Elder Law FAX -- July 18, 2005

Court Upholds "Spousal Refusal" in Medicaid Nursing Home Case
Robert Morenz has lived at the Wilton Meadows nursing home in Wilton, Connecticut, since October 2000. Clara Morenz, his wife, lives at the family home, also in Wilton.

A Medicaid application in Mr. Morenz's name was filed in January 2004 with the Department of Social Services (DSS), the Connecticut agency responsible for administering the state's Medicaid program. As part of Mr. Morenz's application, an "Assignment of Spousal Support Rights" was submitted by Mr. Morenz, through Mrs. Morenz, who held his power of attorney.

The assignment purported to transfer to the State of Connecticut any rights to support that Mr. Morenz had from Mrs. Morenz. In addition, Mrs. Morenz submitted a signed "Spousal Refusal Statement" to the DSS declaring that she "decline[s] to further contribute to the financial support" of Mr. Morenz.

Spousal Impoverishment
In 1988 the Medicare Catastrophic Coverage Act (MCCA) added provisions to the Medicaid program to avoid spousal impoverishment. By setting aside allowances in assets and income for the institutionalized person's spouse at home, the MCCA meant that the couple no longer had to spend everything they owned for nursing home care before Medicaid started paying.

In order to determine whether the institutionalized spouse is eligible for Medicaid, a determination of the couple's countable resources must be made. All countable resources are considered to be available to the institutionalized spouse, except for the resources allocated to the community spouse.

The state determines the minimum and maximum of this amount annually, called the Community Spouse Resource Allowance (CSRA). The minimum in 2005 is $19,020 and the maximum is $95,100. For example, if the total countable resources are $200,000, $95,100 is set aside for the community spouse.

The assets in Mrs. Morenz's name exceeded the CSRA by approximately $157,500. Her "spousal refusal" meant that she refused to make these assets available to pay for her husband's nursing home care. Contending that she was required to make those assets available to her husband, DSS denied Mr. Morenz's Medicaid application.

The case was appealed to the federal circuit court of appeals in New York (this is the level of federal courts one below the U. S. Supreme Court). The federal appeals court upheld the ruling of the federal district court that said that Mr. and Mrs. Morenz had acted within the law when she submitted her "Spousal Refusal Statement" to DSS.

In addition to setting the spousal asset and income allowances, the MCCA law governs what happens when the "community spouse" refuses to make assets in her name available to the "institutionalized spouse."

That law states explicitly that the community spouse has a right to refuse to make assets available. There are two consequences to that refusal.

First, the State Medicaid agency cannot deny Medicaid to the institutionalized spouse who would otherwise be eligible for benefits but for the spousal refusal. The institutionalized spouse is entitled to benefits, provided that he assigns to the State his legal right to be supported by his spouse.

Second, the community spouse does not get off scot-free. Mrs. Morenz may not keep the $157,500. Instead, the State can and usually does require the community spouse to reimburse the State for the Medicaid benefits paid on behalf her institutionalized spouse.

Why would the spouse do this, if she just has to pay anyway? The reason is that in many states, the amount that the State Medicaid program pays to the nursing home is less than the amount that the nursing home charges people who pay privately.

In other words, the nursing home might charge the couple $7500 a month, but get only $5000 from the State Medicaid program. The spouse who "refuses to pay" doesn't actually never pay. She pays $5000 a month instead of $7500 a month.

Morenz v. DSS, July 14, 2005.

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