Last month the New York Court of Appeals and the United States Court of Appeals for the Second Circuit, which covers New York, both issued decisions which will substantially affect Medicaid eligibility for the elderly and disabled. In the State court case the court approved the concept of a “guardianship for Medicaid planning,” in which the guardian rearranges an elderly or disabled person’s assets so as to make the incapacitated person eligible for Medicaid to pay for long term care costs. In the federal court case the court held that the formula used to determine how much assets a spouse in the community could retain was invalid to the extent that Medicaid automatically imputed the patient’s Social Security benefits to the community spouse.
In the guardianship case, Bipin Shah was a self-employed engineer with a wife and two minor children. He suffered an industrial accident on a work site and ended up in a coma in a rehabilitation facility. After several months his health insurance coverage ran out, and a Medicaid application was filed for him. Because the joint assets of Mr. and Mrs. Shah might have been more than the amount allowed by Medicaid, Mrs. Shah asked to be named guardian and to have authority to transfer all his assets to her. She would then exercise her right of “spousal refusal,” a federal and state statutory right not to make your assets available to your spouse. Medicaid must then be made available, subject to the county’s right to seek to recover the withheld assets through the courts.
This approach is frequently taken by competent individuals, or where someone has a power of attorney containing gifting power for the institutionalized spouse. In other instances, gifting is made to adult children or siblings, and the patient must retain enough funds to privately pay for care during the period of Medicaid ineligibility that results from gifts to most relatives (spouses are a notable exception). The Appellate Division in Albany had approved a guardian making such gifts to adult children in a case several years ago.
When the Court of Appeals faced this issue last month, it issued a ringing decision affirming the right of a guardian for an incapacitated person to do whatever the incapacitated person would do in this regard: “No agency of the government has any right to complain about the fact that middle class people confronted with desperate circumstances choose voluntarily to inflict poverty upon themselves when it is the government itself which has established the rule that poverty is a prerequisite to the receipt of government assistance in the defraying of the costs of ruinously expensive, but absolutely essential, medical treatment.” While a guardianship is a somewhat expensive and complicated proceeding, given the very costly alternative of paying for long term care privately, it is likely that more such proceedings will be brought in the future.
The federal court case also concerned a situation where one spouse was in a nursing home while the other lived in the community. The community spouse was allowed about $2,000 of income and $80,000 of savings (these figures change annually, so these are rounded amounts). She had only about $900 per month of income, but about $160,000 of savings. Medicaid does have a procedure for increasing the resource allowance above $80,000 if those extra savings are necessary to generate dividend or interest income to bring the income of the community spouse up to or closer to the $2,000 income allowance. Based on the amounts in question, it would have seemed that the entire $160,000 could have been retained in order to generate some of the approximately $1100 monthly income shortfall.
However, Medicaid had a rule which required that before making such an increase, the income of the patient should first be attributed over to the spouse in the community. However, once the patient’s income, which was over $2,000 per month, was attributed over to the community spouse, that brought her up to the $2,000 income allowance, so no increase in the resource allowance would be allowed to generate extra income since no extra income was needed.
The federal court of appeals substantially undercut that Medicaid policy by ruling that the Social Security benefits of the patient were exempt from being treated this way. Almost everyone has Social Security benefits, so if Medicaid cannot reallocate them in this fashion, the federal court ruling will eliminate or substantially reduce the amount of income which Medicaid can redistribute in such cases. In turn this will allow many community spouses to retain substantially increased amounts of savings. This will be of particular importance for elderly women, who are likely to outlive their husbands and face reductions in income after the death of the husband. They have legitimate needs for increased resources to make up for the shortfall in income that they will suffer after their husbands have passed away.
Both these cases also illustrate one of the ongoing problems affecting how we finance health care, and particularly long term care, in America. It is not enough just to have physicians and other care givers and health facilities, you also need an attorney familiar with the intricate rules of the health care financing system. While some people have access to such resources, many do not, so there is very inequitable treatment of those paying for health care.
