By David Munn, CFP
When a married couple faces the challenge of one spouse needing long-term care while the other remains independent and living at home, qualifying for Medicaid can be complex. Medicaid helps cover long-term care expenses, but it has strict income and asset limits. However, there are protections in place for the "community spouse" (the spouse living at home) to ensure they are not left impoverished while the other spouse receives care.
Understanding Medicaid’s Eligibility Rules
To qualify for Medicaid in Ohio (and most other states), an applicant must meet specific income and asset thresholds. For 2024, the spouse needing long-term care (the "institutionalized spouse") must have an income below $2,742 per month and countable assets of $2,000 or less. However, for a married couple, only the institutionalized spouse's income is counted, but the couple's combined assets are considered when determining eligibility.
Community Spouse Resource Allowance (CSRA)
To prevent the community spouse from becoming impoverished, Medicaid allows them to retain a portion of the couple's assets. This is called the Community Spouse Resource Allowance (CSRA). For 2024 in Ohio, the community spouse can keep up to $148,620 of the couple’s combined countable assets. These assets include cash, stocks, bonds, investments, and retirement accounts.
Certain assets, however, are exempt from Medicaid calculations, including:
- The primary home (if the community spouse lives in it)
- One vehicle
- Personal possessions, such as furniture, clothing, and jewelry
- Prepaid burial plans
Income Protections for the Community Spouse
Medicaid also provides income protection for the community spouse. If their income is below a certain threshold (about $3,715.50 per month in 2024), the community spouse can receive a portion of the institutionalized spouse’s income to ensure they can meet their living expenses. This is known as the Minimum Monthly Maintenance Needs Allowance (MMMNA).
Spend-Down Strategies to Qualify for Medicaid
If the couple’s combined assets exceed Medicaid’s asset limits, they must "spend down" those assets to qualify. There are several strategies available to help achieve this while still protecting the financial well-being of the community spouse:
1. Purchase Exempt Assets: The community spouse can spend excess assets on items that Medicaid does not count, such as home repairs, paying off debts, buying a more reliable car, or prepaying funeral expenses. This allows them to reduce countable assets while benefiting from these necessary purchases.
2. Annuities: A Medicaid-compliant annuity can convert excess assets into an income stream for the community spouse. By purchasing an annuity, the couple can reduce countable assets while ensuring the community spouse has a steady income. It’s important to work with a professional to ensure the annuity complies with Medicaid rules.
3. Spousal Refusal (in some states): Although not available in every state, spousal refusal allows the community spouse to refuse to support the institutionalized spouse financially. This shifts the Medicaid eligibility determination to the institutionalized spouse alone. However, Ohio does not currently allow spousal refusal.
4. Medicaid Trusts: Some couples set up irrevocable Medicaid asset protection trusts to transfer certain assets out of their name. These trusts allow them to preserve assets for their heirs while still qualifying for Medicaid. However, the assets must be transferred at least five years before applying for Medicaid to avoid penalties from Medicaid’s "look-back" period.
Conclusion
As in most areas of life, Medicaid planning is most effective when done in advance, especially outside of the five year “look-back” period. But even in emergency cases, there are options available to preserve assets and protect the community spouse.
This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client. This material is not intended as any form of substitute for individualized investment advice. The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own. Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. Munn Wealth Management, LLC, is registered as an investment adviser (RIA) with the United States Securities and Exchange Commission. Registration as an investment adviser does not imply any certain degree of skill or training. 1323GRS