How a Married Couple Can Avoid Spend Down

Can a Married Couple go through Divisions of Assets, Qualify for Medicaid …And Still Keep Everything?  The Answer May Surprise You

Ralph and Alice were high school sweethearts who lived in Greensboro, North Carolina, all their adult lives.  Two weeks ago Ralph and Alice celebrated their 51st Anniversary.  Yesterday, Ralph, who has Alzheimer’s, wandered away from home.  Hours later he was found sitting on a street curb, talking incoherently.  He was taken to a hospital where he is being treated for dehydration.

Alice comes to see you after their family doctor tells her she needs to place Ralph in a nursing home.  She tells you they both grew up during the Depression and have always tried to save something each month.  Their assets, totaling $200,000, not including their house, are as follows:

Savings Account $45,000
CD’s $85,000
Money Market $60,000
Checking Account $10,000
Residence (no mortgage) $105,000

Ralph gets a Social Security check for $1650 each month; Alice’s check is $825.  Her eyes fill with tears as she says “At $6,500 to the nursing home every month, our entire life savings will be gone in less than three years!”  What’s more, she’s afraid she won’t be able to pay her monthly bills, because a neighbor told her that the nursing home will be entitled to all of Ralph’s Social Security check.

You have good news for Alice.  You tell her that it’s possible she will get to keep everything…all of their assets and all of the income…and still have the state Medicaid program pay Ralph’s nursing home costs.  And, you tell her that, while the process may take a little while, the end result will be worth it.

To apply for Medicaid, she will have to go through the North Carolina Department of Social Services.  If she does things strictly according to the way DSS tells her, she will only be able to keep about one-half of her assets plus she will be entitled to a minimum monthly income to pay her expenses as she always has.

But the results can actually be much better than the traditional spend down, which everyone talks about.  That’s because North Carolina does not follow the “Income First” Rule, which normally says that Alice would be entitled to her income and then Ralph’s income, and then to the income of their assets.  Instead, North Carolina law allows her to go to her income and then the earnings off Ralph’s assets, to generate the income to meet her monthly needs.  Based on a 5% rate of interest, their entire savings, plus their Social Security will still not generate enough income to bring her up to the current allowable minimum monthly income of $1,562.  Therefore, if she does it properly, Alice will be entitled to keep their entire savings, and there will be no spend down, and Medicaid will pay for Ralph’s nursing home.

The challenge is that this cannot be accomplished at the case worker level.  It can only be done on appeal.  So she will have to get advice from someone who knows how to navigate the system.  But with proper advice, she’ll be able to avoid the spend down and keep everything she and Ralph have worked so hard for.

After talking with you, Alice is calmer and says she will find a good nursing home for Ralph.  You have helped her to understand that the law does not intend to impoverish one spouse because the other needs care in a nursing home.   This is certainly an example where knowledge of the rules, and how to apply them, can be used to resolve Alice’s dilemma.

Of course, as you know, proper Medicaid planning differs according to the relevant facts and circumstances of each situation as well as the state law.