Protecting Assets and Maximum Income for the Community Spouse When Applying for MassHealth in 2013 to Help Pay for the Unhealthy Spouse’s Nursing Home Bills in Massachusetts
One of the biggest mistakes that many spouses make when the other spouse enters a nursing home is not getting legal advice from an elder law attorney about Medicaid, known in Massachusetts as “MassHealth.” The “free” information that many community spouses (which under MassHealth law means any spouse who is not in a nursing home) often rely on can turn out to be quite costly to them.
There are different layers in MassHealth law, and many persons only seem to know about the bottom layer, so let’s go over that one first. Under 2013 law, just about everything other than the home and car are totaled, and the community spouse supposedly can keep only the first $115,920. (The rest of the assets are effectively owned by the spouse in the nursing home, and supposedly have to be spent on the nursing home bills of the institutionalized spouse; but note that I intentionally wrote the word “supposedly.”) Unfortunately, this lower layer is where the knowledge of many persons ends, and two other upper layers of the law effectively override the lower layer. One upper layer is that the community spouse can enter into certain types of immediate annuity contracts with the spenddown (i.e., excess) assets.
Before even thinking about buying an annuity, the community spouse should keep three things in mind: (1) not every immediate annuity will work, where Massachusetts law makes most annuities assignable and the annuity has to be nonassignable under federal Medicaid law and MassHealth regulations; (2) the published regulations and unpublished internal procedures and policies which now allow such a move can change with little advance notice, so it is often not advisable that an annuity be purchased until the institutionalized spouse’s nursing home stay has already begun; and most importantly (3) some community spouses can keep everything without needing an annuity, and are better off without an annuity, due to the other upper layer of MassHealth law that protects income for the community spouse.
At present, the community spouse has the absolute right to an income of at least 1,891 per month. (Further, if shelter expenses exceed 30% of this figure, or $567, or if a disabled child lives at home, the community spouse is often entitled to keep much more than $1,891 per month.) If the Social Security and pension payable in the name of the community spouse is less than the $1,891 figure, at the end of the MassHealth application process the community spouse is allowed to keep some or all of the institutionalized spouse’s income. Because the monthly payment from an immediate annuity is considered to be the community spouse’s income, buying an annuity before the basic numbers have been analyzed by an elder law attorney could prevent the community spouse from receiving income from the institutionalized spouse. (That means the annuity payments in some cases would be simply replacing income that the community spouse was already entitled to have, and the annuity ends up not benefiting the community spouse.)
If the needs of the community spouse are greater than $2,898 per month, a higher amount of income can sometimes be preserved for the community spouse via the fair hearing appeal process, where the need to keep the other assets has to be proved to maintain the financial ability to remain in the community. A common situation where need can be fairly easily proved is where the community spouse is living in an assisted living facility and needs to be there due to frailty, medical condition or other special needs. Once the need to be in assisted living is established, the appeal is primarily about numbers and prevailing CD and money market interest rates, so the community spouse need not go to the hearing, and the elder law attorney can often handle it alone.
Another option to retain greater income for the community spouse is a Probate Court procedure known as separate support. Since both spouses need legal representation in court, it is important that the institutionalized spouse have a durable power of attorney that allows the appointed person to hire a lawyer to represent the interests of the institutionalized spouse.
When spenddown and appeal options are determined by an elder law attorney as potentially unsuccessful, the community spouse can often purchase certain types of immediate annuities, which should always be the last resort due to the manner in which the institutionalized spouse’s income ca be allocated to the community spouse for MassHealth purposes.
A warning to the trusting and the gullible: There are elder law “attorneys” and MassHealth application services who profit from selling annuities, so it is important to have the entire picture reviewed, and often to get a second opinion, before rushing into purchasing an immediate annuity from somebody who claims to be helping you; they may instead be helping themselves (to a healthy commission).
A final note : Maintaining the maximum retroactivity of the original MassHealth application is vital to preserve assets for the community spouse and to ensure that the nursing home will be paid by MassHealth, so the MassHealth fair hearing appeal process should never be overlooked if any type of notice of denial is ever received along the way. A community spouse can be (and has been) successfully sued by the nursing home if timely MassHealth benefits are not obtained; see Are You Personally Responsible for Your Spouse’s Nursing Home Bills in Massachusetts?