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Protecting the Community Spouse
When it comes to married couples, the Virginia Medicaid manual states that the purpose of the program is to protect the spouse who is not receiving long-term care (called the Community Spouse) from impoverishment when the other spouse needs long-term care (called the Institutionalized Spouse). As a consequence, even in a crisis situation, when the Institutionalized Spouse requires long-term care, there is a high probability that an experienced elder law attorney will be able to shelter the vast majority, if not all, of a married couple’s life savings from the extraordinary costs of nursing home, or in-home, long-term care.
This is done by employing Federal and state laws and regulations that are designed to encourage couples to preserve their wealth for the protection of the Community Spouse. These laws and regulations are a part of a significant Federal entitlement program called “ABD Medicaid” that is funded by payroll deductions just like Social Security and Medicare. “ABD” stands for “aged, blind, or disabled,” and the program serves individuals with long-term care needs. ABD is not health insurance. Most seniors who utilize ABD use Medicare for their health insurance.
The term “institutionalized” can be misleading. The individual needing care may be “institutionalized” in a nursing home, but he or she may also be receiving in-home long-term care services. Either way, the person receiving long-term care services is referred to as the “Institutionalized Spouse.” The rules laid out in this article are different in many ways from the rules that are applicable when both spouses are “institutionalized” at the same time and both are seeking ABD Medicaid long-term care services.
It is important to understand that there is a distinction between the rules concerning the “countable resources” of the Community Spouse and those of the Institutionalized Spouse. It is even more critical to understand the distinction in the rules concerning the income of those same individuals. This is because there are very different limits on the amount of countable resources that a Community Spouse and Institutionalized Spouse may have for an Institutionalized Spouse to qualify for ABD Medicaid long-term care benefits. When it comes to income, there are strict rules relating to the income of the Institutionalized Spouse and rules requiring co-pays, or “patient pay,” from an Institutionalized Spouse’s income. The income of a Community Spouse, on the other hand, is not considered when an Institutionalized Spouse seeks ABD Medicaid benefits. In fact, if the Community Spouse has low income, it is possible to preserve income of the Institutionalized Spouse and transfer it to the Community Spouse to provide a Minimum Monthly Maintenance Needs Allowance (the MMMNA).
A common misconception is that ABD Medicaid eligibility is dependent upon the assets of the married couple. There is a difference between assets and “countable resources.” An experience elder law attorney is skilled at helping families preserve assets by making sure those assets cannot be categorized as countable resources.
Unless the Institutionalized Spouse’s countable resources are less than $2,000 and the Community Spouse’s resources are less than $29,724 (for 2023), strategies must be employed to convert sufficient countable resources to “exempt” status to permit the ABD Medicaid application to be approved. Under certain circumstances, a Community Spouse may keep up to $148,620 in countable resources (the Community Spouse Resource Allowance or “CSRA”) if the Institutionalized Spouse has the same amount. The experience elder law attorney will have strategies that can be used to convert the Institutionalized Spouse’s excess countable resources to exempt asset status. Similar strategies may be employed by the elder law attorney to lawfully shelter countable resources that exceed the CSRA.
“Exempt” assets are those assets that may have considerable value, but are not considered countable resources for ABD Medicaid qualification purposes because of public policy. For example, a Community Spouse may have a personal residence of unlimited value that is exempt for ABD Medicaid purposes.
In order to calculate how many countable assets the Community Spouse wife may have on the application date, a determination must be made of what the couple’s combined countable assets were on the date of the Institutionalized Spouse’s institutionalization (commonly referred to as the “snapshot date”). This determination is made as of the first day of the month of continuous institutionalization of the Institutionalized Spouse. It is advantageous for the couple to have as many countable assets as possible in their names on the snapshot date so that the amount the Community Spouse is allowed to keep will be as high as possible.
While uncompensated transfers to other third parties will generally trigger a penalty for ABD Medicaid purposes (unless done a minimum of five years before an application), it should be noted that there is no penalty for transfers of assets between spouses.
Disregarding Assets Post-Eligibility
After the Institutionalized Spouse qualifies for Medicaid long-term care assistance, the Community Spouse's resources are no longer deemed available to the Institutionalized Spouse. However, special rules apply to Annuities. This allows the Community Spouse to establish a proactive ABD Medicaid asset protection plan to prepare for the possibility that the Community Spouse may also need long-term care in the future.