What is Spousal Refusal?
Spousal Refusal, which has been dubbed, “just say no,” is when a non-applicant spouse of a long-term care Medicaid applicant refuses to help pay the cost of long-term care for their spouse. While spouses are legally obligated to financially support one another, Medicaid cannot legally deny care if a non-applicant spouse refuses to contribute towards their spouse’s care costs. Furthermore, Spousal Refusal law asserts that non-applicant spouses are entitled to retain their assets by refusing to make them available to their applicant spouse.
This Medicaid planning strategy can be used when one spouse of a married couple requires Nursing Home Medicaid, or in some cases, Medicaid long-term Home and Community Based Services (HCBS) via a Waiver. Non-applicant spouses are often called healthy spouses or community spouses and applicant spouses are frequently called institutionalized spouses. Don’t let the term, “institutionalized”, confuse you. While the “institutionalized” spouse might reside in a nursing home, that spouse could just as likely receive long-term care services in the home or community, such as in assisted living.
Spousal Refusal, although it is a federal Medicaid law, is not currently utilized in all states as a means to protect assets for non-applicant spouses of long-term care Medicaid applicants. The only states in which it is generally practiced are Florida, New York, Ohio, and Rhode Island.
Why and How Spousal Refusal Works
To understand Spousal Refusal as a Medicaid planning tool, we need to back up; Medicaid has both income and asset limits in order for a senior to qualify for long-term care. While these income and asset limits vary based on the state and the marital status of an applicant, generally speaking, the income limit for a married long-term care Medicaid applicant in 2024 is $2,829 / month and the asset limit is $2,000. One big exception is California; the state eliminated their asset limit effective 1/1/24. Another exception is New York with an applicant asset limit of $30,182. See state-by-state financial eligibility criteria.
When a Nursing Home Medicaid / HCBS Medicaid Waiver applicant is married, only their income is used to determine income eligibility, or phrased differently, the non-applicant spouse’s income is not calculated towards the income eligibility of the applicant spouse. More on how Medicaid counts income. Assets, on the other hand, are considered jointly owned. This means assets in the name of the applicant spouse, as well as the name of the non-applicant spouse, are added together and considered towards Medicaid’s asset limit.
To ensure non-applicant spouses of Nursing Home Medicaid applicants and Medicaid Waiver applicants have sufficient income and assets from which to live, there are Spousal Impoverishment Rules. There is a Spousal Income Allowance, called a Monthly Maintenance Needs Allowance (MMNA), which allows an applicant spouse to transfer their income to their non-applicant spouse to bring that spouse’s monthly income up to a specified amount. In 2024, this amount is between $2,465 (eff. 7/1/23 – 6/30/24) and $3,853.50. There is also a Community Spouse Resource Allowance. In 2024, a non-applicant spouse can keep up to $154,140 of the couple’s assets in addition to the $2,000 in assets (or $30,182 in New York and unlimited in CA) the applicant spouse can retain. Since CA no longer has an asset limit, the CSRA is irrelevant. Some higher valued assets are exempt (non-countable) towards Medicaid’s asset limit. This generally includes the couples’ primary residence, household items and appliances, a vehicle, and burial plots. See state-specific MMNAs and CSRAs.
If the couple has assets greater than the allowable Medicaid limits, Spousal Refusal can protect additional assets for the community spouse. With Spousal Refusal, the community spouse’s assets are not considered in calculating the asset eligibility of the applicant spouse. Put differently, all assets in the non-applicant’s name are disregarded. Furthermore, in New York, if a non-applicant spouse has income in excess of the Spousal Income Allowance ($3,853.50 / month in 2024), they are obligated to contribute 25% of their income towards their spouses long term-care. If Spousal Refusal is used as a Medicaid planning technique, the non-applicant spouse will not have to use any portion of their income towards their spouse’s cost of care.
Spousal Refusal Steps
Step 1 – Assets in excess of Medicaid’s applicant asset limit are transferred to the non-applicant spouse, allowing the applicant spouse to meet the asset limit. This is not in violation of Medicaid’s 60-month Look-Back Period, in which Medicaid penalizes Medicaid applicants for transferring assets without fair market payment. Medicaid allows applicant spouses to transfer assets to their non-applicant spouses without penalty.
Step 2 – A notice of Spousal Refusal, which is a written statement of refusal to contribute towards the cost of care, must be signed by the non-applicant spouse and submitted to the Medicaid agency. This statement of refusal results in the Medicaid applicant’s eligibility calculated as if they were a single applicant. This means that whatever financial means the non-applicant has will not be considered when determining the applicant spouse’s eligibility.
Step 3 – Along with the Medicaid application process, the applicant must also complete a Spousal Refusal form. Since the non-applicant spouse has refused to “support” their spouse, this form assigns the right to support to the state. It also allows the state to sue the non-applicant spouse for reimbursement of costs it pays for the applicant spouse’s care.
When Spousal Refusal Might be Considered a Good Option
Spousal Refusal might be a good option for married couples with a significant amount of assets and one spouse requires Medicaid-funded nursing home care. With the nationwide average cost of nursing home care at approximately $7,908 / month ($94,896 / year), a couple can quickly deplete a large amount of their nest egg. Spousal Refusal might also be a good option when the community spouse will not be able to live off Medicaid’s allowable spousal allowances (income allowance and resource allowance) and the couple have a large amount of assets. Furthermore, it can be beneficial in New York when the non-applicant spouse has a very high monthly income.
Negative Implications / Legality of Spousal Refusal
A state’s Medicaid agency can legally pursue a lawsuit against the non-applicant spouse for refusing to contribute towards their spouse’s long-term care. While this rarely happens, one must prepare for this possibility. The non-applicant spouse may receive a letter from the state demanding repayment of care costs in the amount it has paid for the Medicaid beneficiary spouse. If this happens, one can repay the state in the amount that it requested, negotiate a different amount, or refuse to pay any amount and chance a lawsuit. Even if a non-applicant spouse repays the state, the amount should be approximately 25% – 33% less than would have been the cost if the spouse had not become a Medicaid beneficiary. This is because the Medicaid pay rate is lower than the private pay rate.
In Which States is Spousal Refusal Appropriate?
While Spousal Refusal can, for all intents and purposes, be utilized in all states as a Medicaid planning technique, it predominantly has only been allowed in Florida, New York, Ohio, and Rhode Island. Connecticut has claimed they do not allow Spousal Refusal, but it was upheld by a federal court in 2005. Even if a state claims they do not allow Spousal Refusal, one could hire an attorney in an attempt to enforce it. The cost of hiring an attorney could ultimately result in a court decision of Spousal Refusal and save significant assets for the non-applicant spouse.
Necessity of Working with a Medicaid Planning Professional
A Medicaid Planning Professional can help you determine if Spousal Refusal is the right planning strategy for you and your spouse. Remember, all assets are not counted towards Medicaid’s asset limit. A professional can assist in calculating your exempt and non-exempt assets, determining the amount in which the Community Spouse Resource Allowance and Monthly Maintenance Needs Allowance would be, and weighing if Spousal Refusal might financially be the best option. If countable assets are not significantly greater than the combined applicant asset limit and Community Spouse Resource Allowance, another option might be better. If Spousal Refusal is the best choice, Medicaid Planning Professionals can assist with the Spousal Refusal process, such as filing / submitting the appropriate documentation and dealing with a demand letter for repayment of care services. Contact a Medicaid Expert.
Alternatives to Spousal Refusal
There are other Medicaid planning tools that can be used in place of Spousal Refusal. For instance, if a couple’s countable assets are not significantly greater than the combined applicant asset limit and the Community Spouse Resource Allowance, one option would be to spend down excess assets. Ways to do this without violating Medicaid’s Look-Back Rule is to pay off debt (i.e., mortgage or credit cards), make home repairs and modifications, including an addition to the home, or buy a Medicaid device that is not covered by insurance (i.e., hearing aids). Essentially, when one modifies their home or purchases hearing aids, they are utilizing countable assets and turning them into exempt assets. Another option to lower countable assets would be to purchase an Irrevocable Funeral Trust, which allows applicants and their spouses to prepay funeral and burial expenses. Yet another alternative, but one for couples that have a significant amount of assets, is Medicaid Divorce. With this Medicaid planning strategy, the couple legally divorces in order to protect assets for the non-applicant spouse.