The term "Spousal Refusal" sounds mean-spirited. Should an individual be allowed to legally walk away from his or her spouse's long-term care bills? In many cases, I believe the answer is yes. Here's why:
Long-Term Care Coverage
The good news is that we are living longer. The corollary to this trend is that we are more likely than our parents to live to an age when we will require help with activities of daily living (ADLs). These are the less than glamorous functions of life- dressing, bathing, eating, and toileting. Years ago, adult children (daughters...) took on the responsibilities of providing this care. The best of intentions notwithstanding, this is not even an option for most of the adult children I know. The already precarious juggling act of managing careers, children, and carpools would be thrown into a death spiral if we had to add the changing and feeding of an elderly parent to the mix. Today, these caregiving functions are very likely to be outsourced. The costs of this can be enormous.
It comes as an unpleasant surprise to families that Medicare has very limited long term care coverage. Upon discharge from a hospital, Medicare and a Medicare Supplement policy together will cover only up to the first 100 days in a rehab facility. Those who need help beyond this time period are facing costs in excess of $100,000 per year in many areas of the U.S. It is not uncommon for someone to lose their house and all of their savings because they had to go into a nursing home.
Spousal Protections
In an effort to protect the well spouse from complete financial ruin, anti-spousal impoverishment laws were enacted on the federal level in the late 1980s. In 2012, the well spouse (or community spouse) is permitted to retain up to $113,640 in assets while his or her spouse is covered under the Medicaid program. What if an individual has more than this? Enter- Spousal Refusal.
Spousal Refusal laws prevent the Medicaid program from refusing to provide coverage to an eligible individual just because his or her spouse is 'refusing' to cover the cost of the necessary care. This is not the end of the story! Each state's Medicaid law requires an applicant to assign to the program his or her rights to enforce support obligations against all responsible parties including a spouse.
The reality of spousal refusal is very different from the politically motivated sound bites decrying multi-millionaires on Medicaid. If, for example, my husband has a stroke and we apply for Medicaid for him, I may decide to declare spousal refusal in order to protect my nest egg of $300,000. Am I doing this because I am a mean witch? Not necessarily. In every case I see, spousal refusal is declared because the well spouse is sick to her stomach at the very real prospect of hemorrhaging through the couple's life savings.
Those of you who have moral qualms with the practice should perk up with the following: Several months after I declare spousal refusal I will likely get a letter from my new pen pal- the regional Medicaid agency, that reads something like this: "Dear Ann, to date, we have provided $42,000 toward the cost of your husband's care. Kindly send us a check in this amount at your earliest convenience." You may ask what the purpose of the spousal refusal exercise was? Well, even if I send them a check in the requested amount, I will typically be ahead of the game. This is because the Medicaid program can only ask me to reimburse them for the substantially lower rate that they have paid the nursing home or home care agency.
If I send the check in, I have probably gotten at least a 25 percent discount on what the private pay rate would have been. To further reduce the financial outlay, a person in this situation may wish to consult with an elder law attorney to present legal and equitable arguments on his or her behalf. As a practicing elder law attorney, I might argue that my client needs to be permitted to retain assets in excess of the Community Spouse Resource Allowance ($113,640) because she has her own health care concerns. If she is in her seventies, I argue that she has a statistically long life expectancy and needs to retain adequate resources for her own retirement years. Perhaps she will lose pension income upon the death of her spouse. She may be supporting an adult child who is unemployed (very common today...). She may have a child with a developmental disability and is concerned about protecting assets for him or her. These are not frivolous points. These are very real concerns that affect someone's mental state and by extension their health.
Once all of these arguments are presented, the Medicaid agency will usually request a reduced contribution. At the end of the whole process, spousal refusal usually results in a shared public-private long term care payment arrangement.
As for multimillionaires? It is highly unlikely that Medicaid would be eager to offer a negotiated payment option in these cases. These are not cases that I have chosen to undertake.
Future of the Medicaid Program
The confluence of an aging population, soaring health care costs and government cutbacks will likely spell the end to the Medicaid program as we know it in the not too distant future. The baby boomers amongst us should consider long term care insurance options.
In the meantime, it is critically important that seniors inform themselves about all legally available options for protecting their assets. Without these protections, the danger is that seniors will go without needed care in order to protect their savings.