FAQ: What happens when two spouses both enter the nursing home?

by Jerrold Bartholomew

When both spouses of a married couple need nursing home care, the most immediate result is a catastrophic bill of $12,000.00 per month or more. Without the advice of an elder law attorney, the couple will continue to spend down assets until their assets reach just $4,000.00 in cash. Substantially better results can be achieved with some planning, but understanding how to proceed in these circumstances is a delicate matter. The rules are counter-intuitive.

Michigan’s Program Eligibility Manual (which is used by the Department of Human Services to determine eligibility for Medicaid) does not have any clear policies on point to help families facing this situation. The rules allowing a healthy spouse to shelter assets above $2,000.00 do not apply because both spouses are in the nursing home. There is therefore no community spouse.

If any assets are transferred, it appears that the couple will face a shared penalty. What this means is that if the couple were to divest $63,260.00, they would both face a penalty of five months each ($63,260 / $6,326.00=ten months. But divide by two because of the shared penalty). The shared penalty rules are discussed at PEM 405, p11 and read as follows:

A client can be penalized if he or his spouse divests. The penalty is

imposed on whichever spouse is in a “Penalty Situation.” If both

spouses are in a penalty situation, the penalty period (or any remaining

part) must be divided between them.

Example: Mr. Brown is in LTC and under a divestment penalty for 1/1/

04 through 12/31/05. On 9/9/04, Mrs. Brown enters LTC and applies for

MA. She is eligible for MA starting in September. There are 16 months

of penalty left (9/04 – 12/05). Each spouse must serve 8 months. Mr.

Brown’s penalty is now 1/1/04 through 4/30/05. Mrs. Brown’s penalty is

9/1/04 through 4/30/05.

At the outset, I would mention that having the spouses share the penalty makes sense on an intuitive level. But we should expect a little more from the government. The actual rules controlling this situation are not what one would expect.

When two spouses are in the nursing home, it does not follow that gifts by one will result in penalties for both. This is because two spouses in a nursing home are treated as financially separate for purposes of Medicaid eligibility.

When determining financial eligibility for Medicaid, it is important to determine whose assets and income will be counted. There are different rules for making this determination depending on the type of Medicaid for which one is applying. For SSI-related MA, it is clear that the general rule is that an adult applicant forms a fiscal and asset group of one. Fiscal group rules are generally designed to impose financial responsibility among non-traditional living arrangements. But for L/H Patients, there is a clear exception “even if he lives with his spouse.” In other words, no rule to create financial responsibility between spouses will generally be imposed, even if they live together (which is the broadest net DHS casts for capturing assets). The rules prohibit expanding the fiscal group for SSI-related Medicaid where one person who generally lives in the same household is in long term care-and an intention to return to the household is specifically mentioned as not being an exception to this policy. Here is the relevant rule (PEM 211, p5):

SSI-Related Adult SSI-Related MA

An adult’s fiscal and asset groups are:

  • The adult for an L/H patient, a waiver patient (see PEM 106) and a

Freedom to Work customer even if he lives with his spouse.

Exception: When PEM 402 instructs you to determine a couple’s

countable assets for an “INITIAL ASSET ASSESSMENT” or “Initial

Eligibility,” the L/H or waiver patient and his community spouse are

considered an asset group.

In other words, when two spouses are in the nursing home, each long term care resident is a separate applicant for Medicaid. PEM 402 (the community spouse rules) are an exception to this rule. But where both spouses are in the nursing home, they are separate fiscal groups (of one).

On a practical level, this means that one spouse can qualify for Medicaid while the other spouse carries out asset protection planning. While asset protection planning for one in the nursing home generally means carefully managing a penalty period, it is nonetheless possible to protect a significant portion of a married couple’s estate from the enormous expense of two nursing home stays.

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