Protecting Your Life Savings

SPOUSAL REFUSAL: A VIABLE PLANNING OPTION

*By: Anthony J. Enea, Esq.

As can be imagined the prospect of one spouse being admitted into a nursing home can have both devastating emotional and financial consequences upon the spouse remaining at home.  With the average daily cost of a nursing home in Westchester County ranging anywhere from approximately $285.00 per day to $325.00 per day($104,025 to $118,625 per year), it should come as no surprise that many spouses often have no alternative but to elect what is commonly known as Aspousal refusal.@  In years past a discussion of Aspousal refusal,@ with a client would often illicit looks of horror from the client, which were rivaled only if I mentioned the possibility of a divorce.  In recent years it has been my experience that my clients have been significantly more receptive and willing to elect Aspousal refusal@ as an option.  Financial ruin is consistently a significantly less attractive option. 

As part of the Medicare Catastrophic Act of 1988, Congress passed the Aspousal impoverishment@ rules.  This allowed the spouse who remained at home(Acommunity spouse@) to retain resources and income above the levels ordinarily permitted to unmarried individuals without impacting the eligibility of the spouse applying for Medicaid.  The statute created a Minimum Monthly Maintenance Needs Allowance(MMMNA), which for the year 2002 in New York is $2,232 per month and a maximum Community Spouse Resource Allowance(CSRA) which for 2002 is $89,280.  More importantly, Congress permitted the community spouse to refuse to contribute his or her assets above the CSRA without jeopardizing the eligibility for the nursing home spouse, provided that the State was assigned the nursing home spouse=s (Ainstitutionalized spouse@) right of support.

The State of New York codified these Aspousal refusal@ rules in Social Services Law '366(3)(a).  Section 366(3)(a) permits the community spouse to keep resources in excess of the CSRA once two documents are executed:

(a)   A Aspousal refusal@ letter, signed by the community spouse, stating that he or she refuses to make available his or her resources to the institutionalized spouse; and

(b)   An Aassignment of support@ which is signed by the institutionalized spouse, or if the spouse is unable to sign, a statement explaining the medical reason is to be provided.

The signing of the Aassignment of support@ authorizes the Department of Social Services (ADSS@) to commence an action for support against the refusing spouse.  DSS will be able to assert its claim against the refusing spouse once the application has been approved and Medicaid services provided.

From a practical perspective, the decision of whether or not to file the Aspousal refusal@ is more often than not a purely financial decision.  Obviously, if the surviving spouse has income and resources only slightly above the MMMNA and CSRA, the community spouse may consider alternatives other than utilizing the Aspousal refusal@, e.g., funding an irrevocable burial trust, creating a Aluxury fund@ or making improvements to the homestead.  However, when the resources and income are significantly in excess of the permitted amounts and the prospect of spending in excess of $100,000 per year for the nursing home looms in the background, Aspousal refusal@ may be the only viable alternative.  Additionally, the election of Aspousal refusal@ will allow the nursing home spouse to be eligible for Medicaid immediately without necessitating a spendown of the community spouse=s resources.  This is especially important when the community spouse is younger than the institutionalized spouse, and necessitates significant resources to be able to continue to reside in the community in the future.

Historically, the Westchester County DSS has not with any regularity commenced support actions against refusing spouses;  however, in recent years the rumblings of a change in attitude at DSS have appeared.  The first indication of the change is the greater frequency in which DSS has issued demand letters to the refusing spouse.  The demand letter delineates the specific amount Medicaid has paid to the nursing home on behalf of the institutionalized spouse.  It is the fact that Medicaid can only seek to recover the amount of Medicaid properly paid which continues to make Aspousal refusal@ a viable and attractive option.  As long as Medicaid continues to reimburse the nursing home in an amount equal to fifty (50%) percent of the nursing home=s private pay rate, it will continue to make absolute sense for the community spouse to execute a Aspousal refusal.@  The community spouse would not want to deplete his or her resources at the approximate rate of $10,000 or more per month, when in the worst case scenario, if DSS were to commence and successfully prosecute a support action, they would only recover 50% of the private pay rate.  It should be noted that DSS has generally been willing to compromise its claim both at the time of the service of a demand letter and even once a support action has been commenced.