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By John M. Bigler Two recent court cases, one federal and one state, have given seniors some cause for optimism.
The New York State Court of Appeals, the highest court in the state, recently affirmed a decision by the Appellate Division, which unanimously decided that an incapacitated spouse would be allowed, through his guardian who happened to be his wife, to make transfers to his wife so as to be eligible for Medicaid coverage in the nursing home. The Court found that an incapacitated person had a fundamental right to plan and should not lose that right merely because of their incapacity. The Court went on to find that the mental hygiene law was designed to permit an incapacitated person to do, by way of a surrogate, those essential things that a person could do.
The Appellate Division added a statement at the end of its decision that can be used whenever there is an attack on elder-law planning: "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 ruinously expensive, but absolutely essential medical treatment."
I admit to having a real fear that the Court of Appeals would reverse the Appellate Division, as it's disappointingly done in several other decisions favorable to seniors. But this time the court affirmed the Appellate ruling and therefore affirmed the strong language used by the Appellate.
However, spouses should not get carried away by this decision. I've read some articles suggesting that spousal refusal had now been accepted by the courts in New York and is the strategy that should be used by everyone. The fact is that spousal refusal has been accepted in New York since the federal law providing for it was adopted in 1989. The fact that spousal refusal will work to get a Medicaid application approved doesn't mean that the local Department of Social Services is prevented from seeking recovery from a community spouse.
Also, for tax reasons, many couples would have to think twice before transferring all of their assets from both spouses to one spouse. These and numerous other reasons make a decision whether to exercise spousal refusal one that needs to be carefully analyzed on an individual case-by-case basis.
A second favorable decision was recently provided by the Federal Court governing New York. One alternate to spousal refusal used effectively in New York has been to show that additional resources are necessary for the community spouse so as to bring that spouse's income up to the community spouse income allowance, which for the year 2000 is $2,103 a month. Until now the state has successfully argued that before allowing the community spouse to retain additional resources to generate more income, that first income from the institutionalized spouse has to be applied as part of the community spouse income allowance (CSIA).
The federal court has now stated that, at least in regard to Social Security benefits, it's improper to apply the Social Security benefit of the institutionalized spouse to the CSIA of the community spouse. This decision opens the door for a community spouse to choose to retain more assets as opposed to simply keeping the income from the institutionalized spouse. In some cases, this will be beneficial and avoid the need for spousal refusal and therefore eliminate the worry regarding recovery. As with spousal refusal, whether this strategy is appropriate will depend on each couple's financial situation.
Hopefully these two new cases will set a precedent for future cases where the courts will take into consideration the government's policy of requiring people to impoverish themselves so as to access essential medical treatment. I'll keep you posted.
Reprinted with permission of the Suffolk Times © 2003
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In the lower court decision at the Appellate Division, some very encouraging language was used. The court found that "the complexities of the Medicaid eligibility rules, not to mention the complexities of state and federal law concerning gift and estate taxation which often come in to play as hapless middle class Americans seek to save themselves from financial ruin as the result of astronomical nursing home costs, should never be allowed to blind us to the essential proposition that a man or a woman would normally have the absolute right to do anything that he or she wants to do with his or her assets, a right which includes the right to give those assets away to someone else for any reason, or for no reason"