Financial Protection When Your Spouse Needs Nursing Home Care – Part 2
This article concludes a two-part series about how state and federal law can save a nursing home resident’s spouse from poverty and how an experienced elder law attorney can help the spouse increase the amount of assets protected from expensive long-term care. In our first article (Financial Protection When Your Spouse Needs Nursing Home Care – Part 1), we described the Medicare Catastrophic Coverage Act (MCCA) passed by Congress in 1988 and some essential Indiana and Illinois asset (resource) and income eligibility concepts. This article explains how the Indiana Medicaid system evaluates married couples’ resources. We describe basic principles of how a skilled elder law attorney can help protect a married couple’s resources.
Terminology Review
Medicaid law is full of jargon and acronyms. It helps to write this article concisely if we use some of the jargon and acronyms. Therefore, we are using the following terms and acronyms:
- The community spouse lives independently in the community, and the institutional spouse lives in a nursing home.
- Resources are non-exempt assets under Medicaid resource laws.
- The CSRA(Community Spouse Resource Allowance) is the resource value that the community spouse may keep, and the ARA (Applicant Resource Allowance) is the resource value that the institutional spouse may keep.
- While Illinois only uses a fixed value for the CSRA ($109,560 in 2022, with significant scheduled increases from January 1, 2023, to January 1, 2034), Indiana uses the federal maximum CSRA amount ($137,400 in 2022), referred to as the “spousal impoverishment ceiling,” and at the federal minimum CSRA amount ($27,480 in 2022), referred to as the “spousal impoverishment floor.”
- The “snapshot” is the earliest date when the institutional spouse was admitted for inpatient care continuously for at least 30 days in any combination of one or more inpatient health care facilities on or after September 30, 1989. For example, if the institutional spouse were admitted to a hospital on September 30, 1989, and transferred directly to a rehabilitation facility three days later for 27 days of physical therapy, the combined time in the two facilities would meet the 30-day requirement and the “snapshot date” would be September 30, 1989.
- The “snapshot value” is the total value of the couple’s countable resources on the snapshot date. If, in the previous example, the couple’s combined countable resource value was $50,000 on September 30, 1989, the snapshot value would be $50,000.
Calculating CSRAs With Snapshot Values
Record keeping is a big deal for Hoosier married couples because the resource evaluation process determines the couple’s total resource value on two different dates. First, the Medicaid system calculates the snapshot value as it existed on the snapshot date to determine the community spouse’s CSRA. Then, the Medicaid system calculates the couple’s total countable resources as of the first day of the month in which the couple applied for Medicaid and the first day of each of the three preceding months. An institutional spouse is eligible for Medicaid for a whole month if the couple’s combined value of countable resources is less than the total value of the CSRA and ARA.
Here are some examples of a couple’s CSRA calculations:
- If an Indiana couple’s snapshot value is $300,000 in 2022, the combined resource allowance is $139,400 ($137,400 spousal impoverishment ceiling in 2022, plus $2,000 ARA) and the excess resource value is $178,780 ($300,000, minus $137,400 spousal impoverishment ceiling, and minus $2,000 ARA). If an Illinois couple’s snapshot value is $300,000 in 2022, the combined resource allowance is $111,560 ($109,560 Illinois CSRA in 2022, plus $2,000 ARA), and the excess resource value is $188,440. Indiana’s spousal impoverishment ceiling and spousal impoverishment floor increase yearly with federal cost-of-living adjustments, but the Illinois CSRA has been frozen at $109,560 for the past decade. However, a recent change in Illinois law will cause the Illinois CSRA to begin rising each year with the federal cost-of-living adjustments on January 1, 2023. The law will add $2,784 to the CSRA annually from January 1, 2024, to January 1, 2034.
- If the Indiana couple’s snapshot value is $200,000, the current combined resource allowance is $102,000 ($2,000 ARA, plus the Indiana CSRA, which is 50% of $200,000) and the excess resource value is $98,000 ($200,000, minus $100,000 Indiana CSRA, and minus $2,000 ARA). An Illinois couple with a $200,000 snapshot value would have access resources of $88,440 ($200,000 – $109,560 Illinois CSRA in 2022 – $2,000 ARA = $88,440).
- If the Indiana couple’s snapshot value is $25,000, the snapshot value is less than the spousal impoverishment floor ($27,480 in 2022), so the couple would be entitled to keep the entire snapshot value. An Illinois couple with the same snapshot value would have the same result because the snapshot value would be less than the Illinois CSRA.
“Spending” Resources Down to Resource Allowance Values
A couple’s combined resource value usually exceeds the total value of the CSRA and ARA when the institutional spouse enters a nursing home. Contrary to popular myth, the couple doesn’t need to pay all the excess resource value to the nursing home to qualify the institutional spouse for Medicaid. Instead, a skilled elder law attorney and help the couple make a strategic plan to reinvest the excess resources in assets exempt from treatment as countable resources.
A married couple can keep the same exempt assets as an unmarried Medicaid applicant, including:
- one vehicle of unlimited value;
- household goods and effects (furniture, clothing, and the other “stuff” most people keep in their drawers, pantries, cabinets, garages, attics, and basements);
- life insurance policies if the combined amount of their cash surrender values is less than $1,500;
- specific prepaid funeral arrangements;
- certain annuities that satisfy the Medicaid annuity rules; and
- specific arrangements for loans to other people that satisfy the Medicaid promissory note rules.
An unmarried Medicaid recipient can also keep a house if:
- the recipient is likely to return home (a physician’s letter is usually required as proof); or
- the recipient’s minor or disabled adult child lives in the home.
A married couple can keep a house, farmland, rental properties, and any other real property owned only by the community spouse. Additionally, the community spouse’s IRA or similar retirement plan assets are exempt.
Timing Issues Affecting Resource Allowances
Old Snapshot Dates
The federal Medicaid rule establishes snapshot dates as far back as September 30, 1989. If the institutional spouse had a snapshot date many years ago, the old snapshot date would create record-keeping and resource allowance problems for the couple.
The record-keeping problem is that it may be hard to find health care records showing the institutional spouse’s initial admission date and final discharge date to verify the snapshot date. The record-keeping problem can be more complicated if the institutional spouse is admitted to one facility and transferred to one or more other facilities. It would be necessary to prove each facility’s admission date and discharge date to connect the dots for evidence of a continuous 30-day institutionalization. Many financial institutions did not retain customer records for longer than a decade when they relied on paper records, so an old snapshot date could create even worse financial records problems. A skilled elder law attorney may request the Medicaid system’s assistance with establishing the snapshot date and snapshot value if the attorney can show that the couple made reasonable efforts to find and obtain the old records. Still, suppose a married person had a snapshot date from an old health crisis. In that case, the couple should start gathering copies of the old health care and financial records for that period as soon as possible and preserve them for future use in a Medicaid application.
Usually, a person’s wealth grows over time if the person pays down debt, saves money, and invests savings for retirement. If an institutional spouse’s hospitalization established an old snapshot date long ago, the couple’s current resource value might be much larger than the old snapshot value. In that case, the loan snapshot value may cause the CSRA to be smaller than it would be if the institutional spouse’s snapshot date were more recent.
Premature Resource Reinvestment in Exempt Assets
Many people mistakenly believe that a married couple should prepay funeral costs and make other investments in assets that are exempt from treatment as countable Medicaid resources. A Hoosier couple’s premature investment in exempt assets can create the same problems that Hoosier couples with old snapshot dates face – small CSRA values. We wrote about this and other mistakes married couples often make in our blog article, SpousesSpouses of Nursing Home Residents: Avoid These Medicaid Traps!
For a premature exempt asset investment example, suppose a Hoosier couple with combined countable resources worth $200,000 spends $20,000 on prepaid funerals before the snapshot date. In that case, the the prepaid funeral investment will reduce couple’s combined resources to $180,000, which will reduce the CSRA from $100,000 to $90,000, leaving $88,000 of excess resources ($200,000 – $20,000 = $180,000; $180,000 ÷ 2 = $90,000; $180,000 – $90,000 – $2,000 = $88,000). The premature funeral prepayment also eliminates funeral prepayment as an excess resource reinvestment strategy. The removal of funeral prepayment requires the couple to reinvest excess resources in some other exempt investment category. The community spouse may be able to invest some or all the remaining excess resources in a new car or updated household appliances and furnishings. However, the community spouse may have to make a sophisticated investment in a Medicaid-compliant annuity or a Medicaid-compliant loan agreement to reduce the excess resources sufficiently for the institutional spouse’s Medicaid eligibility. Most importantly, the value of the community spouse’s available cash and other liquid resources will be $10,000 less than if the couple had delayed the prepaid funeral investment until after the snapshot date.
Imagine another Hoosier couple waiting to prepay their funerals until after the snapshot. In that case, the CSRA is $100,000 ($200,000 ÷ 2 = $100,000) and the excess resource value is $98,000 ($200,000 – $100,000 – $2,000 = $98,000). Then, the couple can prepay the funerals they would have otherwise purchased and reduce the excess resources from $98,000 to $78,000. It may be easier in this case for the community spouse to invest the remaining excess resources in a new vehicle and updated household furnishings and appliances. Best of all, unlike the other community spouse with a $90,000 CSRA, this community spouse can leave the $100,000 CSRA in an ordinary checking account – a big liquidity difference!
Elder Law Attorneys’ Case Management & Resource Protection Services
A typical institutional spouse’s Medicaid application can include hundreds of pages of income tax returns, account statements, deeds for real estate, and other documents. Elder law attorneys have document management systems that help organize the paper mountain and avoid time-consuming eligibility delays. Experienced elder law attorneys study Medicaid caseworker preferences to anticipate caseworker document requests and provide required documentation quickly and efficiently.
An elder law attorney helps a community spouse protect resources by advising the community spouse on legitimate investment decisions that lawfully convert countable resources into exempt assets. Some investment decisions can be as simple as trading a couple of old vehicles for a brand-new, reliable car with a manufacturer’s warranty. Other investment strategies range from home improvements to investments in specially designed annuities or certain other kinds of income-producing assets. However, it is essential to remember that general practice lawyers, nursing home employees, and investment advisors lack the advanced training and knowledge that enable experienced elder law attorneys to provide sound asset protection advice.
Beware of Amateur Medicaid Planning
Community spouses that try to qualify for Medicaid without experienced elder law attorney assistance risk tens of thousands of dollars. Medicaid law is full of tricky rules, constantly changing policies and procedures, and asset transfer penalties. Experienced elder law attorneys know how to avoid Medicaid traps because they monitor the Medicaid system daily and share information about sudden, unannounced changes in Medicaid policy and procedures that occur almost every month.
About the Authors
Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers and active members of the Indiana State Bar Association and National Academy of Elder Law Attorneys. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a Fellow of the American College of Trust and Estate Counsel, a member of the Illinois State Bar Association, and the 2014-15 President of the Indiana State Bar Association.
Please find more information about these and other topics at www.HawkinsElderLaw.com, like us on Facebook, follow us on Twitter @HawkinsElderLaw or call us at 812-268-8777. © Copyright 2022 Hawkins Elder Law. All rights reserved.
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