Federal law protects the healthy (or healthier) spouse of a nursing home resident. The healthier spouse is known in Medicaidland as the Community Spouse. The protections, known as the Spousal Impoverishment Rule (but logically be called the anti-impoverishment rule) were passed as part of the Medicare Catastrophic Coverage Act of 1988, P.ub. L. No. 100-360 (“MCCA”). Some provisions appear at 42 U.S.C. § 1396p(c), but most are codified at 42 U.S.C. § 1396r-5.
MCCA shelters from diminution a standard amount of assets (called the “community spouse resource allowance,” “CSRA,” or “resource allowance”). Wis. Dep’t of Health and Family Servs. v. Blumer, 534 U.S. 473 (2002). Section 1396r-5(c) provides as follows:
(1) Computation of spousal share at time of institutionalization
(A) Total joint resources
There shall be computed (as of the beginning of the first continuous period of institutionalization (beginning on or after September 30, 1989) of the institutionalized spouse) –
(i) the total value of the resources to the extent either the institutionalized spouse or the community spouse has an ownership interest, and
(ii) a spousal share which is equal to 1/2 of such total value.
(B) Assessment
At the request of an institutionalized spouse or community spouse, at the beginning of the first continuous period of institutionalization (beginning on or after September 30, 1989) of the institutionalized spouse and upon the receipt of relevant documentation of resources, the State shall promptly assess and document the total value described in subparagraph (A)(i) and shall provide a copy of such assessment and documentation to each spouse and shall retain a copy of the assessment for use under this section. If the request is not part of an application for medical assistance under this subchapter, the State may, at its option as a condition of providing the assessment, require payment of a fee not exceeding the reasonable expenses of providing and documenting the assessment. At the time of providing the copy of the assessment, the State shall include a notice indicating that the spouse will have a right to a fair hearing under subsection (e)(2) of this section.
(2) Attribution of resources at time of initial eligibility determination
In determining the resources of an institutionalized spouse at the time of application for benefits under this subchapter, regardless of any State laws relating to community property or the division of marital property –
(A) except as provided in subparagraph (B), all the resources held by either the institutionalized spouse, community spouse, or both, shall be considered to be available to the institutionalized spouse, and
(B) resources shall be considered to be available to an institutionalized spouse, but only to the extent that the amount of such resources exceeds the amount computed under subsection (f)(2)(A) of this section (as of the time of application for benefits).
(3) Assignment of support rights
The institutionalized spouse shall not be ineligible by reason of resources determined under paragraph (2) to be available for the cost of care where –
(A) the institutionalized spouse has assigned to the State any rights to support from the community spouse;
(B) the institutionalized spouse lacks the ability to execute an assignment due to physical or mental impairment but the State has the right to bring a support proceeding against a community spouse without such assignment; or
(C) the State determines that denial of eligibility would work an undue hardship.
(4) Separate treatment of resources after eligibility for benefits established
During the continuous period in which an institutionalized spouse is in an institution and after the month in which an institutionalized spouse is determined to be eligible for benefits under this subchapter, no resources of the community spouse shall be deemed available to the institutionalized spouse.
(5) Resources defined
In this section, the term ”resources” does not include –
(A) resources excluded under subsection (a) or (d) of section 1382b of this title, and
(B) resources that would be excluded under section 1382b(a)(2)(A) of this title but for the limitation on total value described in such section.
Subsection 1396r-5(f)(2) further provides:
(f) Permitting transfer of resources to community spouse
(1) In general
An institutionalized spouse may, without regard to section 1396p(c)(1) of this title, transfer an amount equal to the community spouse resource allowance (as defined in paragraph (2)), but only to the extent the resources of the institutionalized spouse are transferred to (or for the sole benefit of) the community spouse. The transfer under the preceding sentence shall be made as soon as practicable after the date of the initial determination of eligibility, taking into account such time as may be necessary to obtain a court order under paragraph (3).
(2) Community spouse resource allowance defined
In paragraph (1), the “community spouse resource allowance” for a community spouse is an amount (if any) by which—
(A) the greatest of—
(i) $12,000 (subject to adjustment under subsection (g)), or, if greater (but not to exceed the amount specified in clause (ii)(II)) an amount specified under the State plan,
(ii) the lesser of (I) the spousal share computed under subsection (c)(1), or (II) $60,000 (subject to adjustment under subsection (g)),
(iii) the amount established under subsection (e)(2); or
(iv) the amount transferred under a court order under paragraph (3); exceeds
(B) the amount of the resources otherwise available to the community spouse (determined without regard to such an allowance).
The subsection (f)(2) formula is the greatest of:
When calculating the CSRA, the first step is to value of all resources owned by either spouse, jointly or individually. This calculation, necessary due to the deeming provisions in subsection (c)(2), is sometimes called a “snapshot.” The snapshot date is the first date of continuous institutionalization. 42 USC § 1396r-5(c)(4)(1). [Note 7]. Initially, the spousal share is one-half the total of all marital resources. 42 USC § 1396r-5(c)(4)(1)(A)(ii). However, the spousal share is subject to minimum and maximum limits which are indexed for inflation. Either spouse may ask the State to calculate the spousal share prior to seeking eligibility. 1396r-5(c)(1)(B).
The CSRA minimums and maximums are calculated in 1988 dollars, which are adjusted each year. In 2023 the minimum CSRA is $29,724 and the maximum is $148,620. Some States, such as Georgia, allow the Community Spouse to retain the maximum CSRA ($148,620 in 2023). Others, such as Tennessee, apply a formula as permitted in Subsection (f)(2).
In applying the first two prongs of subsection (f)(2), States must allow the Community Spouse to keep the minimum CSRA ($29,724 in FY2023) and, if the marital resources exceed twice the minimum CSRA (meaning, in FY2021, if the marital estate exceeds $54,960), then States must adjust the CSRA so that the Community Spouse keeps one-half of marital resources up to the maximum CSRA.
Example 1: Kevin and Sally own a home valued at $250,000. They have a van valued at $20,000. Kevin has $20,000 in a checking account and has a CD in the amount of $30,000. Sally has CDs in her name totalling $50,000. They have a joint mutual fund account in the amount of $100,000. Kevin is admitted to a nursing home on October 1st. Sally requests a determination of the spousal share. The “snap-shot” is as follows:
Excluded Resources:
Total: $270,000
Countable Resources:
Total: $200,000
Under this example, in a maximum-maximum State like Georgia, Sally will keep the exempt resources, plus $148,620 from the countable resources. Something must be done with the excess before Kevin is eligible for Medicaid. In a State like Tennessee, where the Community Spouse keeps one-half of the marital resources between the minimum and maximum CSRA, the excess resource amount is $100,000, meaning something must be done with the excess $100,000 before Kevin will be eligible for Medicaid. Determining what that “something” looks like is where Medicaid planning becomes relevant.
Example 2: John and Mary own a house with no mortgage valued at $75,000. John has a certificate of deposit in his name in the amount of $35,000. Mary owns stock worth $60,000. Together they own a mutual fund worth $25,000, and an automobile. Mary also has an irrevocable burial trust valued at $5,000. John is admitted to a nursing home for long-term custodial care on May 1. The State Medicaid agency takes a “snapshot” of the couple’s countable assets as of May 1st, the first date of continuous institutionalization. The “snapshot is as follows:
Excluded Resources:
Total: $75,000
Countable Resources:
Total: $120,000
In Georgia, Mary would keep the non-countable resources and all of the countable resources as her CSRA. In Tennessee, where the subsection (f)(2) formula is applied, Mary would keep $60,000 as her CSRA, John would keep $2,000 as his resource limit, and the remaining $58,000 is at-risk to pay nursing home bills. A recent (10/28/2021) article, Legal Ease: What is the Medicaid Asset Split?, by Rebecca Hobbs, CELA, discusses the process used in States like Tennessee and includes advice regarding the timing of any spend-down.
In summary, all countable marital resources, other than the CSRA, are deemed available to the Institutionalized Spouse until eligibility is established. 42 U.S.C. § 1396r-5(c)(2). Stated in the inverse, the CSRA is not deemed available to pay for the institutionalized spouse’s care and need not be spent down for the applicant to become Medicaid eligible.
When calculating the CSRA and the at-risk amount, neither the duration of the marriage nor the manner in which the resources are titled is relevant (unless titled in a manner that prevents the couple from liquidating the resource). All marital resources are pooled, regardless of the length of marriage (whether fifty years or five months). Prenuptial agreements are not relevant except to the extent they are used to secure additional court ordered support under subsection (f)(2).
The couple is not required to spend-down paying nursing home bills. They may spend-down resources on anything benefiting them (other than gifting). Although excess resources are initially “at-risk,” timely planning may protect the at-risk portion of the marital estate.
Example 3: Assume Kevin and Sally have the same resources described in Example 1, but they owe $90,000 on their home. After the resource assessment, Sally uses the “at-risk” resources to pay off the mortgage (converting countable resources into exempt resources). She purchases prepaid cremation contracts (non-countable resources) in the amount of $3,500 each for herself and Kevin. She spends the remaining $3,000 on a trip to visit her son in California. The “at-risk” resources have been spent and Kevin is now eligible for Medicaid benefits.
Excluded Resources:
Total: $270,000
Countable Resources:
Total Countable Resources: $200,000 (At-risk amount in Georgia $49,380 in 2023; at risk amount in Tennessee is $100,000)
Spend-Down
Maximum-Maximum State result: Paying off mortgage (or partially paying at least $49,380) results in immediate eligibility as of the date when eligibility can be established (e.g., some States are first-moment-of-the-first-day-of-the-month States).
Minimum-Maximum State result: Paying off mortgage, plus other spending results in eligibility.
The CSRA and resources gained by the Community Spouse after eligibility is established are not available to pay the health care expenses of the Institutionalized Spouse, see 42 U.S.C. § 1396r-5(c)(4). However, several courts have crafted an exception to this rule where an application for benefits is delayed.
In A.K. v. Division of Medical Assistance and Health Services, 794 A.2d 835 (N.J. 2002), the Institutionalized Spouse was admitted to a nursing home in September, 1995. On October 1, 1995, New Jersey calculated the couple’s total countable resources, but no application for benefits was filed. Resources were calculated as $219,725.40 and, at that time, the CSRA was $80,760. New Jersey informed the Community Spouse that his wife would not be eligible for Medicaid benefits until he spent down the balance over the CSRA, less his wife’s $2,000 personal needs allowance. During the subsequent three years, the Community Spouse spent $136,965.40 on his wife’s care and, thereafter, applied for Medicaid benefits. However, during that time, his Mobile stock appreciated in value. New Jersey took the position that, while the CSRA is fixed as of the “snapshot” date, the application of the CSRA to the marital estate (or determination of how much must be spent down to reach the CSRA) occurs, not at the time of institutionalization, but at the time of application. On appeal, the New Jersey Supreme Court affirmed the department’s ruling. Stating, “[t]he present debate is fueled by the absence of a clear statement in the law specifying the purpose and consequences of the “snapshot” resource evaluation that occurs, or may occur, at the start of a spouse’s continuous institutionalization,” the Court found “that absent an accompanying Medicaid application, this process is informational only.” It then held that “the community spouse’s share of the resources is subtracted from the couple’s total combined resources as of the first moment of the first day of the month of application for Medicaid.” Id., at 839. The Court went on to find that, absent an application for benefits, a valuation requested pursuant to Subsection (c)(1)(B) is “informational only.” The Court held that “the plain language of the federal and state statutes [is that] the spousal share is to be fixed based on the couple’s assets as of institutionalization, but eligibility is to be determined by reference to the total assets owned by the couple at the time of application for medical benefits.” Id., at 842. See also Estate of Atkinson v. Minnesota Department of Human Services, 564 N.W.2d 209 (Minn. 1997) (reaching the same result).
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