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Medicaid is a means tested program requiring that the applicant meet certain income and resource levels. The rules of Medicaid come at both the Federal and State level and are managed at the County level.  This article looks at how the Spousal Refusal can be utilized under New York State Medicaid rules to get Medicaid benefits to a married couple who jointly exceed the Medicaid resource and income levels.

Medicaid will look to the applicant’s resources and income as well as any legally responsible relative’s income and resources when considering Medicaid eligibility. Legally responsible relatives include spouses and parents or step parents of children under 21 years of age. 

For an individual to be eligible for Medicaid in New York, he cannot have more than $13,800 in non-exempt property. If he does, he will be denied Medicaid. If he meets the resource allowance, then his spouse (“community spouse”) is entitled to a resource allowance between approximately $75,000 and $109,000 depending upon the couple’s non exempt resources. Any monies above the determined resource allowance will be used by Medicaid towards the spouse in an institution’s care.

Fortunately, there are two steps that can be taken in New York to help a spouse in an institution whose resource levels exceed those mandated by Medicaid. First, a transfer between spouses does not invoke a Medicaid penalty. This allows the spouse in an institution to legally transfer all his assets to his spouse without penalty.  Second, New York recognizes “spousal refusal”. In other words, the community spouse who now holds all, or the majority, of the couple’s assets in her name, can evoke “spousal refusal” by signing a statement refusing to contribute income or resources to the spouse in an institution’s medical care. If this is done, the Medicaid agency is required to determine the eligibility of the spouse in an institution based solely on his income and resources without considering the community spouse’s income or resources.

The main benefit of New York State allowing spousal refusal is that elders in need of immediate long term health care, who exceed the maximum resource limits set for a husband and wife, can get Medicaid benefits almost …immediately! 

The Medicaid agency, however, is not without recourse. It has the option to commence a legal proceeding to force the community spouse to support the spouse in an institution. It can also file a claim for reimbursement against the community spouse’s estate following her death.  

This article was written on February 26, 2010.

Under the new Deficit Reduction Act of 2005 (“DRA”) rules, a person who is otherwise eligible for Medicaid will be subject to a transfer penalty period based upon transfers made for less than fair market value. As of 2011, the Medicaid agency will look back through the last 5 years for asset based transfers. The DRA increased the look back period for transfers on non-trust assets from 3 to 5 years, for transfers made on or after February 8, 2006. Therefore, any transfers made prior to February 8, 2006 will be governed under pre DRA rules.

For example, let us assume a person made transfers of $13,000 to each of his three grandchildren last year, for a total annual gift of $39,000. He would be penalized by the Medicaid agency in the following manner. First Medicaid determines the regional nursing home transfer rate in Suffolk County which is approximately $11,000 per month. This number is usually less than what an individual not on Medicaid would pay privately for the same services in a Suffolk County nursing home. Second The Medicaid agency will calculate the total transfers made and divide that number by the nursing home transfer rate of $11,000. In this example the penalty would be $39,000 divided by $11,000 to get 3.5 months of penalty time from the date the Medicaid application was filed (not from the date of the transfer).

Therefore annual gifts of $13,000 or less may not be a good component to your long term health care plan if you wish to rely on Medicaid to pay your nursing home bills.