By Cohen, Kenneth M.
The CPA Journal , Vol. 69, No. 3
Recent court decisions involving the New York State Medicaid laws threaten to impair the ability of seniors to protect their hard-earned assets in the event they require long-term care. Although they are not the type of court cases to make the 11 o'clock news, such decisions could have a subtle yet profound impact on millions of seniors throughout the state.
Under the Medicaid laws in New York State, the spouse of a nursing home patient on Medicaid (the well spouse) is entitled to keep a minimum income and a minimum amount of assets. Specifically, for 1998, a well spouse in New York may keep $2,019 of monthly income and (approximately) $80,760 of assets, excluding the home. The $80,760 is known as the Community Spouse Resource Allowance (CSRA).
If the well spouse wants to keep assets above this amount, a "spousal refusal" document must be filed, in which the well spouse declares that his or her income and assets are unavailable for the cost of the nursing home spouse's care. Without a spousal refusal, Medicaid will consider any assets of the well spouse above the CSRA to be owned by the nursing home spouse and therefore deny Medicaid benefits to the nursing home spouse.
By law, the state must provide Medicaid benefits to the nursing home spouse if the well spouse has executed a spousal refusal. However, the state can still sue the well spouse who has assets above the CSRA to compel further contribution to the cost of the nursing home spouse's care. In fact, over the past two or three years, this is exactly what the state has been doing, and recent court decisions have made it even easier for these lawsuits to proceed. Unfortunately, today's legal climate is very different from what it was only a few short years ago. In those days, it was virtually unheard of for New York State to sue a well spouse, although the state had always reserved the right to do so. Seniors thus could rest assured that their hard-earned assets would be available for their benefit.
Despite the state's newly aggressive pursuit of a well spouse's resources above the CSRA, the law has always allowed the well spouse, under certain circumstances, to keep these so-called excess resources. For example, if the well spouse could show that his or her pension and social security income, combined with the income and dividends generated by the CSRA, did not produce $2,019 in monthly income, then the well spouse was entitled to keep an amount of assets exceeding the $80,760. If, even with the income generated by the increased CSRA, the well spouse's total income still did not reach the $2,019, the shortfall could be made up from the nursing home spouse's income. The examples below show how these rules work.
Example A. Suppose a couple had $300,000 in jointly held liquid assets, yielding $1,200 per month in interest and dividends. In addition, the husband receives Social Security and a pension totaling $1,300 per month and his wife receives Social Security of $819 per month. The husband now requires nursing home care. In the past, to qualify for Medicaid, he would transfer his portion of the couple's assets to his wife, who would then execute a spousal refusal. Thus, the wife's monthly income would then be $2,019, consisting of her $819 in Social Security benefits plus the $1,200 in income and dividends generated by her $300,000 in assets. Under the old approach, though, the wife would now have assets exceeding the CSRA and would be entitled to show that she needed all of the $300,000 to bring her income up to the minimum amount of $2,019.
Example B. To take a slight variation on Example A, suppose the wife's Social Security benefits were $619 instead of $819. In this case, because she now has income of only $1,819, the wife would be allowed to take $200 of her husband's income (which would otherwise go to the nursing home) to bring her up to the $2,019 minimum. …