For married couples with one spouse in a North Carolina nursing home, division of assets is an important concept to protect the spouse at home. Under Medicaid law as first enacted, both spouses needed to be impoverished in order for one spouse to qualify for care. However, Congress eventually reconsidered this, since the spouse at home would have nothing to live on after paying for the care of the ill spouse.
History of Division of Assets
In 1988, Congress passed the Medicare Catastrophic Coverage Act of 1988 (also called “MCCA” and pronounced “Mecca”). MCCA allows the spouse at home (called the “Community Spouse”) to keep part of the couple’s assets, while the ill spouse in the nursing home (called the “Institutionalized Spouse”) can only have $2,000 of countable assets. The amount that is protected is called the Community Spouse Resource Allowance (or “CSRA”). CSRA is calculated based on a process called “division of assets.” The amount of the minimum and maximum CSRA changes each year, with the current CSRA shown here as part of the North Carolina Medicaid numbers.
Here is how division of assets works. The Community Spouse can keep one-half of the couple’s countable assets, up to the CSRA amount. If the couple’s assets are below the minimum CSRA, then the healthy spouse can keep all of the couple’s countable assets without needing to divide them. If the couple’s assets are above the maximum CSRA amount, then the institutionalized spouse will be eligible for Medicaid only after the assets have been reduced to the permitted level.
Example of Division of Assets and Community Spouse Resource Allowance in North Carolina
For example, let’s consider Bob and Mary’s situation. Mary is at home, and Bob just entered the nursing home for rehabilitation after getting care in the hospital for a week. Medicare will cover a brief period of rehab, not to exceed 100 days but ending sooner if Bob stops rehabilitating. If Bob continues to need nursing home care after Medicare stops, then the cost will be be $6,000 to $7,000 per month or more for nursing home care in North Carolina. When she talks with the nursing home and with friends, Mary is told to spend down their assets and apply for Medicaid later.
Fortunately for Mary, she talks with an experienced Certified Elder Law Attorney who helps. She doesn’t have to spend down. Looking at Bob and Mary’s assets as of the “snapshot date” for purposes of computing the amount of the CSRA she can keep, their attorney determines that their total countable assets include checking, savings, a couple of CDs, an IRA, and some brokerage accounts. Those assets are considered countable assets for Medicaid, and totaled $200,000. Under the rules for division of assets, that means Mary gets to keep one-half of the countable assets up to the current maximum CSRA. Since one-half equals $100,000 and that is less than the CSRA limit that is what Mary can keep in any assets she wants. The other $100,000 will need to be
spent down” to the amount that Bob can keep, or $2,000. In other words, under the division of assets rules, Mary will be able to keep her $100,000 of assets, plus Bob’s permitted reserve of $2,000 or a total of $102,000.
In addition to those assets, Mary also has her house and one car, and a term life insurance policy. All of those assets are considered “noncountable” so she can keep those in addition to the amount allowed as described above.
Does this mean that Mary must spend $98,000 (the excess countable assets) on nursing home care? The answer is “no!” There may be things that Mary should apply those funds to, such as paying off an existing mortgage, or getting a more reliable car, or prepaying for funeral expenses. Her Certified Elder Law Attorney can help her through those decisions, and the best way to use the funds. If there are still funds that keep Bob from qualifying for Medicaid, it may be advisable for Mary to purchase an OBRA ’93 Medicaid eligible annuity. That is something that Mary needs guidance through, and to let her Certified Elder Law Attorney coordinate with the Medicaid application that needs to be filed for Bob.
For Mary, the end result will be that with the right help she will keep nearly all of the couple’s assets, provided she acts quickly. Unfortunately for families who never learn about Medicaid division of assets, the result is much worse. I’ve see situations where one spouse has been paying privately the nursing home bills for the ill spouse for year after year, and winds up with very little left. That is so sad! If only he or she would have known where to turn to get the right help and advice, the community spouse could have preserved nearly all of the assets so that he or she would have something to live on for the rest of his or her life.
But by Mary’s taking right steps, she can make sure she can stop worrying about having enough money to live on, and instead make sure that she only needs to worry about Bob’s care.
Here is another article about how to protect assets when one spouse is in the nursing home.