Does ‘Spousal Impoverishment’ Protect against Medicaid Recovery?

Long-term care costs nearly $100,000 a year, so assets can quickly be wiped out.

KMAland’s recent article entitled “'Spousal Impoverishment' Preserves Assets from Medicaid Recovery” explains that states must "recover" funds Medicaid spends on in-home or out-of-home nursing care for those 55 and older. However, the Spousal Impoverishment program lets the healthy spouse save some of their assets, such as their house, if the spouse continues to live there.

If one spouse needs nursing home care, they should request a "Spousal Impoverishment" assessment through the Department of Health and Human Services. This entails dividing their total assets in half.

They look at half of the assets that go to the spouse, who will be considered the one needing the nursing care. So, for example, that person needs to spend their assets down to $4,000 in Nebraska to qualify for Medicaid.

The family home isn’t considered when totaling the couple's assets. However, once the spouse needing care qualifies for Medicaid, the house should be transferred to the name of the spouse still living there. That individual is called the "community spouse."

If this is not done, and the community spouse dies first, the house becomes eligible for Medicaid recovery. However, again, that’s because it’s considered an asset of the spouse receiving Medicaid.

The "community spouse" can keep a maximum of roughly $137,000 and a minimum of approximately $27,000. They can also keep their income up to just over $3,400 a month, with amounts adjusted annually based on inflation.

By waiting on the Medicaid assessment until the couple’s assets have further dwindled, the community spouse may qualify to keep a lower amount.

Note that assets given away within five years of applying for Medicaid, the "look-back" period in most states, will be considered when determining total assets. This won’t permanently disqualify a person from Medicaid but will result in a "penalty period."

States’ Spousal Impoverishment Program and Medicaid Recovery both include several exceptions and special considerations. Seniors should speak to an experienced elder law attorney and not delay seeking a Spousal Impoverishment assessment if they anticipate needing Medicaid.

Reference: KMAland (March 19, 2023) “'Spousal Impoverishment' Preserves Assets from Medicaid Recovery”