Newly Updated Article -- "Some Thoughts on the Effects of Marital Status on MassHealth Eligibility"
[November 14, 2006]
Donald N. Freedman

In the context of MassHealth eligibility for nursing home services, marital status affects the financial rights and responsibilities of married and unmarried couples differently, in relation to assets, income, transfers and trusts. In the following sections, I will summarize the ramifications of three circumstances: that of (1) married couples, (2) legally separated couples, and (3) divorced or unmarried couples.

Married Couples

Ordinarily, the assets of both members of a married couple, one of whom is in a nursing home (referred to as the institutionalized spouse), are considered available to the institutionalized spouse for MassHealth eligibility purposes, unless the assets are excluded from consideration by law. The most important exclusions are for the principal residence (of either spouse), retirement accounts associated with the current employer of either spouse, annuities in payment status, certain trusts and pre-paid funeral and burial arrangements. Also disregarded is a “community spouse resource allowance” ordinarily limited to $99,540 of otherwise available assets at the date of institutionalization (unless the income of the community spouse, in relation to certain living expenses, is very low) and an “asset allowance” of $2,000 for the institutionalized spouse. Assets of the community spouse accumulated, inherited, or obtained from the sale of exempt assets after the date of initial MassHealth eligibility of the institutionalized spouse are also disregarded.

Regarding income in the context of a married couple, the income of the community spouse is disregarded for purposes of determining the eligibility of the institutionalized spouse, without limitation. All income of the institutionalized spouse on MassHealth must be applied toward the cost of care except to the extent that certain deductions are available by law. The deductions are for (1) a personal needs allowance of $60 per month; (2) a deduction for other necessary health care (such as a personal care attendant) or health insurance (such as Medex); (3) a deduction for the support of minor or dependent disabled children; (4) a deduction to maintain the home where return is medically likely within six months; and (5) a deduction for the support of the community spouse.

The deduction for the support of the community spouse is intended to reduce any shortfall between the community spouse’s own income and the highest level of income needed, as determined on the basis of either of two pertinent methodologies: an amount determined by applying a standard formula set by law, taking only certain particular living expenses into account; or an amount determined after an administrative hearing, taking certain extraordinary living expenses into account.
The highest deduction available under the standard formula, applied in the normal course of the MassHealth application process, is currently $2488.50 per month, less the community spouse’s own income.

For purposes of obtaining a higher deduction through means of an administrative hearing, only “exceptional circumstances resulting in significant financial duress” may be considered. Since the standard formula itself supposedly takes into full account the basic necessities of shelter, food and clothing, ordinarily only extraordinary expenses resulting from the individual’s medical condition or frailty are pertinent for the hearing. Common examples would be costs of an assisted living placement made necessary by the individual’s special need for care or supervision, day care or unreimbursed medical and dental expenses.

Transfers by either spouse (other than to the other sposue) within a certain time prior to filing for MassHealth for nursing home services (the “look-back” period) may result in a period of ineligibility unless a specific exception applies.

Transfers prior to February 8, 2006 (the effective date of Medicaid amendments under the Deficit Reduction Act of 2005), are subject to the following restrictions. The “look-back” period is 36 months from the time of filing, other than for transfers to or distributions from certain types of trusts (in which case a look-back period of 60 months applies). Transfers within the look-back period may or may not affect current eligibility, depending on the timing and value of the transfer or transfers.

Transfers on or after February 8, 2006 are subject to even more restrictive limitations. For one thing, the look-back period is extended to five years for any transfer. Also, changes in the methodology for determining the start-date for any period of ineligibility resulting from a transfer are quite punitive.

In any case, transfers between spouses are permitted without limitation or qualification.

The treatment of trusts in the MassHealth context is very complicated, and any full description would be wildly beyond our scope. Let me highlight a few considerations as they relate specifically to marital status.

Basically, the principal of a revocable trust is treated as an available marital asset, even if the assets composing the trust would not be considered available if held outright, for example, the principal residence.

Generally, an irrevocable trust funded during lifetime by either spouse, where the trustees have discretion under any circumstances to distribute income or principal, or both, results in trust income or principal, or both, as the case may be, being considered fully and indefinitely available for MassHealth eligibility purposes. This adverse result continues even after divorce, and even after the death of the first spouse.

On the other hand, principal and income of discretionary trusts funded by a third party, including an ex-spouse, are considered available to the beneficiary only to the extent of direct distribution to the community or institutionalized spouse, as the case may be. Similarly, the principal and income of trusts funded by will for the benefit of the spouse, whether as a testamentary or pour-over trust, are considered available only to the extent of direct distribution.

Legally Separated Couples

Regarding assets, transfers and trusts, the same rules apply to legally separated couples as to married couples.
Regarding income, the same provisions apply as for married couples, but there is an important addition to the options available to maximize the amount of income the community spouse may keep for her support. MassHealth is required to allow a spousal income deduction form the institutionalized spouse’s income for the amount of a court order of support. A court order need not be limited by the maximum spousal income allowance deduction (currently set at $2,377.50). Thus, only through the use of a court order can general considerations of accustomed manner of living be taken into account. A voluntary agreement for separate support should also be honored by MassHealth, provided that the agreed level of support is also reflected in an order of the court.

Non-Cooperating Spouses

The discussion of MassHealth for married couples above begins with the statement that “ordinarily” the assets of both members of a married couple, one of whom is in a nursing home, are considered available to the institutionalized spouse for MassHealth eligibility purposes. We now come to consider the circumstances under which this is not the case. Under the Regulations, the Office of Medicaid will not deny MassHealth coverage to an institutionalized spouse whose community spouse refuses to cooperate in making available assets in excess of the community spouse resource level, or information on assets (or whose whereabouts are unknown).
In other words, the institutionalized spouse who has countable assets under $2,000 assets may be eligible even though his or her spouse in the community has assets in excess of the applicable community spouse resource allowance level (ordinarily $99,540). For this exceptional result to apply, the institutionalized spouse must assign any rights of support from the community spouse to MassHealth (unless the individual lacks the physical or mental capacity to do so); and the institutionalized spouse must submit evidence that the community spouse is failing to disclose his or assets or is otherwise failing to cooperate in the MassHealth application process.

Theoretically, MassHealth could then file a separate support action on behalf of the institutionalized spouse who is on MassHealth. As a practical matter, we are not aware of a case in which MassHealth has brought such a support action.

A pre-nuptial agreement may play a protective role in this context, for example, in the circumstances of a later-life re-marriage where the spouses desire not to assume responsibility for each other’s long-term care and where the level of assets is such as to make MassHealth a potential need for either. With an assignment of rights, the state should be seen by the court as having no more or less rights to support than the assignor. At least if the matter of support for long-term care is explicitly within the scope of the pre-nuptial agreement, then some protection may be afforded. However, models of agreements in common use are often limited in scope to support only in the context of divorce, whereas the probate court in Massachusetts has the power to order support also in the context of separate support and guardianship. Pre-nuptial agreements where spousal responsibility for long-term care is a matter of concern should be drafted accordingly, and leave as little as possible to implication.

Unmarried or Divorced Couples

The assets of members of a divorced couple are not considered available to one another, except to the extent provided in the divorce agreement or judgment. (An applicant for MassHealth must assign any rights of support to the Commonwealth.) From the perspective of the institutionalized individual, his or her assets alone are considered available for purposes of determining eligibility. The same general exclusions as listed above for married couples apply here as well, except for the $99,540 community spouse resource allowance. The non-availability of the community spouse resource allowance is a disadvantage, however, only where the non-institutionalized ex-spouse has assets below the community spouse resource allowance level.
The asset limit for the institutionalized individual is $2,000. The income and assets of the ex-spouse who is not institutionalized are not required to be used for the institutionalized ex-spouse’s care, absent a support obligation deriving from court order or divorce agreement.

Regarding income, as with married and separated couples, the income of the ex-spouse living in the community has no bearing on the eligibility of the institutionalized spouse and he or she is under no obligation to assist in payment for care.

There is, however, a major difference between the MassHealth treatment of a separate support order and an alimony order entered in the context of a divorce. If an institutionalized spouse is ordered by a court to pay separate support, MassHealth will permit a deduction from the institutionalized spouse’s income to allow the institutionalized spouse to pay the amount ordered, as described above. In contrast, if the couple is divorced and the institutionalized spouse is ordered to pay alimony, MassHealth will not allow a deduction from the institutionalized spouse’s income to satisfy the court ordered alimony. To the extent that the institutionalized ex-spouse follows the court order and makes alimony payments to the ex-spouse from his or her income, there would be a shortfall in the amount paid overall to the nursing home. And since non-payment of nursing home expenses is one of the few grounds available to a nursing home for involuntary discharge of a patient, the institutionalized ex-spouse is placed in an impossible situation – pay the ex-spouse and risk discharge form the nursing home or pay the nursing home and risk contempt of the court order to pay alimony. At least two Superior Court decisions have supported the MassHealth position disregarding alimony orders when determining the amount that must be paid to the nursing home. Thus, a divorced spouse dependent on alimony may as a practical matter be deprived of support as the result of the institutionalization of the ex-spouse, regardless of provisions to the contrary in the divorce agreement or court order.

However, the court may consider all resources available to the institutionalized ex-spouse in determining his capacity to comply with the alimony order, not just income. Circumstances may well arise where the institutionalized ex-spouse has resources aside from income which are non-countable for MassHealth purposes for one or another reason. For example, an asset which the MassHealth applicant or member owns in conjunction with another person who refuses to join in sale may be considered inaccessible for MassHealth purposes, under 130 CMR 520.006. Whether the court will be satisfied that the asset is truly inaccessible for purposes of excused non-compliance with a court order of support is another matter. What of a simple two-signature bank account? What if the MassHealth applicant or member facilitated the inaccessibility by having sold or given away a minority interest in the asset to another who could be counted on to refuse sale?

The principal residence of the MassHealth applicant or member is non-countable for MassHealth purposes, without reference to the medical possibility of the individual ever returning home. 130 CMR 520.008(A). The court certainly need not be bound to this rule, however, in determining the availability of the house to satisfy support obligations.

Similarly, certain business and non-business property is non-countable for MassHealth purposes, 130 CMR 520.008(B), as are loans and grants. Assets in Keogh plans are non-countable if they include employees in addition to the MassHealth applicant or member and spouse. 130 CMR 520.007(C)(2). Assets in pension funds are non-countable if set aside for the individual by his “current” employer. 130 CMR 520.007(C)(3). But often an individual even on indefinite medical leave is permitted to retain his employee status for insurance and other benefit purposes.

Return to Articles List