs or updates, or paying off debt. If all the qualifying purchases have been made and the resource limit still hasn’t been met, Gummer says the next step is to purchase a Medicaid-qualified spousal annuity—one that can’t pay out for a period longer than the community spouse’s life expectancy. The annuity counts as part of the community spouse’s income then, which is exempt.
“So with a spousal case, for the most part, they don’t have to spend much money at all on the nursing home. We can pretty much save the lion’s share of the couple’s resources,” Gummer says. “Now, I’m not saying that they wouldn’t have to pay a month or two, because it takes time to get all this in place.”
Pennsylvania Medicaid law also provides for what is called the Community Spouse Resource Allowance. Under this rule, if a couple’s joint assets are $25,728 or less, then the non-applicant spouse can retain 100% of those assets. Again, this is to ensure the non-applicant spouse is not left impoverished and unable to provide for themselves just because the applicant spouse needs help paying for nursing home care.
Beware the Look-Back Period
One final thing to keep in mind: The federal government imposes a five-year “look-back period” when assessing Medicaid eligibility. This means that if you and your spouse gave away or sold assets below fair-market value in the five years preceding your Medicaid application, officials can still count those assets against you. “Then the person applying for Medicaid is going to be subject to a penalty,” Gummer says. “And the penalty is based on the amount of money or other assets that you gave away.” The kicker, he adds, is that penalties won’t apply until after you’ve spent down to qualifying levels. Once again, a Pennsylvania elder law attorney can provide you with additional guidance on this subject.
An Attorney is an Important Piece of the Puzzle
Medicaid rules are incredibly complex, which is why it’s important to consult with an experienced attorney. “In my opinion, this is the most confusing issue facing senior citizens and their caregivers that can ever come up,” Gummer says. “It is a complex process, and it’s a process that people are going through when they’re not at their best. … And I find that, for the average layperson, without a lawyer, many times they’re not going to be able to take advantage of the laws that could benefit them.” And, while some nursing homes may have people to help with a Medicaid application, they may not be up to date on effective planning strategies and may also be unable to give some types of advice due to conflicts of interest. An attorney can provide counsel regarding your specific situation. “That’s why I think it’s essential that people see elder law attorneys,” Gummer says.