“Spousal Refusal” Now Recognized in Connecticut
Morenz v. Wilson-Coker is a breakthrough for elderly spouses
A federal case won at the 2nd Circuit Court of Appeals against the State of Connecticut by Attorneys Joshua Z. Hersh, Ann L. Fowler Cruz, and Jane L. Tyree, newly affiliated with Cohen and Wolf, has brought about exciting new changes in the Medicaid rules that affect married persons. In August, 2005, the 2nd U.S. Circuit Court of Appeals upheld the doctrine of “spousal refusal”— an estate-planning technique that enables elderly spouses to keep their homes and other assets longer, even when their spouse is in a nursing home paid for by Medicaid.
Before Morenz, spousal refusal, a benefit provided by federal law, was not recognized by the Department of Social Services (“DSS”), the state agency charged with administering Connecticut’s Medicaid program. With this breakthrough victory for elderly spouses, Attorneys Hersh and Fowler-Cruz have made it possible for married couples in Connecticut to consider this approach to help reduce the costs of long term care. Unfortunately, since this is a federal rule, the changes will most likely not apply to couples joined by civil union.
Writing in the Connecticut Law Tribune, Thomas B. Scheffey highlights the significance of Morenz in his article, “Elderly Spouses Gain Asset Armor,” (August 4, 2005). “Some Connecticut elder law attorneys see the 2nd Circuits’ decision in Morenz v. Wilson-Coker as momentous, with an impact likely to spread beyond the three 2nd Circuit states of New York, Connecticut and Vermont” he wrote. Noting that no other circuit court has construed the language of the spousal refusal provision, Ms. Tyree told the Tribune that the federal statute should be applicable to the Medicaid programs of all 50 states.
Background to Morenz
Previously, when a married person needed nursing home care, the healthy spouse (“community spouse”) was permitted to keep only one-half of their combined assets at the time of the illness (but no more than about $100,000), plus the marital home. In the past, there may have been an opportunity to increase the amount kept by the community spouse, but that opportunity has been lost for the most part with the changes in the rules that occurred in 2006. This harsh standard forces the community spouse to spend down at least one-half of the family savings in order to qualify his or her spouse for Medicaid. For families with more than $200,000, the “spend down” amount could be far more than one-half of the marital assets. Additionally, the rules stripped the community spouse of all (or most) of his or her partner’s income. This forced divestiture can result in a substantive loss of lifetime savings for couples seeking Medicaid, with devastating results.
The loss of savings, combined with the loss of income generated from the family assets and income from the ill spouse, made it impossible for many seniors to meet the true costs of remaining in the family home. The rigid application of the eligibility rules by the State of Connecticut began to defeat the original spirit and purpose of Medicaid for the elderly – prevention of the unreasonable impoverishment of a community spouse once his or her spouse enters a nursing home.
“Spousal Refusal” is a process by which the community spouse is able to retain family assets and still obtain Medicaid for his or her “institutionalized” (ill) spouse. Under spousal refusal, the community spouse “refuses” to support the ill spouse, and the ill spouse assigns his or her right of spousal support to the State of Connecticut. Once the assets of the ill spouse are under $1,600, the ill spouse will qualify for Medicaid.
The community spouse is not off the hook totally, however. The State of Connecticut has the right to collect support from the community spouse to help pay for the cost of care for the ill spouse. The benefit is the reduced cost of care. Traditionally, nursing home fees charged to Medicaid eligible persons are less than the fees charged for those who are paying from their own funds. Therefore, when the community spouse is asked to contribute, that contribution will be towards the reimbursement to the State of Connecticut at the lower Medicaid rate, stretching out the family assets.
This exciting development allows Medicaid benefits to be based upon real life circumstances, like the actual costs associated with living in the home, and the health and circumstances of the community spouse, to ensure that an elderly spouse may continue to live in their own home, during a long term medical crisis of their spouse. Though the State is entitled to stand in the shoes of the ill spouse for purposes of a support action against the community spouse to contribute to the cost of care, any support obligation should be based upon the individual circumstances of the community spouse.
New legislation has been proposed that restricts the practical application of spousal refusal, so it is important to consult an experienced elder law attorney during the Medicaid planning process.
