A recent decision of the Superior Court of New Jersey, Appellate Division, should be of interest those individuals who have a spouse in a nursing home. A nursing home in New Jersey costs anywhere from $8,500 to $12,000 a month, with most costing around $10,000 a month.
Given the cost of a nursing home, many individuals who require nursing home care are desirous of qualifying for Medicaid benefits. Medicaid is a federal and state government health insurance program for needy individuals. Unlike most health insurance programs, Medicaid will pay for the cost of long-term care, such as care in a nursing home.
When a single person qualifies for Medicaid benefits, his income is owed to the nursing home. The payment of his income reduces the amount the Medicaid program pays the nursing home. Only limited amounts of his income can be diverted to pay for items other than his nursing home bill. The common deductions are a deduction for the Medicaid beneficiary’s health insurance premium and a $35 per month deduction for the Medicaid beneficiary’s personal needs.
Let’s assume that Mr. Smith is residing in a nursing home. Mr. Smith has monthly income from Social Security and a pension of $2,135. Mr. Smith’s private health insurance costs him $200 per month. Once Mr. Smith qualifies for Medicaid benefits, Medicaid will permit a $200 deduction from his income to pay his health insurance premium and a $35 per month deduction from his income for his personal needs. The remainder of his income, or $1,900, will be owed to the nursing home.
If Mr. Smith were married, his wife may be entitled to retain a portion of his income. This spousal income allowance is designed to avoid the pauperization of Mrs. Smith. Mrs. Smith may very well be dependent upon Mr. Smith’s income, so if that income were taken away, she may find herself living on the streets. The Medicaid Act seeks to avoid this result by allowing Mrs. Smith to retain a portion of Mr. Smith’s income.
The laws governing Medicaid establish a formula for calculating the spousal income allowance. Mrs. Smith can only increase her income allowance if she can show “exceptional circumstances resulting in financial duress.” Our courts have said “exceptional” means unexpected and unusual. Since most expenses Mrs. Smith has are probably routine expenses—such as food, clothing, and shelter—in most instances, Mrs. Smith would not be able to show exceptional circumstances.
Another provision of the Medicaid Act compels the State to give Mrs. Smith a spousal income allowance equal to the amount provided for in a court order. So, if Mrs. Smith has an order from a court saying Mr. Smith must pay her $1,900 per month as spousal support, then Medicaid must honor that award.
Given this provision of the law, some elder law attorneys attempt to obtain an order from the Family Part court—the court that typically hear issues involving divorce, child support, and spousal support—before apply for Medicaid on behalf of their client. Using this procedure, the attorney is seeking to increase the income allowance that Medicaid would otherwise afford to the community spouse.
In R.S., the Appellate Division held that unless the Medicaid Office participates as a litigant in the Family Part action resulting in the spousal support order, Medicaid does not have to honor that order. Furthermore, the R.S. Court appears to say that the community spouse still must show exceptional circumstances for any order to be valid.
The bottom line is, this decision effectively abrogates a provision of the Medicaid Act and leaves only one method for calculating the spousal income allowance.
The spousal income allowance exists because Medicaid rules recognize that one spouse should not be left without adequate resources when the other requires long-term care. Understanding how these protections work can help families make more informed decisions and avoid unnecessary financial hardship during an already challenging time.