When a married individual needs long-term nursing home care, the cost of care can jeopardize the financial security of the spouse at home. With average nursing home costs in Pennsylvania exceeding $8,000 a month, the spouse at home can easily become impoverished.
In 1988 President Reagan signed measures into law that were been designed to protect the at-home spouse from impoverishment. States are required to comply with these federal rules in determining whether the resources of the spouse at home (called the “Community Spouse”) must be used to pay for the institutionalized spouse’s care. States must follow these federal rules.
One of the spousal impoverishment rules is that the value of the home of the Community Spouse (“CS”) is not to be counted in determining the financial eligibility of the institutionalized spouse for Medicaid. The home of the CS is a protected asset if it has a value of $525,000 or less. But what if the CS sells the home after the Institutionalized Spouse (IS) qualifies for Medicaid nursing home benefits? Can the CS keep the proceeds of the sale?
The Department of Public Welfare (“DPW”) is the Pennsylvania state agency that decides who qualifies for Medicaid. When the CS sells the home “post eligibility,” DPW’s written policy has been to count any sale proceeds that are not immediately used to purchase a new home as resources that are available to pay for the IS’s care. This means that the IS will typically lose their Medicaid if the CS sells the home.
In June 2011 DPW issued a policy clarification to its local County Assistance Offices to advise them to follow this policy. Policy Clarification PMN15842440 states, in part:
If the CS sells the property, the entire value of the property will be counted as a resource for the IS. It does not matter that the property was titled only in the name of the CS. When the property is sold, all of the proceeds are considered available to the IS except for the amount used to purchase a new residence. The purchase of the new residence should be within three months. Proceeds remaining after the purchase of the new residence may be transferred to the CS, but only up to the Community Spouse Resource Allowance figure.
Now, DPW has apparently been forced to back off its position that the proceeds of a post-eligibility sale of a residence owned solely by a community spouse can be treated as an available resource of the institutionalized spouse.
In a case brought in federal court for the Eastern District of Pennsylvania [DeMarco v. Alexander (Docket No 11-6444-RBS] Wife had been in a Skilled Nursing Facility and receiving Medicaid long term care (MA-LTC) benefits since 2003. In 2003 the home was transferred from joint names to the sole name of her Husband.
In 2008 Husband sold the home for $245,732 and placed the proceeds into an account in his sole name. DPW thereupon discontinued Wife’s MA-LTC due to excess resources. Wife appealed and lost at fair hearing. She and her husband then filed an action in federal court. In the federal court case, DPW backed down and agreed to reinstate wife’s eligibility. The government lawyers signed a settlement stipulation that conceded that the proceeds from the sale of the home belong entirely to the CS and have no effect on the continued eligibility of the IS for Medicaid benefits.
DPW likely backed off because its written policy as set out in PMN15842440 is in pretty clear violation of the spousal impoverishment protections mandated by federal law. The federal Medicaid rules prohibit states from attributing resources of the CS to the IS after the IS has established eligibility. Here is what the federal law says:
During the continuous period in which an institutionalized spouse is in an institution and after the month in which an institutionalized spouse is determined to be eligible for benefits under this [subchapter], no resources of the community spouse shall be deemed available to the institutionalized spouse. 42 U.S.C. 1396r-5(c)(4).
As one federal court put it, “Congress appears to have meant what it said: once the institutionalized spouse’s eligibility is determined, the state is not authorized to take any resources belonging to the community spouse and deem them available to the institutionalized spouse. Houghton v. Reinertson, 382 F.3d 1162 (10th Cir. 2004).
Although DPW backed off when pressed by the knowledgeable and ardent advocates for the DeMarco family, lawyers should not assume that it will withdraw the policy set out in PMN15842440. For example, DPW has never rescinded its policy on DRA compliant annuities (see OPS0702208) despite a number of state and federal court decisions holding that policy to be in violation of federal law and enjoining its enforcement. (See, James v. Richman, 547 F.3d 214 (3 Cir. 2008); Weatherbee v. Richman, 595 F. Supp. 2d 607 (W.D.Pa.2009), aff’d 2009 U.S. App. LEXIS 24939, 2009 WL 3792406 (3d Cir. 2009).
This means that lawyers representing couples where one is in a nursing home will need to be aware of the law and be ready, willing, and able to fight DPW at fair hearing and even in federal court. And consumers facing devastating long term care costs need to seek that kind of lawyer/advocate to represent them and protect their rights under the law.