Every year, thousands of American couples must stop living together when age and infirmity force one spouse to enter a nursing home.
Many of those couples turn to Medicaid to pay for nursing home care. But Medicaid, the state-federal health-care program for the poor and disabled, isn’t meant to be a free ride. To qualify, you must meet certain financial guidelines.
Along with the pain of separating from each other, couples in this situation must deal with the pain of separating from some of their assets. Some you can keep, some you can’t.
“A lot of people worry about it, and there’s a lot of misinformation out there,” said Huey Strickland, a certified financial planner and head of Senior Partners Inc. in Overland Park, Kan. “They think you can lose everything, and that’s just not the case.”
Craig Reaves, a Kansas City attorney who specializes in law affecting older people, often gets calls from people who say they can’t afford the cost of nursing home care for a spouse and ask him what to do.
“There are lots of options available to people who are caught in this position,” Reaves said. “It truly depends on what they own and what their income is. Medicaid is designed to step in before they totally run out of money.”
Some consumers may feel that there’s a stigma attached to Medicaid because they don’t want to ask the government for help. But Julie Brookhart, a Kansas City spokeswoman for the federal agency that oversees Medicaid, said Medicaid is the lifeline for 67.6 percent of the 1.5 million Americans in nursing homes. Medicaid spent $29.6 billion for nursing home care in fiscal 1996, and the tab keeps growing.
The Medicaid law is designed to provide assistance to those who need it. At the same time, the framers of the law did not want to financially devastate the spouse who remains in the couple’s home.
“We expect people to share in the cost of their nursing home care if they can, but not to the extent of impoverishing the spouse who’s not in a nursing home,” said Dick Brummel, associate regional administrator in the Kansas City office of the U.S. Health Care Financing Administration, which oversees Medicaid and Medicare.
The spouse outside the nursing home is allowed to keep certain assets, primarily the primary residence and one vehicle. Personal items such as furniture, jewelry and clothing are protected, too, as are life insurance with death benefits not exceeding $1,500 and irrevocable prepaid burial plans.
The government will look over these “exempt” assets carefully.
“There was a case once where a guy sold everything he had and bought a diamond worth $70,000 or $80,000 and tried to claim it as exempt jewelry,” Reaves said. “The claim was rejected.”
Then there are assets you must give up and liquidate before you can qualify for Medicaid.
They include second homes and additional vehicles beyond the one that is exempt.
They also include savings in individual retirement accounts and 401(k) plans. Stocks, bonds, mutual funds, checking accounts and savings accounts all are subject to liquidation.
Some might wince at the thought of liquidating these assets, especially IRAs and 401(k) plans geared toward providing retirement income. But Reaves said the government policy is that “if you’ve got the money, you need to spend it on the care of your spouse. If you run out of money, Medicaid is there to help.”
In addition to the exempt assets, the spouse outside the nursing home can keep half the value of the non-exempt assets, up to $80,760 worth. For example, that spouse could keep a vacation home worth $60,000 plus $20,760 worth of other non-exempt assets. The spouse who goes into the nursing home can keep only a small amount of non-exempt assets.
When you liquidate the value of non-exempt assets to qualify for Medicaid, you can spend the money on anything you want, Reaves said.
“Normally, the goal would be to spend the money on something that benefits them, like fixing up the house, replacing the car, paying for a burial plan.”
Another set of rules applies to income.
Income that goes exclusively to the spouse in the nursing home, such as a Social Security check, usually must be used to help pay for the care of that spouse.
However, the spouse outside the nursing home is entitled to receive at least $1,327 a month. If his or her income falls below that level, then part of the nursing-home spouse’s income can be allocated to the other spouse. That minimum can be bumped as high as $2,019 a month under certain circumstances.
The spouse outside the nursing home is entitled to 100 percent of any income that’s earmarked solely for him or her, such as paychecks, pension payments or Social Security checks. But if that spouse’s income exceeds $1,327 a month, then he or she cannot receive any of the nursing-home spouse’s income.
Someone with a large income, however, is not likely to seek Medicaid assistance to pay for the nursing home care of a spouse. Such a person probably would not want to give up the required assets to qualify for Medicaid.
“It’s probably a sounder economic decision for them to go ahead and pay for that care themselves totally,” Brummel said. “That’s why a couple facing the possibility of one or both spending time in a nursing home should seek professional financial advice.”
After both spouses die, the government typically will file a claim against the couple’s probate estate to obtain reimbursement for what Medicaid paid for nursing home care, Reaves said.
Reaves noted that the government discourages people from giving away their assets to qualify for Medicaid. Medicaid officials will scrutinize what you’ve given away, and your acceptance into the program could be delayed by any big gifts you’ve made during the previous three years.
Reaves recommended that couples make sure they need Medicaid to pay for nursing home care before they apply for it.
“Look at all the investments and assets and see if there’s a way to invest the money so that it generates enough money to pay for everything,” he said. “Sometimes there’s a lot of money sitting in low interest-bearing accounts.”
