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By John M. Bigler In last month's article I discussed favorable court decision in which a federal court judge issued a temporary injunction against the law that made transfer of assets a crime when applying for Medicaid. This month I'm going to discuss a case that was decided in the last month that will have a negative impact on the spouses of institutionalized recipients of Medicaid benefits.
The court found that when a spouse of an institutionalized person refused to contribute assets on behalf of a spouse in the nursing home, the Department of Social Services had an implied contract with that spouse to recover the assets paid by Medicaid. The case was appealed by the spouse to the Appellate Division, which has now affirmed the lower court decision. The court unanimously rejected defendant Spellman's argument that the city's Department of Social Services could not sue him for past Medicaid expenses made on behalf of his wife. Whether or not the case will be appealed remains to be seen. In the meantime, however, this case has serious implications for a couple planning for long-term catastrophic illness.
This doesn't mean the end of spousal refusal. There's still a benefit to making a spouse eligible for Medicaid even if the assets can be recovered from the community spouse. First, the Medicaid rate of payment to the nursing home is approximately 30 percent less that the private rate, so that even if the nursing home bill does eventually have to be paid by the spouse, it will be paid at a lower rate. Also, typically, the local Medicaid office will be willing to negotiate a settlement, and so the payment to them might be a payment over time or might be a payment of a lump sum lower amount as part of the normal negotiation in settling a lawsuit. Accent on planning What this case does mean is that spouses who have the opportunity to plan ahead of time, before a catastrophic situation arises, might want to take more aggressive steps. They should look at spousal refusal more as a safety valve, rather than simply relying on to save them should a nursing home situation arise in the future. If there's an n emergency that catches the couple unprepared, then they always know that assets can all be transferred to the well spouse and Medicaid can be obtained. But if there's an opportunity to plan ahead of time, then it would make sense for the couple to consider other alternatives. One such alternative would be long-term catastrophic insurance. If it's affordable and both spouses and in good health, then the purchase of the long-term insurance can eliminate or at least cut down on the need of Medicaid. Another alternative would be to transfer assets out of both spouses names either to children on into an irrevocable asset management trust, starting a period of ineligibility against both spouses at a time when neither spouse is in immediate need of care. If the couple isn't thrilled with the prospect of making a straight gift to the children, then they could set up an irrevocable asset management trust. The trustee of such a trust cannot be the couple and the trustee cannot have the right to invade principal on behalf of the couple. However, the couple will be entitled to receive the interest generated by the assets in the trust. the couple will also control the actions of the trustee and can change the beneficiaries of the trust at any time prior to the death of both spouses. There's no denying that this decision is disappointing for the elderly couples in New York State. However, it doesn't mean the end of planning to protect assets. Spousal refusal is still available, and at the moment, only New York City is bringing actions for recovery against the spouse. There are other alternatives that can be considered. The bottom line, as always, is this: The earlier the planning, the more options that a couple will have. Reprinted with permission of the Suffolk Times © 1999 [ Contact Us ] [ Guestbook ] [ Email ]  The Law Offices of John M. Bigler, Attorney At Law 1421 Wantagh Avenue, Wantagh, New York 11793-2206 1-888-ELDER-LAW · 516-409-6565 · Fax: 516-409-6522 E-Mail: info@biglerlaw.com · Web Site: www.biglerlaw.com |
In the case of New York City Department of Social Services v. Spellman reported in the New York Law Journal, May 7, the Appellate Division of the State of New York affirmed a decision of a New York Supreme Court judge. The lower court judge had found in favor of New York City in a motion brought by a spouse on an institutionalized Medicaid recipient to dismiss an action by the City of New York to recover from the spouse the costs of a nursing home paid fro by New York City Medicaid.
As I've noted in previous articles, the State of New York is extremely liberal when it comes to spouses and Medicaid. Unlimited transfers can be made from one spouse to the other without the normal period of ineligibility for nursing home care that would be imposed for transfers to a third party. The community spouse can then refuse to contribute his or her assets and Medicaid will be approved for the spouse in the institution. Now, that community spouse will have to be concerned that once the application has been approved, the Department of Social Services may file a lawsuit against the community spouse to recover the assets paid by the local Medicaid department.