The Centers for Medicare & Medicaid Services has released the 2023 federal guidelines for how much money the spouses of institutionalized Medicaid recipients may keep, as well as related Medicaid figures.
What Are Spousal Impoverishment Rules?
Spousal impoverishment is a concern for older couples when there is one spouse who requires long-term care and applies for Medicaid.
Before the federal government enacted spousal impoverishment protections in the early 90's, many spouses faced poverty when their husband or wife needed long-term care and the couple had to spend all their assets down to $2,000 before the spouse in the nursing home could qualify for Medicaid. The spousal impoverishment rules are based on the idea that in marriage, spouses will provide for each other. There are rules for assets, income, and the home. This blog is about the 2023 update to the asset rules.
Protected Spousal Amount
In 2023, the spouse of a Medicaid recipient living in a nursing home (called the "community spouse") may keep as much as $148,620 without jeopardizing the Medicaid eligibility of the spouse who is receiving long-term care.
Known as the Protected Spousal Amount (PSA), this is the most that a state may allow a community spouse to retain without a hearing or a court order. While some states set a lower maximum, the least that a state may allow a community spouse to retain in 2023 will be $29,724.
Just because the government says the community spouse may keep as much as $148,620 does not mean the community spouse automatically gets to keep that much. The way it works is the Medicaid applicant spouse (spouse in the nursing home) and the community spouse must document and verify the amount of their assets as of a certain date. The total amount of Medicaid countable assets are divided in two, and the community spouse gets to keep half that amount, but no more than the maximum PSA of $148,620. The following are some illustrations:
Married couple A owns a total of $250,000 in Medicaid countable assets. The community spouse gets to half that amount, $125,000, as the PSA, the spouse in the nursing home gets to keep $2,000, and the remaining $123,000 (the amount at risk) either has to be paid to the nursing home or otherwise legally spent down before the spouse in the nursing home will qualify for Medicaid. The law also allows the couple to legally restructure the $123,000 so that it does not have to be paid to the nursing home or spent down but the government will not tell you about that or help you with it. It is important to protect the $123,000 amount at risk because the community spouse usually needs more than the PSA to meet their financial needs.
Married couple B owns a total of $600,000 in Medicaid countable assets. The community spouse gets to keep not half that amount, but instead just the maximum PSA of $148,620. This is because the formula to determine the PSA that is used by the government serves to set a range of Protected Spousal Amounts based on the total countable assets of the particular couple applying for Medicaid. When application of the formula results in an amount that exceeds the maximum PSA set by the government, the community spouse gets to keep the maximum PSA amount ($148,620) not half ($300,000 in couple B's example). Like couple A, the spouse in the nursing home of couple B gets to keep $2,000. Couple B's remaining $449,380 in countable assets (their amount at risk) has to either be paid to the nursing home, legally spent down, or, like in couple A's example, can also be legally restructured for the benefit of the community spouse.
Married couple C own a total of $25,000 in countable assets. Since this amount is less than the minimum $29,724 PSA the government has set for 2023, the spouse in the nursing home qualifies for Medicaid in this case and the community spouse gets to keep all of the $25,000 in assets. However, the government will not give the community spouse more assets to raise them to the minimum PSA of $29,724.
The above examples are summaries of a complex process for illustrative purposes. As such, you should get legal counsel from an experienced Medicaid planning attorney for a more detailed analysis of how the rules apply to your particular situation. Residents of Michigan are welcome to call me or contact me using the “contact us” form on the right.