Estate Planning Isn’t Just For The Elderly

Happy, smiling couple in their sixties.

Basics of Medicaid Eligibility

By: Anthony J. Enea, Esq.*


In 1965 the Federal Medicaid Assistance Program commonly known as “Medicaid” was created as part of the same legislation that created the Medicare program. Medicaid was created as a health insurance program for the poor. It is a “means tested” entitlement program wherein individuals are entitled to benefits if they are financially categorically eligible. It is a jointly financed federal‑state program.1

In 1966, New York State Statutorily adopted the Medicaid program.2 New York’s program encompasses virtually every medical program available. New York elected to give the responsibility for administering Medicaid to the Counties.

For every dollar spent on Medicaid in New York, fifty (.50) cents comes from the Federal Medicaid Program, twenty-five (.25) cents from New York State and twenty-five (.25) cents from the Counties.3

The Medicare Catastrophic Coverage Act of 1988, effective October 1, 1989, made significant changes to the structure of the Medicaid program in three main areas: (1) the transfer of assets rules, (2) the rules regarding the treatment of assets owned by the spouse of an institutionalized patient and how the assets of that spouse would effect the eligibility for Medicaid of the institutionalized patient, and (3) the rules regarding the amount of income and resources the spouse living in the community would be allowed to keep.

Additional changes to the Medicaid program were later enacted as part of the Revenue Reconciliation Act of 1993 (often referred to as “OBRA 93” which became effective on August 10, 1993. These changes were adopted by the New York Legislature and signed into law on June 9, 1994. OBRA 93 applied to transfers of assets made after August 10, 1993, and with respect to applications for and recertifications of eligibility for medical assistance submitted on or after September 1, 1994.

II. Categories of Medicaid Coverage

A. Community Medicaid ‑ Physicians, dentists, pharmaceutical, nursery services and other professional services provided to individuals on a clinical or outpatient basis for individuals who are eligible; and

B. Home Care Services ‑ Home health services, such as personal care services, nursing, physical therapy, occupational therapy and home health aid services; and

C. Institutional Services ‑ Hospitals, other medical facilities, nursing homes and services under the Lombardi long‑term home health care program. (A waivered program).

III. Eligibility for Medicaid

A. Medicaid may be authorized for individuals whom are:
a. Medically needy;
b. Categorically needy;
c. Legal U.S. Residents

B. To be eligible for Medicaid, the applicant must be:
a. A legal U.S. resident, citizenship is not a requirement. There is no durational residency requirement.
– The Personal Responsibility and Work Opportunity Act of 1996 established new standards for ‘qualified’ and ‘unqualified’ aliens. Both “qualified” and ‘unqualified’ aliens within the first five (5) years of their entry into the U.S. are not eligible for Medicaid benefits, except for emergency care.

– On October 26, 2004, ADM 04-OMM/ADM-07 was issued to clarify DSS’s policies relevant to Medicaid for non-citizens and aliens. The ADM provides a detailed historical overview of prior legislation relevant to Medicaid eligibility for non-citizens and aliens, and creates the guidelines as to how the Medicaid program will continue to be available to immigrants.

The ADM can be found at

– The applicant must be a resident of the state and county where the application for Medicaid is made. Residency requires a physical presence within the state and the “intent to remain.” Any person age twenty-one (21) and over is a resident of New York State,4 if he or she is living in the State and:
(i) intends to remain permanently or indefinitely; or
(ii) is unable to state intent unless he or she is in an institution, and another state made the placement.5

b. Under the age of twenty-one (21) or over the age of sixty-five (65) and disabled.6
If you are between the ages of twenty-one (21) and sixty-five (65) you can be eligible for medicaid, only if you are:
1. Disabled – a physical or mental incapacity which prevents you from any gainful employment, which is expected to endure for at least one (1) year;7
2. Blind – certified blind by NYS Commission for Blind and Visually handicapped.8
3. Eligible for Public Assistance – either receiving or be eligible to receive safety net assistance or family assistance, thus, must be below the public assistance income and resource levels;9 or
4. Recipient of Supplemental Security Income “SSI”

If receiving SSI from the Social Security Administration, you will be automatically eligible for Medicaid. No application for Medicaid is necessary.10
C. Medicaid is a “means tested” entitlement program, thus, there are both resource and income eligibility requirements. Applicant must have income and assets below specified amounts.11
Factors considered in determining financial eligibility
1. Size of the household of the applicant, i.e., is applicant single or married;
2. Income – available to the applicant during period for which Medicaid is requested.
– Medicaid counts most income with certain specified exceptions, irrespective of whether the income is earned or unearned.12 Certain income is exempt (not counted as available) for Medicaid eligibility purposes.13 For example, the first twenty ($20) dollars per month of income whether earned or unearned is exempt. German and Austrian reparation payments, Nazi Persecution Funds, State Crime Victims Assistance Funds as well as other income sources are totally exempt, so long as they are kept segregated from other funds.14
– Income can be “deemed” or attributed to another irrespective of whether it is actually paid. “Deeming” is only applied to legally responsible relatives, i.e., husband and wife, parents and a child under age twenty-one (21). However, deeming not applicable in “Spousal Refusal” cases.15
3. Resources available to the applicant during period for which Medicaid is requested.

A. Available Resources
– Resources are defined to include property of all differing kinds, e.g., personal property, (cash, IRA’s, stocks, bonds) real property, tangible, intangible, liquid or illiquid “real property”
– NYS DSS Administrative Directive: 96 ADM – 8, “assets” for purposes of Medicaid are defined as all income and resources of the individual applicant and the applicant’s spouse.

– Income and/or resources which the applicant or the applicant’s spouse is entitled to, but does not obtain because of action or inactions takes by (a) the applicant or his or her spouse, or (b) a person, Court, administrative body with legal authority to act on behalf of applicant or applicant’s spouse; or (c) a person, Court or administrative body acting at the direction or request of the applicant or applicant’s spouse.
Examples of actions taken which would cause resources or income not to be received, but still considered as an available resource or income pursuant to NYS DSS 96 ADM – 8 are:
a. Renunciation of an inheritance or waiver of spousal right of election;
b. Waiving pension income irrevocably; and
c. Waiving or not accessing personal injury or tort settlements.16
B. IRA’s KEOGH’s and 401K’s
– Are considered available as illiquid resources for Medicaid eligibility purposes.17

– Medicaid will not consider the IRA or retirement account as an available resource if the applicant places the account into “payout status” (begins taking the minimum required distribution or MRD). However, Medicaid will count the income received as available income.18
– If an IRA is cashed out, even before age 59 1/2, the net proceeds (after payment of any taxes or penalties) are considered an available resource for eligibility purposes.19
C. Annuities
– Annuities are a type of investment wherein one (“annuitant”) in consideration for his or her investment will receive the right to receive fixed periodic payments either for a term of years or for life.
– If the projected return “payout” from the annuity is reasonably proportionate “actuarially sound” to the investment made (based on life expectancy and rate of return) for Medicaid purposes the purchase of the annuity will be considered a compensated transfer, thus, not creating a period of ineligibility for Medicaid. However, if the projected return is proportionately less than the investment made, Medicaid will consider the purchase of the annuity as a trust related transfer in an amount less than fair market value, which creates a period of ineligibility for Medicaid nursing home.20 – Health Care Financing Administration, State Medicaid Manual Transmitted No. 64 (November 1994) and HCFA Pub. 45-3 (HCFA Transmittal No. 64) delineates how annuities are treated under the trust/ transfer provisions.
– If the annuity is (actuarially sound( and the annuity has been reduced to an income stream (a “fixed annuity”, no period of ineligibility for Medicaid would be created under the trust/transfer provisions. However, the monthly payout will be considered and counted as available income.21

D. Exempt Resources
The following have been determined to be (exempt resources(, therefore, they are not considered or counted for purposes of Medicaid eligibility:

(1) “Homestead” – “primary residence” (not a second or vacation home) which is occupied by the applicant, applicant’s spouse, minor, blind or disabled child.22 A one, two or three family home, condo, co-op, mobile home is considered to be a homestead. The homestead can be income producing property, or even attached or contiguous to income producing property. Although the primary residence will be considered as an exempt homestead, however, any income will be counted and treated as available.23
– If the applicant is institutionalized and expresses the intent to return home, the homestead will not lose its exempt status. However, the homestead can still lose its exempt status if the applicant is declared to be in “permanent absent status.”24 A declaration of permanent absent status can be made upon the applicant entering the nursing home, or if applicant remains in a hospital for more than six (6) months. By declaring the individual to be in permanent absent status, Medicaid could attempt to place a lien on the homestead.25
(2) Burial Allowance – $1,500 cash or face value of life insurance. Must be in a separate account designated as “burial allowance.”26
(3) Burial Space and Irrevocable Burial Trust – Applicant may own in addition to the $1,500 burial allowance, a burial space, grave, crypt, mausoleum, headstone, casket, without effecting medicaid eligibility.27

– Effective January 1, 1997 NY Law was amended to permit the applicant/ recipient of Medicaid to pre-pay his or her funeral and burial expenses with a funeral home director by using an Irrevocable Trust Fund. There is no dollar limit on the amount that can be placed in the Irrevocable Trust. However, it is not recommended that the trust be over funded, because any monies not utilized for the funeral and burial must be turned over to Medicaid.28

(4) Personal Property – The applicant’s personal
belongings and furnishings are exempt. No valuation is made for Medicaid eligibility purposes.29
One automobile, irrespective of its value is also exempt.
(5) $4,000 of Exempt Resources for the year 2005. Was $3,950.00 for 2004, a/k/a “Luxury Fund”.
4. Comparison of Applicant’s Net Available Income and Resources to the Eligibility Standards for His or Her Medicaid Household Size.

If the applicant’s net available resources exceed the eligibility standards for his or her household size, then he or she will be ineligible for Medicaid until he or she has incurred medical expenses equal to or greater than the amount of his or her excess resources. Similarly, if the applicant’s net available income is above the income standard for his or her Medicaid household size, he or she will be ineligible for Medicaid until medical expenses are incurred equal to or greater than the excess income.

V. Income and Resource Eligibility Requirements for 2005

A. Income Levels for a Single Individual
(i) For Community/Homecare Medicaid – $667 per month plus $20 per month disregard.30
(ii) For Nursing Home – all of the recipients monthly income (except exempt income) in excess of $50 per month “personal needs allowance”,31 must be paid to nursing home as an offset to the services provided by Medicaid.
– NY is an income spend down state.

B. Income Levels for a Couple (i) For a Couple receiving Community/Home Care Medicaid – $975 Plus one $20 per month disregard.32

C. Resource Levels for a Single Individual
– $4,000 Total33 – Known as “Luxury Fund”

D. Resource Levels for a Couple for Community/Homecare Medicaid
– $5,850 34

E. Income and Resource levels for the Community Spouse of an Institutionalized (Nursing Home) Medicaid Recipient
– Minimum Monthly Maintenance Needs Allowance (MMMNA)
– $2,378 per month35
– Community Spouse Resource Allowance “CSRA”
On a sliding scale from a minimum of $74,820 to a maximum of $95,100 total.36

V. Spousal Impoverishment Provisions
As part of the Medicare Catastrophic Coverage Act “MCCA” of 1988, changes were made to prevent the impoverishment of the Community Spouse. Congress granted the states the authority to establish income and resource levels for the community spouse of an institutionalized Medicaid recipient. However, the law established a maximum level that could be utilized by the states.37 New York has adopted and consistently selected the Federal maximums.38

VI. Community Spouse Income Allowance
The Community Spouse is permitted a Minimum Monthly Maintenance Needs Allowance “MMMNA”, the maximum MMMNA for 2005 is $2,378 per month. If the Community spouse’s income falls below the MMMNA, the Community Spouse is permitted to receive total income up to the amount of the MMMNA by deducting income of the Institutionalized Spouse. However, the income can be made available to the Community Spouse only if it is actually made available to or for his or her benefit.39

96 ADM-11 of the NYS Dept. Of Social Services provides that income (not the resources of the Institutionalized Spouse) should be transferred first to the Community Spouse to allow the Community Spouse to receive income up to the MMMNA. DSS’s position on this issue was tested in Golf v. NYS Dept. Of Soc. Services, 221 A.D. 2d 997, 634 N.Y.S. 2d 581 (4th Dept 1991) order reversed, 91 N.Y.3d 656, 674 N.Y.S. 2d 600, 697 N.E. 2d 555 (1998). In Golf, the Court of Appeals in reversing the Appellate Division Fourth Department held that the “income first” approach of the Dept. of Social Services and the Federal Statutes had to be applied. The Community Spouse must first seek an income contribution from the Institutionalized Spouse, before the Institutionalized Spouse’s resources are utilized to increase the income of the Community Spouse to the MMMNA level.

If the Community Spouse requests income in excess of the MMMNA and a State Court orders said increase, the MMMNA can then be increased to the Court established amount.40

In Robbins ex rel. Robbins v. DeBuono, 218 F. 3d 197 70 Soc. Sec. Rep. Serv. 408 (2nd Circuit 2000), cert. Denied, 531 U.S. 1071 121 S. St. 760, the Second Circuit decided that the (income first( approach does not apply to the Social Security income of the Institutionalized Spouse. The Court determined that the application of the “income first” approach to the Social Security income resulted in the alienation of Social Security benefits, which amounted to a violation of federal law.41

The effect of Robbins was that a Community Spouse would not be required to raise his or her MMMNA by a contribution from the Institutionalized Spouse’s Social Security benefits, thus, perhaps, permitting him or her to apply for an increased Community Spouse Resource Allowance “CSRA” in an amount that would be sufficient to increase his or her MMMNA to the $2,378 amount for 2005.
On January 12, 2005, the NYS Dept. of Social Services in GIS05MA/002 rescinded GIS00MA/027 relevant to the “Treatment of Institutionalized Spouses’ Social Security Benefits and Requests for Additional Allowances,” which dealt with Robbins and the provisions of 01 OMM/ADM-4 related thereto. The Department of Social Services decided that it would no longer treat Institutionalized Spouses with Social Security Income differently than other Institutionalized Spouses. Thus, Community Spouses with income less than the MMMNA will not be allowed to retain resources in excess of the maximum CSRA in order to generate income that could be provided by the Institutionalized Spouse from his/her Social Security Benefits; irrespective of whether the Institutionalized Spouse makes the Social Security benefits available to the Community Spouse. The decision to give a Community Spouse a higher CSRA continues to necessitate resolution by a fair hearing or a Court Order. The Department of Social Services went on to further state that an Institutionalized Spouse is not required to transfer Social Security benefits to the Community Spouse. He or she is allowed, but not required to make it available. The Department of Social Services relied upon the 2003 U.S. Supreme Court Decision in Washington State Dept. Of Social Services v. Guardianship Estate of Keffeler, 537 U.S. 371 in support of its position.

VII. Enhanced Income Allowance
If the Community Spouse wishes to seek an increase of the permitted MMMNA ($2,378 for 2005) he or she must either at a fair hearing or in a family court proceeding establish that there exist “exceptional circumstances which result in significant financial distress”. If the above is established Medicaid must permit an amount adequate to provide additional necessary income to the Community Spouse from the income of the Institutionalized Spouse.42

In Gomprecht v. Sabol, 86 N.Y.2d 47, 629 N.Y.S. 2d 190 (1995), the NY Court of Appeals severely limited the ability of Community Spouses to increase the MMMNA in a state Court proceeding. The Court determined that the fair hearing “exceptional circumstances” test was to be utilized by the Court in support proceedings. The Court opined that “exceptional circumstances” must be the result of “true financial hardship that is trust upon the Community Spouse by circumstances over which he or she has no control.” See Schachner v. Perales, 85 N.Y. 2d 316, 624 N.Y. 3d 558 (1995)

VIII. Community Spouse Resource Allowance
The spouse of an Institutionalized Spouse, whom is residing in the community (a/k/a “community spouse” is granted by Federal Law a Community Spouse Resource Allowance “CSRA” which is set by the State. The CSRA can be adjusted annually pursuant to the Consumer Price Index “CPI”.43

IX. Computation of CSRA
Commencing on the first date the Institutionalized Spouse begins a period of institutionalization, which is likely to endure for at least 30 days, the following resources of the Community Spouse are calculated to determine his or her CSRA:44
(i) Total value of resources to the extent either the Institutionalized Spouse or the Community Spouse has an interest. All of the resources held by either or both the Community and Institutionalized Spouse are deemed available to the Institutionalized Spouse to the extent they exceed the maximum CSRA;45 and
(ii) A spousal share that is equal to one-half (1/2) of the total value of the resources.46
In 1996 NY amended how it calculates the CSRA. In NY the Community Spouse is permitted available resources in an amount equal to the greater of the following:
(i) $74,820; or
(ii) one-half (1/2) of the total value of the available resources the husband and wife have, commencing during the month of the first continuous period of institutionalization of the Institutionalized Spouse to an amount no greater than $95,100 for the year 2005. Thus, if husband and wife have $190,200 in available resources, the Community Spouse may retain $95,100.47

X. Enhanced Resource Allowance
Pursuant to the Federal Statute if it can be established that the CSRA is an amount which is insufficient to raise the community spouse’s income to the MMMNA level, then Medicaid must permit as the CSRA an amount sufficient to do so.48 Again, as per the Court’s decision in Gomprecht, it must be established at either a fair hearing, or by Court order that there exists exceptional circumstances which result in significant financial distress. For example, if a Community Spouse only has $1,000 of monthly income, he or she could argue that he or she should be entitled to retain resources in excess of the $95,100 CSRA permitted in 2005, so as to generate sufficient income to allow her to achieve the $2,378 MMMNA for the year 2005.

XI. Transfer of Asset Rules
A. Penalty and Look Back Periods
Because Medicaid is a “means tested” entitlement program, if assets are “transferred,” i.e., given away by the applicant or his/her spouse without the receipt of something of equivalent value in return “uncompensated transfer”, within thirty-six months immediately prior to the application for Medicaid, a period of ineligibility for Medicaid nursing home care will be triggered, unless the transfer is deemed to be an exempt transfer.49
The transfer of asset rules contain two separate and distinct components, being, the “look back period” and the “penalty period”. Pursuant to the Omnibus Budget Reconciliation Act of 1993 (“OBRA 93”),50 a thirty-six (36) month “look back period” was created for outright transfers of assets. Thus, Medicaid will “look back” thirty-six (36) months immediately prior to the date of the Medicaid application to determine whether or not any uncompensated transfers of assets have been made. OBRA 93 created a “look back” period of sixty (60) months for any transfer made to or from a “lifetime trust”.51
The second component of the transfer of asset rules is the (penalty period(. The “penalty period” commences on the first of the month following the date of the uncompensated transfer,52 and is a number of months determined by taking the value of the uncompensated transfer and dividing it by the average monthly cost of a nursing home for the applicants Medicaid district as determined by Medicaid. New York is divided into seven Medicaid districts. (See Regional Rates infra)
For example, for 2005 the average monthly cost of a nursing home for Westchester County is determined by Medicaid to be $8,332 per month. Thus, a $100,000 uncompensated transfer would create a twelve (12) month penalty period for Medicaid nursing home care.53 An uncompensated transfer of $300,000 would create a thirty-six (36) month period of ineligibility. Thirty-six (36) months will be the maximum period of ineligibility for Medicaid nursing home care that is created by an outright transfer (not to or from a lifetime trust), so long as no application for Medicaid is made until all periods of ineligibility have expired. Sixty (60) months is the maximum period of ineligibility for Medicaid nursing home care that is created for all transfers to or from a lifetime trust, so long as no application for Medicaid is made until all periods of ineligibility have expired.

B. Regional Rates for 2005

The regional rates pursuant to the Regulations are to be updated on January 1 of each year by Medicaid.54

Central $ 5,988
Long Island $ 9,612
New York City and Five Boroughs $ 8,870
Northeastern $ 6,501
Northern Metropolitan (Westchester,
Putnam, Orange, Rockland, Dutchess) $ 8,332
Rochester $ 6,981 – The regional rate which is in effect at the time the Medicaid application is made, not the date of transfer, is used to calculate the ineligibility period.55

C. General Rules as to Transfers of Assets and Income.
– The transfer of asset rules apply to the assets and income of the applicant or his or her spouse as well as any income or assets that they are entitled to receive, but do not receive because of any action or inaction on their part, court or administrative body, or person acting on their behalf, such as, waiving pension income, renunciations of inheritance, waiver of right of election.56
– In New York the transfer of asset penalty periods do not apply to Medicaid homecare. OBRA 93 permits the states to extend the penalty periods to the Medicaid home care program.
– In New York jointly owned assets are presumed to be owned entirely by the Medicaid applicant. However, this presumption can be overcome by evidence that the joint owner actually owns part or all of the property.57 Joint owner would need to submit documentary proof, i.e., deposit slips.
– If assets are held by the applicant as a tenant-in-common, an asset transfer will be deemed to have occurred when any action is taken which reduces or eliminates his or her ownership interest or control. The act of placing another’s name on an asset is not in and of itself a transfer of assets.58
– Penalty periods are imposed for a partial month.59
– When multiple transfers are made, and the penalty periods created by the transfers overlap, the period of ineligibility commences on the first of the month following the month in which the first transfer is made. The period of ineligibility is determined by adding together the total value of the uncompensated transfers and dividing it by the applicable regional rate.60
– When multiple transfers are made and the penalty periods do not overlap, each transfer will create a separate period of ineligibility for Medicaid.
– Within the look back period, if a transfer of property is made with the retention of a life estate (right to use property for his or her lifetime), it will be deemed a partially uncompensated transfer. The dollar value of the uncompensated transfer is the value of the remainder interest (value of right to possession or ownership when life tenant dies)61 at the time the life estate is created. The life estate and remainder interest tables are provided by the Center for Medicare and Medicaid Services in its State Medicaid Manual.
– If the life estate holder transfers or relinquishes his or her life estate during a look back period, it will be necessary to determine if fair market value was received for the life use. If fair market value or less than fair market value was not received it will be necessary to impose a penalty period for the uncompensated transfer by utilizing the applicable regional rate.
– Life estates are not available/countable resources for purposes of Medicaid eligibility.62
– When real property or assets are transferred to a lifetime trust, the value of the life estate retained is not subtracted for purposes of determining the value of the uncompensated transfer for purposes of calculating the period of Medicaid ineligibility.63

D. Exempt Assets and Transfers
There are transfers of assets which can be made by the Medicaid applicant which do not trigger a period of ineligibility for Medicaid:
1. If an asset other than the homestead is transferred to: (a) the applicant’s spouse, or to another for the sole benefit of the individual’s spouse;64 (b) from the applicant’s spouse to another for the sole benefit of the individual’s spouse;65 (c) disabled child;66 or (d) to a trust established solely for the benefit of an individual under 65 years of age who is disabled;67 the transfer will be an exempt transfer which does not create any period of ineligibility for Medicaid.

2. If the homestead is transferred to: (a) the spouse of the applicant;68 (b) a child of the applicant who is under age 21;69 (c) a child of the applicant who is blind or disabled, regardless of age;70 (d) the sibling of the applicant who has an equity interest in the home, and who has resided in the home, and is using it as his or her primary residence for at least one (1) year prior to applicant’s admission to a long term care facility;71 or (e) a child of the applicant who has resided in the home as his or her residence for at least two (2) years immediately prior to applicant’s admission to the long term care facility and has provided care to his or her parent,72 “caretaker exempt transfer” the transfer will be an exempt transfer that does not create a period of ineligibility for Medicaid.

3. Transfers Made by the Community Spouse
If after the institutionalized spouse has been residing in the nursing home for thirty (30) days and receiving Medicaid, any non-exempt transfer of assets made by the community spouse will only effect his or her eligibility for Medicaid and not the eligibility of the institutionalized spouse.73

4. Transfers Made For Purposes Other Than Qualifying for Medicaid
If the applicant can factually establish that the asset transfer was made for purposes other than qualifying for Medicaid for nursing home care, i.e., catastrophic illness occurred unexpectedly after transfer was made; the transfer will be an exempt transfer for Medicaid eligibility purposes.74

5. Imposition of Penalty Period Creates an Undue Hardship
If it can be established that the imposition of an eligibility period would cause an “undue hardship” upon the applicant, Medicaid is prohibited from denying nursing home benefits to the applicant.
In order to establish an “undue hardship” it must be shown that:
a. The applicant is otherwise eligible for Medicaid;
b. Applicant and/or applicant’s spouse are unable to have transferred assets returned despite their efforts to do so;
c. The denial of care would endanger the applicant’s health or life.75
The granting of Medicaid based upon “undue hardship” rarely occurs in New York.

6. Assets Comprising the Non-Exempt Transfer are Returned to Applicant
If prior to a decision being made as to Medicaid eligibility, all of the assets comprising the non-exempt transfer are returned, a period of ineligibility will not be imposed.76

If only a portion of the assets comprising the non-exempt transfer are returned prior to a decision being made on Medicaid eligibility, the value of the uncompensated transfer is reduced by the value of the portion returned.77

XII. Spousal Refusal In New York

A. Overview

As part of the Medicare Catastrophic Act of 1988, Congress passed the “spousal impoverishment” rules. This allowed the spouse who remained at home “community spouse” to retain resources and income above the levels 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 2005 in New York is $2,378 per month and a maximum Community Spouse Resource Allowance (CSRA) which for 2005 is $95,100. 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 “institutionalized spouse” right of support.78
The State of New York codified these “spousal refusal” rules so that the community spouse may keep resources and income in excess of the CSRA once two documents are executed:79
a. A “spousal 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 “assignment 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 “assignment of support” authorizes the Department of Social Services “DSS” 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 “spousal 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 “spousal refusal”, e.g., funding an irrevocable burial trust, creating a “luxury 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, “spousal refusal” may be the only viable alternative. Additionally, the election of “spousal refusal” will allow the nursing home spouse to be eligible for Medicaid immediately without necessitating a spend down of the community spouse’s resources. This is especially important when the community spouse is younger than the institutionalized spouse, and requires significant resources to be able to continue to reside in the community.

B. Executing a Spousal Refusal

1. In order to qualify the institutionalized spouse for Medicaid nursing home benefits, the institutionalized spouse will generally need to transfer his or her resources to the community spouse who will then often own non-exempt resources in excess of the current maximum CSRA level of $95,100 and/or have monthly income above the current MMMNA level of $2,378. Thus, an otherwise Medicaid eligible institutionalized spouse will be deemed ineligible for Medicaid. The community spouse will then need to execute a “spousal refusal”.
A transfer of assets between spouses will not affect the applying spouse’s right to secure Medicaid. Said transfer is commonly known as an “inter-spousal transfer”.80

2. Under Federal law, the community spouse may exercise “spousal refusal”, and may thereby retain resources and income in excess of the CSRA or the MMMNA without jeopardizing the institutionalized spouse’s Medicaid eligibility, provided that:81
a. As to Resources – (i) the institutionalized spouse assigns to the state any right of support from the community spouse;82 or (ii) if the institutionalized spouse is unable to execute an assignment of support due to physical or mental impairments, in which case the state may commence a support proceeding against the community spouse without the assignment;83 or (iii) the state finds that the denial of eligibility would “work an undue hardship”.84
b. As to Income – The exercise of a “spousal refusal” necessitates that during any month in which an institutionalized spouse is in the institution, except as provided in certain specific circumstances, no income of the community spouse shall be deemed available to the institutionalized spouse.85
c. Statutorily Authorized in New York To Establish Medicaid Eligibility Through the Execution of a “spousal refusal”
1. “Medical assistance shall be furnished to applicants in cases where, although such applicant has a responsible relative with sufficient income and resources to provide medical assistance as determined by the regulations of the department, the income and resources of the responsible relative are not available to such applicant because of the absence of such relative or the refusal or;
failure of such relative to provide the necessary care and assistance. In such cases, however, the furnishing of such assistance shall create an implied contract with such relative, and the cost thereof may be recovered from such relative in accordance with title six of article three and other applicable provisions of law.”86
d. “spousal refusal” can be used in the context of not only Medicaid nursing home benefits, but also other types of community-based Medicaid in which case the non-applying spouse can have no more than $667 in monthly income and $4,000 in non-exempt resources. For example, the Lombardi Long Term Home Health Care Program.

3. Impact of (Spousal Refusal)
a. Medicaid may only consider the income and resources of the applying spouse.
b. The community spouse must disclose information about his or her resources and income, as well as any personal information which must be included as part of the Medicaid application.
c. If a husband and wife were living “separate and apart” from one another at the time that the applying spouse was institutionalized, he or she may be unable to obtain information as to the income and resources of the non-applying spouse.
d. Refusing spouse does not have to sign the Medicaid application on behalf of the institutionalized spouse.

4. Spousal Recovery Suits
– If the non-applying spouse has resources and/or income above the allowable levels, and exercises his or her “spousal refusal” to render the ineligible applying spouse, eligible for Medicaid, the refusing spouse may be sued by Medicaid for the benefits paid on behalf of the spouse receiving Medicaid.87
– In New York Medicaid also relies on Social Services Law (101 in asserting its right to seek reimbursement from the “responsible relative”.
– Social Services Law ‘101 provides the refusing spouse have “sufficient ability”, which infers that the refusing spouse must only have resources or income above the allowable Medicaid levels.
– Spousal recovery cases are pursued both in State Supreme Court and Family Court, although there is no authority for Medicaid to bring such proceedings in Family Court under the Family Court Act.

5. Spousal Recovery Cases

a. Matter of Shah, 95 N.Y.S. 2d. 148, 711 N.Y.S. 2d 824(2000), the Court of Appeals recognized the doctrine of “spousal refusal” and upheld the refusing spouse’s right to transfer all of the institutionalized spouse’s assets to her, and to thereafter execute a “spousal refusal” to render the institutionalized spouse eligible for Medicaid nursing home benefits.
b. Department of Social Services v. Fishman, NYLJ July 23, 1998, p.21 (Supreme Ct. NY Co.), reversed, 713 N.Y.S. 2d. 152 (1st Dept. 2000). The trial court dismissed the complaint filed by Medicaid seeking reimbursement from the refusing spouse on that ground that they did not plead that income and resources of the refusing spouse were above the allowable levels at all times during the period that Medicaid had paid for the institutionalized spouse’s care. The complaint had instead only plead that there were excess resources at the time that eligibility was established.

c. The Appellate Division, First Department reversed, finding that: (Since “the furnishing of such assistance” to an applicant who has a “responsible relative with sufficient income and resources…as determined by the regulations of the department” who has failed or refused to provide assistance “creates an implied contract with such relative,” the implied contract is created at the time the responsive relative refuses to make his or her income available to provide care to the institutionalized spouse. A contrary interpretation would engraft on to the statute a requirement that DSS make continual reassessments of the responsible spouse’s “ability to pay.” 713 N.Y.S. 2d. At 154.
d. Commissioner of the Department of Social Services v. Mandel, N.Y.L.J., September 14, 2001, p. 18, col. 1, Supreme Court, New York County): Medicaid was awarded summary judgment on its claim that the community spouse owed Medicaid $319,656.50 for benefits paid on behalf of the institutionalized spouse. The Court held that the community spouse (assets exceeding $1.5 million) had sufficient ability to pay for his wife’s care. The community spouse’s argument that his assets included illiquid commercial real estate that should be considered exempt was rejected by the Court. The Court also ordered interest be paid.
e. Matter of Craig, 82 N.Y. 2d 388, 604 N.Y.S.2d 908 (1993), in which DSS sought recovery from the estate of the refusing spouse of a Medicaid recipient, the Court of Appeals held “recovery” against the refusing spouse’s estate in the nature of an implied contract for support is possible against the estate of the refusing spouse who was possessed of “sufficient ability” to provide support to the institutionalized spouse at the time that Medicaid paid benefits out on behalf of the institutionalized spouse. “The plain import of the Social Services Law (366(3)(a),… allows the belated recovery [emphasis added} from the responsible relative only if that party had sufficient means during that period of medical assistance was rendered.” 82 N.Y.2d at 393, 604 N.Y.S.2d at 911.
f. Matter of the Estate of Lois Link, 718 N.Y.S.2d 758 (App. Div. 4th Dep’t 2000): Medicaid was allowed to recover monies from the estate of the community spouse that it had paid on behalf of an institutionalized spouse. The Court opined that the community spouse had sufficient income and resources to pay for the institutionalized spouse’s care. It also determined that Medicaid was also entitled to interest at the rate of 9 percent per year from the date of each separate payment of medical assistance made on the institutionalized spouse’s behalf.

6. Recovery Against the Estate of a Refusing Spouse

– Claims against the estate of the institutionalized spouse are not permitted if he/she survived by the refusing spouse. However, at the time that the refusing spouse dies, a lien for the amount paid on behalf of the Medicaid spouse can be placed against the refusing spouse’s estate.88

– New York only seeks to recover against assets which are part of the Medicaid spouse’s estate and passing under a valid Last Will or in intestacy (does not include property passing by operation of law).89 However, this regulation would not protect the refusing spouse’s estate in the event that Medicaid seeks reimbursement for monies paid out on behalf of the Medicaid spouse.

– A 10 year statute of limitations prohibits Medicaid’s recovery of benefits paid 10 years or more after the Medicaid spouse’s death also applies to the refusing spouse and his or her estate.90 If the refusing spouse survives the Medicaid spouse by more than 10 years, and if Medicaid benefits were paid on behalf of the Medicaid spouse when he or she was 55 years or older, Medicaid has no claim against the refusing spouse or the refusing spouse’s estate.91

– In the event that the refusing spouse predeceases the Medicaid spouse, then a lien may be placed against the refusing spouse’s estate for benefits paid on behalf of the Medicaid spouse as long as Medicaid can show that the refusing spouse had “sufficient ability” to pay for the Medicaid spouse’s care during the period in question. Matter of Craig, supra (i.e., that the refusing spouse had resources and/or income above the CSRA and MMMNA levels respectively).

XIII. Spousal Right of Election

The elective share of a spouse is $50,000 or one-third (1/3) of an estate, whichever is greater. If the institutionalized spouse is receiving nursing home Medicaid and the refusing spouse dies without any provision in his or her Last Will for the institutionalized spouse, then Medicaid has the institutionalized spouse’s right to enforce his or her right of election (usually 1/3) against the deceased refusing spouse’s estate.92 The inaction of the surviving institutionalized spouse in not exercising the right of election may be deemed a transfer of assets or the failure to obtain an available resource, thus, rendering the institutionalized spouse ineligible for Medicaid.93

XIV. Waiver of the Right of Election

If the institutionalized spouse is receiving Medicaid benefits, the refusing spouse should consider not making any provision for the institutionalized spouse in his or her Last Will, in the event that the refusing spouse should predecease the institutionalized spouse. If the couple has simple wills leaving their estates to each other, the assets of the refusing spouse’s estate would be inherited by the institutionalized spouse, thus, disqualifying the institutionalized spouse from Medicaid.

However, Medicaid will have the right to assert the institutionalized spouses right of election of up to one-third (1/3) of the refusing spouse’s estate. A waiver of the right of election by the institutionalized spouse could prevent Medicaid from exercising the institutionalized spouses elective share.94 However, the waiver of the right of election will be deemed an
uncompensated transfer by Medicaid and a period of ineligibility for Medicaid will be imposed for the dollar value of the elective share waived.

142 U.S.C. (1396 et seq.1 42 C.F.R. (430 35 et seq.
2Soc. Serv. L. “363 et seq., 18 NYCRR ” 360.1 et seq.

3Soc. Serv. L. (62.
4Soc. Serv. L. “117,18 NYCRR ” 349.4, 360.2.
518 NYCRR ( 360-3.2(g)(5).
6Soc. Serv. L. (366(1),(2),(3).
7Soc. Serv. L. (366 (1)(a)(2), 18 NYCRR (360-3.3 (a)(3).
818 NYCRR (368.13.
9Soc. Serv. L. (366 (1)(a)(4),(7)
10Soc. Serv. L. (366 (1)(a)(2)
1118NYCRR (360-4.1.
1218 NYCRR (360-4.3 (b)(2) and 18 NYCRR (360-4.3(b)(3).
1318 NYCRR (360-4.6 (a).
1418 NYCRR (360-4.6 (b)(2)(iv), 18 NYCRR (360-4.6(a)(1) (xxii)
1518 NYCRR (360-1.4(e)
1626 U.S.C.A (408
1718 NYCRR “360-4.4; 4.6 (b)(2)(iii)
18GIS 98 MA/024
[email protected]
20NYSDSS 96ADM-8,(a)8
21Id @20
22Soc. Serv. L. (366 (2)(a); 18 NYCRR “360-1.4 (f), 4.7 (a)(1)
2318 NYCRR (360-1.4 (f), 18 NYCRR (360-4.3 (d)
2418 NYCRR (360-4.10
2518 NYCRR (360-7.11 (a)(3)
2618 NYCRR (360-4.6 (b)(1)
2718 NYCRR (360-4.7
28Soc. Serv. L. (209 (6)(b), General Business Law (453 (1)(b)
2918 NYCRR (360-4.7 (a)
30GIS 04 MA/031 Exhibit A
3118 NYCRR (360-4.9 (a)(1)
32Id @30
33Id @30
34Id @30
35Id @30
36Id @30
3742 U.S.C. (1896R-5(d)
38Soc. Serv. L. (366-c.2(h)
3942 U.S.C. (1396r-5(d)(1)(b); Soc. Serv. L. (366-c.4 (b)
4042 U.S.C. (1396Rr-5 (d)(5); Soc. Serv. L. (366-c.2 (g)
4122 U.S.C.A. (407
4218 NYCRR (360-4.10 (b)(6)
4342 U.S.C. (1896-5 (c)(1)
4518 NYCRR (360-4.10 (c)(2); Soc. Serv. L. (366 – c.5(a)
47Soc. Serv. L. (366-c.(2)(d), 42 U.S.C. (1896-5 (c)(1)
48Soc. Serv. L. (366-c.8(c)
49Social Security Act (1917, 42 U.S.C. (1396 p, Soc. Serv. L. (366.5.
50P.L. 103-66, 1993 H R 2264.
5118 NY CRR (360-4.4(c)(2)(i)(C),NYS Dept. of Soc. Serv. 96 ADM-8.
53Soc. Serv. L. (366.5(d)(4).
5418 NY CRR (360-4.4(c)(2)(iv)(a),GIS 04 MA/033.
55NYS Dept. Of Soc. Serv. Administrative Directive: 95 ADM-14.
5618 NY CRR (360-4.4(c)(2)(i)(a),(360-4.4(c)(2)(i)(a)(1), Soc. Serv. L. (366.5(d)(1)(i).
57Soc. Serv. L. (366(5)(d)(5).
58NYS Dept. Of Soc. Serv. 96 ADM-8.
6018 NY CRR (360-4.4(c)(1).
6418 NY CRR (360-4.4(c)(2)(iii)(c)(1)(i); Soc. Serv. L. (366.5(d)(3)(ii)(A).
6518 NY CRR (360-4.4(c)(2)(iii)(c)(1)(i); Soc. Serv. L. (366.5(d)(3)(ii)(A).
6618 NY CRR (360-4.4(c)(2)(iii)(b)(1)(iii); Soc. Serv. L. (366.5(d)(3)(i)(C).
6718 NY CRR (360-4.4(c)(2)(iii)(b)(1); Soc. Serv. L. (366.5 (d)(3)(i)(D).
6818 NY CRR (360-4.4(c)(2)(iii)(b)(1); Soc. Serv. L. (366.5 (d)(3)(i)(A).
6918 NY CRR (360-4.4(c)(2)(iii)(b)(2); Soc. Serv. L. (366.5 (d)(3)(i)(B).
7018 NY CRR (360-4.4(c)(2)(iii)(b)(2); Soc. Serv. L. (366.5 (d)(3)(i)(B).
7118 NY CRR (360-4.4(c)(2)(iii)(b)(3); Soc. Serv. L. (366.5 (d)(3)(i)(C).
7218 NY CRR (360-4.4(c)(2)(iii)(b)(4); Soc. Serv. L. (366.5 (d)(3)(i)(D).
73NYS Dept. Of Soc. Serv. Administrative Directive: 96 ADM-11.
74NYS Dept. Of Soc. Serv. Administrative Directive: 96 ADM-8.
7518 NY CRR (360-4.4(c)(2)(iii)(e); Soc. Serv. L. (366.5 (d)(3)(iv).
7618 NY CRR (360-4.4(c)(2)(iii)(d)(1)(iii); Soc. Serv. L. (366.5 (d)(3)(iii)(c).
77NYS Dept. Of Soc. Serv. Administrative Directive: 96 ADM-8.
7842 U.S.C. (1396K(a)(1)(A)
79Soc. Serv. L. (366(3)(a).
8042 U.S.C. (1396 P(c)(2)(A)(i).
8142 U.S.C. (1396K(a)(1)(A).
8242 U.S.C. (1396R 5(c)(3)(A); Soc. Serv. L. (366-C.5(b)
8342 U.S.C. (1396R-5(C)(3)(B).
8442 U.S.C. (1396R-5(c)(3)(C); Soc. Serv. L. (366-C.5(b)
8542 U.S.C. (1396R-5(b)(ii)
86Soc. Serv. L. (366.3(A)
87Soc. Serv. L. (366(3)(a)
8818 NY CRR (360-7.1(b)(2)
89Soc. Serv. L. (366(6)
90Soc. Serv. L. (104(b)
9118 NY CRR (348.4, (352.31(d)(5)
92EPTL (5-1.1-A(a)
9318 NY CRR (360-2.3 (c)(1)
94EPTL (5-1.1-A(e)

Enea, Scanlan & Sirignano, LLP