When a spouse enters a nursing home, the healthy spouse is often concerned about her ability to continue to support herself. For instance, Mr. Smith, aged 85, enters a nursing home.  Mr. Smith receives Social Security income of $1,000 per month and a pension of $1,500 per month.  Mrs. Smith, aged 81, remains at home.  Mrs. Smith has Social Security income of $700 per month.

Understandably, Mrs. Smith is concerned about her ability to pay her bills. For many years, she has relied upon both her and her spouse’s income to pay the household expenses.  Now, her spouse lives in a nursing home that costs $10,000 per month.  Mrs. Smith would like to qualify Mr. Smith for Medicaid benefits, but she is concerned as to what that means in relation to Mr. Smith’s income.  Will the nursing home take all of his income?

Medicaid is a health payment plan for needy individuals. In order to qualify for Medicaid benefits, an individual must have very limited assets.  The individual qualifying for Medicaid—in this case, Mr. Smith—can have no more than $2,000 in assets.  Mrs. Smith, who will remain at home, can retain ownership of the home.  In addition, she can retain all the personal effects in the home (cloths, furniture, appliances, etc.) and up to a maximum of $120,900 in cash type assets.

The $120,900 figure is a maximum figure. Mrs. Smith may not be able to retain that much in cash assets; it depends what the Smiths owned when Mr. Smith entered the nursing home.  For instance, if the Smiths only owned $150,000 in cash assets when Mr. Smith entered the nursing home, then Mrs. Smith would only be permitted to retain $75,000.

Then there is income. Mrs. Smith can retain all of her income, but in this case, her $700 isn’t going to get her very far.  She still needs to pay the real estate taxes, the utilities, the food bill, her own medical bills, etc.  For Mrs. Smith, life goes on, and now, she has to make due with substantially less income.

While her expenses will decrease somewhat. For instance, she is now only food shopping for herself, not Mr. Smith.  Many of Mrs. Smith’s expenses are fixed.  Her real estate taxes are not going to decrease simply because her husband resides in a nursing home.

In addition to permitting her to retain certain assets (the home, a car, the personal effects, and up to $120,900 in cash assets), Mrs. Smith may be permitted to retain a portion of Mr. Smith’s income.

Mr. Smith, in this hypothetical, has total monthly income of $2,500. Mr. Smith can retain $50 of his income as his personal needs allowance.  This is money that Mr. Smith can use to pay for clothing and haircuts and entertainment.  Mr. Smith can also use a portion of his income to pay his private health insurance premium.  The Medicaid program wants Mr. Smith to retain his private health insurance, so the program permits a deduction from his income to pay the premium for his health insurance.  Let’s assume that the premium for Mr. Smith’s health insurance is $200 per month.

Mrs. Smith can retain up to a maximum of $3,022 of Mr. Smith’s income. Mrs. Smith’s income allowance is reduced by her income.  In this example, Mr. Smith has $2,500 of monthly income.  He can retain $50 and his health insurance premium is $200.  So, the available income to Mrs. Smith is $2,250 ($2,500 – $50 – $200 = $2,250).  Mrs. Smith’s income allowance is reduced by her monthly income of $700, so in this case, Mrs. Smith would be able to retain $1,550 ($2,250 – $700 = $1,550) of Mr. Smith’s income as a spousal income allowance.

If Mrs. Smith had high monthly income, for instance, if Mrs. Smith’s income were $3,500 per month, then she would not be able to retain any of Mr. Smith’s income.