What Happens When Your Spouse Goes into a Nursing Home Paid for by Medicaid?

Page Reviewed / Updated - Jul. 2019

Introduction

When a spouse enters a nursing home paid for by Medicaid and the other spouse is healthy and can live independently, couples have many questions. Some questions are financial in nature, such as what happens to each of the spouse’s income, while other questions relate to their home and other assets. In this article, we address these pressing questions and concerns in order to put families at ease.

In brief, the federal government has written a law to ensure the healthy spouse does not go broke and is not left without a place to live when their spouse enters a nursing home. In Medicaid-speak, this law is referred to as Spousal Impoverishment Protection, Spousal Impoverishment Law, or Division of Assets. This law ensures the spouse that is not in a nursing home has sufficient funds to live by protecting a set amount of income and assets.

It should also be emphasized that this article is about nursing homes paid for by Medicaid. Nursing home care costs anywhere from $153 to $963 per day, depending on one’s state of residence. Medicaid pays for nursing home care for most Americans who require it. However, one must be financially eligible for Medicaid. Medicare does not pay for long term nursing home care.

Finally, to avoid confusion, readers should be aware there are several different terms used to describe the non-institutional spouse, which include “Community Spouse,” “Healthy Spouse,” and “Well Spouse.” There are also terms used for the spouse residing in the nursing home and these are “Institutionalized Spouse” and “Needy Spouse”.

Do you have questions about what happens when your spouse enters a nursing home that are not addressed in this article? Let us know
Will I lose my income?

No, you, as the healthy spouse, will not lose your income, including Social Security. In fact, your income, as the Non-Institutionalized Spouse is not even considered when your spouse applies for Medicaid, and has no impact on whether your spouse is eligible for this program. It is only your spouse’s income that will be considered for eligibility purposes.

Although your income is not a factor in your spouse’s eligibility, a few states require the community spouse to contribute a portion of their income towards the cost of the nursing home care, IF their income exceeds a certain amount. However, even if this is the case, you, as the healthy spouse, will not have to contribute to the point that you will not have enough income on which to live.

Do I lose the income of my spouse who’s in a nursing home?

One doesn’t necessarily lose the income of their institutionalized husband or wife simply because that spouse moves into a nursing home paid for by Medicaid. Whether you, as the healthy spouse, can receive your spouse’s income depends on your own income, and if you need the extra income to support yourself.

How much of your institutionalized spouse’s income you receive is based on something called the Minimum Monthly Maintenance Needs Allowance (or MMMNA). The MMMNA is the minimum amount of income to which a healthy spouse is entitled monthly. In simplified terms, if your income is determined to be below the MMMNA, then your income can be supplemented with your spouse’s income to meet the MMMNA. As of July 2019, the federal government has set the MMMNA at $2,113.75. Two exceptions are Alaska ($2,641.25) and Hawaii ($2,432.50), which have higher MMMNA’s due to the increased cost of living. (These figures increase in July of each year).

The federal government also sets a maximum monthly maintenance needs allowance, which as of January 2019, is $3,160.50. (Unlike the MMMNA, the maximum monthly figure changes each January). The maximum monthly maintenance needs allowance calculation is based on a rather complicated formula that takes your housing costs into consideration. 

While the federal government sets this minimum and maximum monthly income allowance, some states use just one standard figure within the given parameters. For instance, as of 2019, California and Texas both use a standard spousal income allowance of $3,160.50, and Illinois has a standard figure of $2,739. 

Generally speaking, if your income is less than between $2,113.75 and $3,160.50 per month, then you are entitled to keep some of your spouse’s income.

Example 1:  The Medicaid agency in your state has determined your monthly maintenance needs allowance is $2,700. You, as the healthy spouse, have a monthly income of $2,800. Therefore, your income is $100 / month over the MMMNA, and your spouse cannot supplement your income with his or her own income. However, you can keep all your income and your spouse will have their nursing home care paid for by Medicaid.

Example 2:  You live in a state where the Medicaid agency has set your monthly maintenance needs allowance at $2,450. As the non-institutionalized spouse, your monthly income is $2,000. This means that your incomes falls $450 / month under the MMMNA, and your spouse is able to transfer $450 / month of his or her income to you to meet your state’s MMMNA.  
Will my spouse in the nursing home lose their income?

The short answer is yes, they will lose most of their income. When your spouse enters a nursing home that is paid for by Medicaid, he or she is only able to keep a small portion of their monthly income. This is called a Personal Needs Allowance (PNA), and can be used on anything your spouse wishes, such as salon services, magazines, hygiene products, and clothing. The amount of the monthly personal needs allowance varies by state. For example, in 2019, the PNA in Colorado is $86.95 / mo., in Massachusetts it is $72.80 / mo., and in Illinois it is $30 / mo.

There is one exception to this rule. If, you, as the healthy spouse have income that falls below the Minimum Maintenance Needs Allowance (see question above) for your state, or are determined to be entitled to a higher spousal allowance based on shelter costs, a portion of your institutionalized spouse's income can be transferred to you.

Will I lose my home?

No. If you, the community spouse, continue to live in your home, you will not lose it, regardless of the value. In addition to your house being exempt (a non-countable asset for Medicaid eligibility), other assets are also considered exempt and therefore you are permitted to hold onto them. These include your household items, personal effects, a vehicle, pre-paid funerals, burial plots, and life insurance policies that have a face value no greater than $1,500.

Will I lose my 401K, IRA, stocks or savings?

The short answer is maybe, it depends on your state and the combined value of these assets. However, by working with a Medicaid planner, it is likely the non-institutionalized spouse will be able to retain most of these assets.

Unlike income, where a Medicaid recipient’s income is considered separate from his or her spouse, a married couples’ assets are considered jointly owned and are used to determine Medicaid eligibility. This holds true even if the assets, such as a savings account, is only in one spouse’s name. Of course, certain assets, such as your home, household goods, vehicle, and personal belongings are exempt. (Learn more about Medicaid and joint assets here).

Countable (non-exempt) assets include checking and savings accounts, CDs, stocks and bonds, and property that is not your primary residence. Independent Retirement Accounts (IRA’s) and 401K’s are a little bit trickier. For example, there are approximately 20 states that allow a community spouse’s 401K or IRA to be exempt, given the asset is fully owned by him or her.

In most states, as of 2019, a non-institutional spouse is permitted to retain up to $126,420 in assets, in addition to their home and vehicle.

The Spousal Impoverishment Law has been put into effect to protect you, the healthy spouse, from becoming “impoverished” by allowing you to keep a certain portion of your and your spouse’s combined, non-exempt assets. Briefly, what happens is that all countable assets are added up and the state Medicaid agency decides how much you can keep of the combined assets. This is called the Community Spouse Resource Allowance (CSRA). A minimum and maximum CSRA is set by the federal government, which as of January 2019, ranges from $25,284 to $126,420. The CSRA varies by state, with each state choosing the amount within the federally provided range. For instance, California and Florida set the CSRA at $126,420, and Illinois sets it at $109,560. In the states that only use one figure, the non-applicant spouse can retain 100% of the couple’s joint assets, up to the figure set by the state. In other states, both a minimum and maximum CSRA is used. As an example, Connecticut sets the minimum CSRA at $25,284 and the maximum CSRA at $126,420. How the CSRA works in this case is that the community spouse can keep either 100% of the couple’s joint assets, up to the minimum figure, or half of the couple’s joint assets, up to the maximum figure (whichever is greater).

Example 1:  You and your spouse have countable assets valued at $100,000. Your state has set the CSRA limit at $126,420. Therefore, you would be permitted to retain these assets.

Example 2: You and your spouse live in a state that has a minimum CSRA of $25,285 and a maximum CSRA of $126,420. Your combined assets are $25,000, which is less than the minimum CSRA of $25,285. Therefore, you can keep the entire $25,000.

Example 3: You and your spouse have $180,000 in assets. You live in a state that has a minimum CSRA of $74,280 and a maximum CSRA of $126,420. One half of $180,000 is $90,000., which is greater than $74,280. Therefore, you can retain $90,000. Your spouse is permitted $2,000 in assets, which means a total of $92,000 in assets is exempt. That said, the remaining $88,000 must be “spent down” before Medicaid will cover the cost of nursing home care. This extra money cannot be given away, nor be used to purchase any non-exempt assets. However, it can be used to pay-off debt and make certain home modifications. A Medicaid planner will have additional strategies to help families preserve these assets.

Example 4:  You and your spouse have countable assets valued at $300,000. Your state has set the CSRA limit at $126,420 and your spouse is permitted to retain $2,000 for a combined total of $128,420. Therefore, you must spend $171,580 of the $300,000 before Medicaid will pay for a nursing home.  As with the example above, this extra money cannot be gifted, nor spent on non-exempt assets. However, you can pay off your mortgage or build an addition to your home. In this situation, it is best to contact a Medicaid planner for assistance in implementing strategies to help preserve assets. 
Is my spouse in a nursing home able to keep any assets?

Yes, your spouse can keep a minimal amount of assets. This figure varies by state, but in most states, the spouse entering the nursing home can keep $2,000 in assets.

What can be done to protect my assets?

You cannot simply give your assets away to qualify a spouse for Medicaid. This can put you in violation of Medicaid’s 5-year Look Back Period and result in a period of Medicaid ineligibility. However, there are ways for you to protect your assets. You can put money into non-exempt assets, such as paying for home modifications / renovations, vehicle modifications, or purchasing an irrevocable funeral trust. You can also pay off debt, such as your mortgage loan or credit cards. In addition, you could purchase an annuity, which takes countable assets and transforms them into non-countable income. Some of these approaches are straight forward and others are complicated. It is best to consult with a Medicaid eligibility expert prior to taking any action to ensure you are not in violation of Medicaid’s complicated rules.

How can a professional Medicaid planner help?

Professional Medicaid planners provide a wide variety of assistance, from helping with the Medicaid application paperwork to re-structuring finances to ensure eligibility. The rules of Medicaid eligibility are complex, state-specific, ever-changing, and the eligibility requirements differ for a single individual versus a married couple. The application process can be exceptionally complex when only one spouse of a married couple is applying for long-term Medicaid. Applications can be further complicated when one spouse is receiving veterans’ benefits. Professional Medicaid planners are extremely knowledgeable in the complexities of Medicaid, as well as have experience in situations, such as yours, where one spouse will be entering a Medicaid-funded nursing home. Working with a professional is particularly beneficial if you and your spouse are over the income and / or asset limit(s), as being over the limits doesn’t necessarily equate to denial of Medicaid services. To learn more about professional Medicaid planners, click here.