MEDICAID ELIGIBILITY PART II - PROTECTING THE SPOUSE

Transcription

1 MEDICAID ELIGIBILITY PART II - PROTECTING THE SPOUSE Matthew J. Nolfo, Esq. Law Offices of Matthew J. Nolfo, Esq. 275 Madison Avenue New York, New York (212) mnolfo@elderlawny.com Introduction For most elderly married couples, avoiding the astronomical costs of long term care has become an important component to overall estate preservation. The cost of long term care in a skilled nursing facility ranges from $7,000 to $12,000 per month. The cost of long term care services at home, in an adult home or assisted living facility ranges anywhere from $2,000 to $12,000 per month. Because the average stay in a skilled nursing facility is 2.3 years, at a monthly cost of $10,000 per month, care for one spouse can run over $250,000. Moreover, long term care costs affect middle to upper middle class seniors who sometimes do not have estates large enough to worry about estate tax liability, but who have worked hard to accumulate the assets they own and normally desire to pass on their assets to their families. Prior to 1988, if one spouse became ill and required long-term care, either the couple would have to pay privately for the care or would have to completely impoverish themselves to secure important Medicaid nursing home or home care benefits. In 1988, the government enacted the Medicaid Catastrophic Coverage Act ( MCCA ) which had important Medicaid components to it (note that Medicare is only an aged based program that has a very limited role in paying for the costs of long term care at home or in a skilled nursing home). MCCA contained spousal impoverishment rules under the Medicaid program that provided for enhanced asset and income levels for the spouse living in the community (hence, the community spouse ), while the institutionalized spouse in receiving care in a skilled nursing facility. The amount of assets that an institutionalized spouse may retain while receiving Medicaid nursing home benefits is $3,850. The institutionalized spouse may only retain monthly income of $50. Currently, if one spouse is institutionalized, the community spouse may retain $90, in non-exempt assets and $2,267 per month in income. (Exempt assets are generally the primary residence, irrevocable prepaid burial funds, personal property, an automobile and, in some circumstances, the principal balance in a qualified retirement account). Although it is not stated anywhere in MCCA, the spousal impoverishment rules apply only to long term care furnished in a skilled nursing facility because the community spouse is left alone and must support his or herself while dealing with the trauma of having a spouse in a skilled nursing facility. Importantly, the spousal impoverishment levels do not apply to the well spouse when the ill spouse is receiving home care services. Thus, in a typical scenario, the institutionalized spouse applying for Medicaid nursing home benefits cannot have non-exempt assets of more than $3,850 and may only retain income of $50 per month. The community spouse may not have assets greater than $90,660 and income of $2,267 per month. If this is the case and the institutionalized spouse is otherwise eligible, then Medicaid will accept the application for nursing home benefits. However, there is no question that most middle and upper middle class senior couples have assets and/or income in excess of these levels. As such, applying for Medicaid nursing home benefits involves a two-step process. First, a transfer of all assets in the institutionalized spouse s name in excess of $3,850 must be accomplished before the application for Medicaid nursing home benefits is submitted. If the transfer of these assets is made to the community spouse, there is no period of ineligibility ascribed to the institutionalized spouse for the transfer of assets (this is generally not the case for non-spousal transfers although a detailed analysis of how gifting assets affects Medicaid nursing home eligibility is not part of this outline).

2 Page 2 Second, in most cases, the transfer of virtually all of the institutionalized spouse s assets to the community spouse will cause the community spouse assets to exceed the $90,660 maximum that he or she is allowed to retain without affecting the institutionalized spouse s right to secure Medicaid eligibility. As a result, upon the submission of the Medicaid application for the institutionalized spouse, the community spouse will execute and submit a spousal refusal form which states that the community spouse refuses to make his or her excess assets and/or income available to pay for the cost of the institutionalized spouse s care. This will cause Medicaid to disregard any excess assets the community spouse retains above $90,660 and/or any monthly income above $2,267 at the time of the application in determining the institutionalized spouse s eligibility. However, because with the spousal refusal, an assignment of support form is also executed or is deemed to be executed by the institutionalized spouse, Medicaid has the right to seek reimbursement from the community spouse for benefits that it pays on behalf of the institutionalized spouse. A number of spousal lawsuits have resulted over the past several years which has required additional planning techniques to preserve the assets and income that are attributable to the community spouse. This outline will cover the various ways to preserve the assets and income retained by the refusing community spouse. This may involve seeking an increase in the asset and income levels that the community spouse may retain, the transferring of some of the community spouse s assets subsequent to an approval of the institutionalized spouse s Medicaid benefits as well as suggestions on how to handle a spousal lawsuit. Every possibility to maximize the amount of assets and income that the community spouse can retain must be exhausted at each stage of the planning process. I. Preserving the Assets of the Community Spouse Once the Institutionalized Spouse is Deemed Eligible for Medicaid Nursing Home Benefits I. Spousal Impoverishment Rules: Medicare Catastrophic Coverage Act (MCCA) (42 U.S.C. section 1396r-5): Congress sought to end the pauperization of the non-applicant, community spouse by assuring that he or she has a sufficient amount of income and resources to live comfortably while the other spouse is institutionalized. B. Applies only in the Medicaid nursing home and Long Term Home Health Care ( Lombardi program) context. C. Definition of Institutionalized Spouse : 1. New York State Social Services Law ( SSL ) section 366-c codified the MCCA and defines an institutionalized spouse as a person in a "medical facility or nursing home" who is likely to be in the institution for at least 30 days or who is receiving waivered services pursuant to section 1915 (c) of the Social Security Act; 2. The institutionalized spouse must be married to a person not in an institution and not receiving waivered services. II. Spousal Income and Resource Levels A. Income: 1. Minimum Monthly Maintenance Needs Allowance ("MMMNA"): defined at SSL section 366-c(2)(h) (Also referred to as the Community Spouse Income Allowance ( CSIA )).

3 Page 3 2. For 2003, the community spouse of an institutionalized spouse may keep income up to $2,267 per month. 2. In the event that the community spouse s income exceeds the $2,267 MMMNA level, unless the community spouse is able to secure a Court order increasing the MMMNA level or executes a spousal refusal stating that the community spouse refuses to make his or her income over the MMMNA level available to pay for the cost of the institutionalized spouse s care, then the excess income above the MMMNA will render an otherwise Medicaid-eligible institutionalized spouse ineligible for Medicaid. 3. For a non-applicant spouse who lives at home with a spouse receiving Medicaid home care services (personal cares services as opposed to skilled, Lombardi services), the non-applicant spouse may only retain income of $642 per month. 4. Income First Rule - If the community spouse's income falls short of the MMMNA level of $2,267, then he or she must first deduct income of the institutionalized spouse to bring the community spouse up to the MMMNA level. 3. Good result if the community spouse has resources at or below the allowable resource level, as is discussed below. However, where the community spouse has resources above the allowable resource level from which he or she can generate additional income to bring the community spouse s income up to the MMMNA instead of first applying the institutionalized spouse s income, this is not a good result (See discussion below regarding the Income First Rule) b. Applying a portion of the institutionalized spouse s income can normally be done on a proposed income budget on the Medicaid application being submitted on behalf of the institutionalized spouse and normally does not require any court intervention. 5. Community Spouse Resource Enhancement - In contrast, if the community spouse and the institutionalized spouses combined income still falls short of the MMMNA level, then the community spouse may seek a "community spouse resource enhancement", as discussed below. Normally, this may only be achieved at a Fair Hearing or a Family Court support hearing. 6. Community Spouse Income Enhancement - Finally, in the event that the community spouse receives monthly income of $2,267 or more, but requires additional income, then the community spouse can seek to increase the MMMNA level either through a Family Court support hearing or at a Fair Hearing. 42 U.S.C. section 1396r-5(d)(5) and SSL section 366-c.2(g). a. To achieve this, the community spouse must demonstrate "exceptional circumstances resulting in significant financial distress", Gomprecht v. Sabol, 86 N.Y. 2d. 47 (1995), which will be further discussed below.

4 Page 4 7. In the absence of a court order providing for an enhanced MMMNA above the current $2,267 level, in the event that the community spouse has income above the MMMNA, pursuant to 18 N.Y.C.R.R. section (b)(5), Medicaid will request that the community spouse contribute 25% of his or her income above the current MMMNA level of $2,267 toward the cost of the care provided to the institutionalized spouse. 18 NYCRR section (b)(5). a. If the community spouse executes a statement whereby he or she refuses or fails to make such additional income available to pay for the institutionalized spouse's care, then the institutional spouse who is otherwise eligible may not be denied Medicaid nursing home benefits. (See below for broader discussion on Spousal Refusal) b. Continued Liability of the Refusing Spouse + even though the community spouse may refuse to pay for the cost of the institutionalized spouse's care with income above the MMMNA level, Medicaid has the right to sue the refusing community spouse at 25% of any income above the MMMNA. The community spouse's refusal will not insulate him or her from a lawsuit by Medicaid, which is also more generally discussed below. B. Resources: 1. The MCCA also established a level of resources that a community spouse can retain to establish a basic level to protect against impoverishment once the institutionalized spouse is deemed eligible for Medicaid. This resource level is known as the Community Spouse Resource Allowance ("CSRA"). 2. The minimum CSRA is $74,820 in the event that the spouses' combined resources are below $161,520. In the event that the spouses' resources exceed $161,520, then the CSRA is a maximum of $90,660 for The CSRA does not include exempt resources for purposes of Medicaid eligibility such as the homestead (SSL section 366(2)(a)); personal property (18 NYCRR action (a)); burial allowance (18 NYCRR section 4.6(b)(1)(i)) and an Irrevocable Pre-Paid Burial Trust (SSL section 209 (6)(b)). 1. In addition, the qualified retirement plan of the community spouse will be considered exempt for purposes of determining the institutionalized spouse s Medicaid eligibility. However, income from the retirement plan is countable in determining whether the community spouse is above the MMMNA level. SSL section (b)(2)(iii). Finally, the principal balance of the retirement plan is also the first resource counted in the calculation of the CSRA level. 4. Just as the case where a community spouse has monthly income in excess of the MMMNA, if the community spouse has resources in

5 Page 5 excess of the CSRA, then the community spouse must execute a spousal refusal to deem the institutionalized spouse eligible for Medicaid nursing home benefits. a. However, it is important to note that the spousal refusal will not insulate the refusing community spouse from a lawsuit by Medicaid seeking to be reimbursed for monies paid on behalf of the institutionalized spouse. Unlike monthly income in excess of the MMMNA level of $2,267, of which only 25% is required to be paid to Medicaid, 100% of all resources above the CSRA (maximum of $90,660 for 2003) are deemed available for a Medicaid lawsuit seeking reimbursement against the community spouse. As such, when possible, it is important to convert resources in excess of the CSRA to income. 5. CSRA Enhancement: a. In the event that the combined incomes of the community and institutionalized spouses are below the MMMNA of $2,267, the community spouse may seek an order at a Fair Hearing or from the Family Court to convert excess resources to income to bring the monthly income up to the MMMNA level. 6. Income First Rule: 4. However, in the event that the community spouse has income below the MMMNA level, and the combined incomes of the community spouse and the institutionalized spouse will bring the community spouse s income up to the MMMNA, the community spouse must first apply the income of the institutionalized spouse to bring the community spouse s income up to the MMMNA level before the community spouse can attempt to generate income from those resources above the CSRA. See, Golf v. New York State Department of Social Services, 674 N.Y.S. 2d. 600 (1998), a copy of which is annexed hereto as Exhibit A. b. For example, if the community spouse has Social Security income in the amount of $400 and a pension of $600, and the institutionalized spouse has pension income of $1,300, then the community spouse must first apply the institutionalized spouse's monthly income of $1,300 to her income of $1,000 to bring her up to the MMMNA level of $2, Once again, the Income First Rule forces a community spouse with resources above the CSRA, 100% of which are subject to a recovery suit by

6 Page 6 Medicaid, to apply income of the institutionalized spouse first to bring the community spouse up to the MMMNA level. As a result, the Income First Rule does not allow the community spouse to first attempt to generate income from excess resources to bring the community spouse up to the MMMNA level, which would enable the community spouse to protect a portion of the resources above the CSRA level of $89,280. This leaves the community spouse vulnerable to a more rapid dissipation of resources that may otherwise be needed to sustain the community spouse or his or her family if a spousal recovery suit is brought by Medicaid. 4. Exception to the Income First Rule - Robbins v. DeBuono, 718 F. 2d. 197 (2d Cir 2000)(copy of which is annexed as Exhibit B): The anti-alienation clauses of the Social Security Act render the institutionalized spouse s Social Security income unassignable to the community spouse to bring the community spouse s income up to the MMMNA level. As such, the Income First Rule does not apply when the institutionalized spouse has Social Security income. 1. For example, if the community spouse has monthly income of $1,000 and the institutionalized spouse has monthly income of $600 from Social Security and an additional $600 in pension income, under the Income First Rule, the community spouse would normally be required to add the institutionalized spouse s income of $1,200 to her income of $1,000 to bring her up to the MMMNA level of $2,267. However, under DeBuono, because the institutionalized spouse s $600 in Social Security income is unassignable to the community spouse s monthly income for purposes of the Income First Rule, then the community spouse is only obliged to first apply the institutionalized spouse s pension income of $600 to her monthly income of $1,000, totaling $1,600. This affords the community spouse the ability

7 Page 7 to then seek to generate additional income to bring him or her up to the MMMNA level of $2,267 from resources that are in excess of the maximum CSRA level of $90,660 and to therefore better insulate the spouses resources from a potential spousal recovery suit by Medicaid. 7. Community Spouse Income Enhancement: 1. In the event that the community spouse has income at or above the MMMNA level of $2,267, but requires additional income from the institutionalized spouse, which would otherwise not be permissible, the community spouse can petition the Family Court or the New York State Department of Health at a Fair Hearing for an order granting a Community Spouse Income Enhancement to increase the MMMNA above the $2,267 level. 2. On June 29, 1995, the New York State Court of Appeals in Gomprecht v. Sabol, 86 N.Y.2d 47, 629 N.Y.S.2d 190 ( Gomprecht ), attached hereto as Exhibit C, found that the Fair Hearing exceptional circumstances standard (SSL section 366-c) is the standard to be applied by New York State courts, and not the prior life-style standard found under Family Court Act section 412, in support proceedings brought by a community spouse in which the community spouse seeks to increase his or her MMMNA. Further, citing its holding in Schachner v. Perales, 85 N.Y.2d 316, 624 N.Y.S.2d 558 (1995), the Court of Appeals found that exceptional circumstances must be occasioned by true financial hardship that is thrust upon the community spouse by circumstances over which he or she has no control. 86 N.Y.2d at 51-52, 629 N.Y.S.2d at 192. (A copy of the Schachner decision is annexed as Exhibit D) 3. Therefore, the current standard for court-ordered support required for a community spouse seeking an increase in the MMMNA level is that he or she show significant financial distress which is defined in 18 N.Y.C.R.R (a)(10) as... exceptional expenses which the community spouse cannot be

8 Page 8 expected to meet from the monthly maintenance needs allowance or from amounts held in resources. Such expenses may be of a recurring nature or may represent major one time costs, and may include but are not limited to: recurring or extraordinary noncovered medical expenses; amounts to preserve, maintain or make major repairs on the homestead; and amounts necessary to preserve an income producing asset. 4. The exceptional circumstances standard has been applied in a number of post-gomprecht decisions affecting the community spouse s ability to seek an enhanced MMMNA level: 1. Naccarella v. Naccarella, NYLJ July 8, 1996, p.34, col.1. The community spouse had monthly income of $2,400, which exceeded the MMMNA for that year. However, the Family Court held that based on the community spouse s consumer debt (resulting from special needs of institutionalized spouse), special transportation needs and home maintenance expenses, the community spouse was awarded $1,000 from the institutionalized spouse s income to covers the costs. 2. Drozdow v. Drozdow, (Fam Ct. Broome Cty) F community spouse who had very little in resources allowed an increase in the MMMNA to cover costs to maintain the marital residence. 3. White v. White, 656 NYS2d. 697(3rd Dep t 1997). The community spouse was entitled to an increase in support above the MMMNA level from the institutionalized spouse s income to pay for necessary care, such as the cost of home health aides. The Court also declined to compel the community spouse to take funds from her resources that comprised

9 Page 9 the CSRA. (A copy of the White decision is annexed hereto as Exhibit E) 3. Spousal Refusal: 1. In the typical case, in order to qualify the institutionalized spouse for Medicaid nursing home benefits, the institutionalized spouse transfers resources to the community spouse who will then often own nonexempt resources in excess of the current maximum CSRA level of $90,660 and/or have monthly income above the current MMMNA level of $2,267. In this case, an otherwise Medicaid-eligible institutionalized spouse will be deemed ineligible for Medicaid. Hence, the need for the community spouse to execute a spousal refusal. 2. The transfer of assets between spouses will not affect the applying spouse s right to secure Medicaid eligibility. 42 USC section 1396p (c)(2)(a)(i). 2. In addition to the right to retain a fixed income and resource allowance, under Federal law, the community spouse may also exercise a right of spousal refusal (42 U.S.C. 1396k(a)(1)(A)) and may thereby retain amounts in excess of the CSRA or the MMMNA without jeopardizing the institutionalized spouse s Medicaid eligibility, provided that: a. For resources - (i) the institutionalized spouse assigns to the state any right of support from the community spouse (42 U.S.C. 1396r-5(c)(3)(A), SSL 366-c.5(b)); or (ii) the institutionalized spouse lacks the ability to execute an assignment of support due to physical or mental problems in which case the state has the right to bring a support proceeding against the community spouse without such assignment (42 U.S.C. 1396r-5(c)(3)(B)); or (iii) the state finds that the denial of eligibility would work an undue hardship (42 U.S.C. 1396r-5(c)(3)(C), SSL 366-c.5(b)); 3. For income - (i) the community spouse exercises his or her right of refusal pursuant to 42 U.S.C. 1396r-5(b)(1) which provides that during any month in which an institutionalized spouse is in the institution, except as provided in certain specific circumstances, no income of the community spouse shall be deemed available to the institutionalized spouse. c. Authority to Establish Medicaid Eligibility Through the Execution of a Spousal Refusal - Social Services Law 366.3(a) provides: 1. Medical assistance shall be furnished to applicants in cases where, although such applicant has a responsible relative with sufficient income and resources to provide medical assistance as determined

10 Page 10 by the regulations of the department, the income and resources of the responsible relative are not available to such applicant because of the absence of such relative or the refusal or failure of such relative to provide the necessary care and assistance. In such cases, however, the furnishing of such assistance shall create an implied contract with such relative, and the cost thereof may be recovered from such relative in accordance with title six of article three and other applicable provisions of law. 4. Spousal refusal is not only used in the context of Medicaid nursing home benefits, but also other types of communitybased Medicaid in which case the non-applying spouse can have no more than $642 in monthly income and $3,850 in non-exempt resources. 5. The Spousal Refusal form is typically a one-page document provided by HRA which sets for that the community or nonapplying spouse will not make his or her resources and/or income above the allowable resource and income levels available to pay for the of care for the applying spouse. A copy of a spousal refusal form is attached hereto as Exhibit F. 6. As a condition of eligibility for Medicaid, an individual who has the ability legally to execute an assignment for himself, also must cooperate with the state in identifying, and providing information to assist the state in pursuing any third party who may be liable to pay for care and services under the plan, unless such individual has good cause for refusing to cooperate as determined by the state agency in accordance with the standards prescribed by the Secretary [of Health and Human Services], which standards shall take into consideration the best interests of the individuals involved. 42 U.S.C. 1396k(a)(1)(C). The form for an assignment of support to be executed by the institutionalized or applying spouse is also attached to these materials as Exhibit G. 3. The Impact of the Execution of a Spousal Refusal 1. Medicaid can only consider the income and resources of the applying spouse. 2. However, the community or non-applying spouse cannot refuse to divulge information about his or her resources and income as well as personal information which must be included as part of the applying spouse s Medicaid application. 3. This information will not have any impact on the applying spouses s eligibility but provides information to Medicaid if it

11 Page 11 chooses to seek reimbursement from the refusing, nonapplying spouse at a later time. 4. Only exception is when the applying and non-applying spouses were living separate and apart from one another at the time that the applying spouse was institutionalized (DSS s Medicaid Assistance Reference Guide, page 334.3). 5. The refusing spouse is not obligated to sign the Medicaid application on behalf of the institutionalized or applying spouse. This may be important at trial in the event that Medicaid seeks reimbursement against the refusing spouse as Medicaid will have no written admission by the refusing spouse that he or she had excess resources and/or income at any time that benefits were paid on behalf of the institutionalized spouse. 4. Current Spousal Refusal Case Law: 1. Matter of Shah, 95 N.Y. 2d. 148, 711 N.Y.S. 2d. 824 (2000), wherein the Court of Appeals recognized the doctrine of spousal refusal and upheld the guardian-refusing spouse s right to transfer all of the incapacitated institutionalized spouse s assets to her and to thereafter execute a spousal refusal to render the institutionalized spouse eligible for Medicaid nursing home benefits. A copy of the Shah decision, which sanctions many important elements of Medicaid planning, is annexed hereto as Exhibit H. 4. Spousal Recovery Suits: 1. As set forth above, in the event that the non-applying spouse has resources and/or income above the allowable levels and executes a spousal refusal to render the otherwise eligible applying spouse eligible for Medicaid, the refusing spouse may be sued by Medicaid to be reimbursed for benefits paid on behalf of the spouse receiving Medicaid. 2. Legal Basis for Medicaid to Seek Recovery: SSL section 366 (3)(a) provides the basis for spousal refusal as well as the basis for spousal recovery suits, as it provides: In cases where, although such applicant has a responsible relative with sufficient income and resources to provide Medicaid assistance as determined by the regulations of the department, income and resources of the responsible relative are not available to such applicant because of the absence of such relatives or the refusal or failure of such relative to provide the necessary care and assistance. In such cases, however, the furnishing of assistance shall create an implied contract with such relative,

12 Page 12 and the cost thereof may be recovered from such relative in accordance with title six of article there and other applicable provisions of law. 1. Interestingly, Medicaid also relies on SSL section 101 in asserting its right to seek reimbursement from the responsible relative, most typically a refusing community spouse in a Medicaid nursing home context. SSL section 101 provides: Except as provided by law, the spouse or parent of a recipient of public assistance or care or of a person liable to become in need thereof shall, if of sufficient ability, be responsible for the support of such person, provided that a parent shall be responsible only for the support of a child under the age of twenty-one years. 2. However, unlike SSL section 366 (3)(a), which indicates that a refusing relative must have resources and income above allowable Medicaid levels, SSL 101 clearly sets forth that the refusing spouse have sufficient ability, which infers that the refusing spouse must only have resources or income above the allowable Medicaid levels. 3. See also, Commission of the Department of Social Services v. Spellman, 243 A.D. 2d. 45, 672 N.Y.S. 2d. 798 (1 st Dept 1998), wherein the First Department recognized Medicaid s right to sue a refusing spouse for reimbursement of monies paid out on behalf of the institutionalized spouse and applied the standard under SSL section 366(3)(a) where the community spouse only had resources above the CSRA without any mention of the amount of her monthly income. A copy of the Spellman decision is attached to the materials as Exhibit I. 3. The spousal recovery cases are being pursued in Supreme Court and Family Court, although there is no authority for Medicaid to bring such proceedings in Family Court under the Family Court Act. 4. Until recently, Medicaid was pursuing recovery from refusing spouses in New York City at every income and/or resource level above the allowable Medicaid levels. Medicaid was not only pursuing refusing spouses in the Medicaid nursing home context, but also refusing spouses in the Medicaid home care context where the resource and income levels that the refusing spouse is permitted to retain are significantly lower than what a refusing spouse in the Medicaid nursing home context is entitled to keep. As a result, the aggressive stance that Medicaid had taken against refusing spouses, some of whom have little means to support themselves, came under

13 Page 13 public scrutiny. As a result, Medicaid has not been pursuing these cases as aggressively as it had. However, this could change at any time. 1. Normally, settlements of these cases vary and depend upon the circumstances of each case. These cases usually settle for.70 to.85 cents for each $1.00 that Medicaid has paid out. 2. Some of the cases were being litigated (i.e., traverse hearings, discovery, procedural motions to dismiss). No spousal reimbursement case has ever gone to trial. 3. In most cases, a demand letter is first sent by Medicaid to the refusing spouse to afford the refusing a short period of time (usually 15 days) to respond to the demand letter and/or pay the amount requested. Many times, the figures set forth in the demand letters are inaccurate. A copy of a demand letter is annexed hereto as Exhibit J. A copy of a summons and complaint commencing a spousal recovery suit is annexed as Exhibit K. 5. Recent Spousal Recovery Case Law: 1. Department of Social Services v. Fishman, NYLJ July 23, 1998, p. 21 (Supreme Ct. NY Co.), reversed, 713 N.Y.S. 2d. 152 (1st Dept. 2000). The trial court had dismissed the complaint filed by HRA seeking reimbursement from the refusing spouse on that ground that HRA did not plead that income and resources of the refusing spouse were above the allowable levels at all times during the period that Medicaid had paid for the institutionalized spouse s care. The complaint had instead only plead that there were excess resources at the time that eligibility was established. 2. The First Department reversed, finding that: Since the furnishing of such assistance to an applicant who has a responsible relative with sufficient income and resources...as determined by the regulations of the department who has failed or refused to provide assistance creates an implied contract with such relative, the implied contract is created at the time the responsive relative refuses to make his or her income available to provide care to the institutionalized spouse. A contrary interpretation would engraft on to the statute a requirement that DSS make continual reassessments of the responsible spouse s ability to pay. 713 N.Y.S. 2d. at The First Department went on to hold that:...dss s right of recovery accrued and the implied contract with the defendant was created when she refused to make her income available for her husband s support, at the

14 Page 14 approximate time that DSS examined her income and resources and found that she was sufficiently able to pay for her husband s care. 713 N.Y.S. 2d. at The Fishman decision ignores the meaning of the statute that a refusing spouse only has an obligation to reimburse Medicaid for monies paid out on the institutionalized spouse s behalf as long as that refusing spouse has sufficient ability (SSL section 101) to assist in paying for the cost of the institutionalized spouses s care during the time period that benefits were paid (i.e., the refusing spouse had resources and/or income above the allowable levels). It ignores the fact that often, the level of the refusing spouse s resources and/or income will be diminished for a variety of reasons from the time that eligibility is established for the institutionalized spouse to the time when Medicaid actually gets around to sending out a demand letter and serving a summons and complaint. 1. It is likely that Fishman would only be interpreted to lessen Medicaid s pleading requirements and not the proof that Medicaid must furnish at trial to demonstrate that the refusing spouse had the resources and/or income above the allowable resource and income levels for the time period that Medicaid paid benefits out on behalf of the institutionalized spouse and for which it is seeking reimbursement from the refusing spouse. A copy of the decision in Fishman is annexed hereto as Exhibit L. e. Commissioner of the Department of Social Services v. Mandel, N.Y.L.J., September 14, 2001, p. 18, col. 1, Supreme Court, New York County): Medicaid was awarded summary judgment on its claim that the community spouse owed Medicaid $319, for benefits paid on behalf of the institutionalized spouse. The Court held that the community spouse, who had assets exceeding $1.5 million, had sufficient ability to pay for his wife s care. The community spouse s argument that his assets included illiquid commercial real estate that should be considered exempt was rejected by the Court. The Court also ordered interest be paid. A copy of the Mandel decision is annexed as Exhibit M. 6. Matter of Craig and When Does the Refusing Spouse Have Sufficient Ability : a. In Matter of Craig, 82 N.Y.2d 388, 604 N.Y.S.2d 908 (1993), in which DSS sought recovery from the estate of the refusing spouse of a Medicaid recipient, the Court of Appeals held recovery against the refusing spouse s estate in the nature of an implied

15 Page 15 contract for support is possible against the estate of the refusing spouse who was possessed of sufficient ability to provide support to the institutionalized spouse at the time that Medicaid paid benefits out on behalf of the institutionalized spouse. b. The plain import of the Social Services Law 366(3)(a),... allows the belated recovery [emphasis added] from the responsible relative only if that party had sufficient means during that period of medical assistance was rendered. 82 N.Y.2d at 393, 604 N.Y.S.2d at Thus, the Court of Appeals decision in Matter of Craig makes it clear that in seeking reimbursement against the refusing spouse, Medicaid must demonstrate that the refusing spouse has excess resources and/or income during the period for which Medicaid is seeking reimbursement. 4. A copy of the decision in Matter of Craig is annexed hereto as Exhibit N. 5. Matter of the Estate of Lois Link, 718 N.Y.S. 2d. 758 (App. Div. 4 th Dep t 2000): Medicaid allowed to recover monies from the estate of the community spouse that it had paid on behalf of the institutionalized spouse. The Court found that the community spouse had sufficient income and resources to pay for the institutionalized spouse s care and that Medicaid was also entitled to interest at the rate of 9 percent per year from the date of each separate payment of medical assistance made on the institutionalized spouse s behalf. A copy of the Klink decision is annexed as Exhibit O. 7. In Light of the Multitude of Spousal Recovery Suits, is Spousal Refusal Still Advisable?: 8. Renders institutionalized spouse eligible and avoids a potentially otherwise hurried, ill-advised plan to transfer assets out of the institutionalized spouse s name. 2. Refusing spouse only potentially liable for.65 cents on every private pay dollar. Historically, the amount that a nursing home receives from Medicaid is approximately two-thirds of the private pay rate that most nursing homes charge and there is no guarantee that Medicaid will even pursue reimbursement. c. Settlement with Medicaid + In the event that Medicaid seeks reimbursement from the refusing spouse, the average settlement is usually $.70 to $.85 to the $1.00 that Medicaid had paid to the nursing home. This means that the refusing spouse will pay about one-half of what he or she would have paid privately to the nursing home for the cost of care provided to the institutionalized spouse if he or she did not exercise the right of spousal refusal. 4. Post-eligibility planning - Once the institutionalized spouse is

16 Page deemed eligible for Medicaid, the refusing spouse is entitled to make transfers of assets to third parties without affecting the institutionalized spouse s Medicaid eligibility. V. Post-Eligibility Planning: 1. In the event that the institutionalized spouse has been on Medicaid in a nursing home for at least one month, transfers by the refusing, community spouse will not affect the eligibility of the institutionalized spouse. N.Y.S. Department of Social Services Administrative Directive: 96 ADM -11. This is because at such time, it cannot be argued that such post-eligibility transfers are being made to qualify the institutionalized spouse for Medicaid. 2. Such transfers will affect the refusing spouse s own Medicaid nursing home eligibility if he or she should require care within a penalty period created by such transfers. 3. As is set forth above, because the resources of the refusing spouse that exceed the maximum CSRA level of $90,660 are considered 100% available to a spousal recovery suit, it is essential that the refusing spouse engage in post-eligibility planning to reduce or eliminate the exposure of the refusing spouse to liability for the institutionalized spouse s nursing home expenses. 4. The post-eligibility planning should be done as early as possible since Medicaid will not normally commence spousal lawsuits until Medicaid has paid out benefits on behalf of the institutionalized spouse for several months. 5. Post-eligibility planning will also help reduce the estate of the refusing spouse that could be subject to a future claim by Medicaid after death. 6. Debtor-Creditor Law: Medicaid will attempt to bring an action in cases where the refusing spouse has transferred all or part of the excess resources above the CSRA level. The Debtor-Creditor Law authorizes creditors to pursue and recover assets transferred by a debtor to avoid a claim or a future claim of a creditor. (Debtor- Creditor Law sections 273 and 275; 18 NYCRR section ) 1. The commonly accepted view is that post-eligibility transfers may be made prior to the time that Medicaid serves a demand letter requesting reimbursement from the refusing spouse for benefits paid on behalf of the institutionalized spouse. As such, it is important to engage in post-eligibility planning at the earliest possible date after the institutionalized spouse has been in a nursing home on Medicaid for at least 30 days. 2. Fishman - However, in the Fishman decision, discussed and quoted at page 13 and 14 of this outline, the First Department

17 Page 17 suggests that the refusing spouse is on notice of Medicaid s claim at the time that he or she executes a spousal refusal, which threatens to render post-eligibility planning done at any time thereafter fraudulent under the Debtor-Creditor Law. VI. Recovery Against the Refusing Spouse s Estate: 1. No claims against an estate of the institutionalized spouse are permitted if survived by the refusing spouse. 18 NYCRR (b)(2). However, at the time that the refusing spouse dies, a lien for the amount paid on behalf of the Medicaid spouse can be placed against the refusing spouse s estate. 2. New York opts only to recover against assets which are part of the Medicaid spouse s estate and passing under a valid will of intestacy. N.Y. Soc. Serv. Law 369 subd. 6 (does not include property passing by operation of law). 3. However, this regulation would not protect the refusing spouse s estate in the event that Medicaid seeks reimbursement for monies paid out on behalf of the Medicaid spouse. 3. The 10 year statute of limitations which prohibits Medicaid s recovery of benefits paid 10 years or more after the Medicaid spouse s death also applies to the refusing spouse and his or her estate. SSL section 104(b). 1. If the refusing spouse survives the Medicaid spouse by more than 10 years, assuming that Medicaid benefits were paid on behalf of the Medicaid spouse when he or she was 55 years or older (18 NYCRR section 348.4, (d)(5)), Medicaid has no claim against the refusing spouse or the refusing spouse s estate. 4. In the event that the refusing spouse predeceases the Medicaid spouse, then a lien may be placed against the refusing spouse s estate for benefits paid on behalf of the Medicaid spouse as long as Medicaid can show that the refusing spouse had sufficient ability to pay for the Medicaid spouse s care during the period in question. Matter of Craig, supra (i.e., that the refusing spouse had resources and/or income above the CSRA and MMMNA levels respectively) 5. Right of Election Issues: a. Pursuant to EPTL A(a), the elective share of a spouse is $50,000 or one-third (1/3) of an estate, whichever is greater. b. If the institutionalized spouse is receiving benefits in a nursing home and the refusing spouse dies with no provision in the will for the institutionalized spouse, then Medicaid has the institutionalized spouse s right to enforce his or her right of election (usually 1/3) against the deceased refusing

18 Page 18 spouse s estate. c. The inaction of the surviving institutionalized spouse in not exercising the right of election may be deemed as a transfer of assets (18 NYCRR (c)(1)) or the failure to obtain an available resource rendering the institutionalized spouse ineligible for Medicaid. 6. Waiver of the Right of Election: a. If the institutionalized spouse is receiving Medicaid benefits, the refusing spouse has an interest in disinheriting the institutionalized spouse from his or her will in the event that the refusing spouse should predecease the institutionalized spouse. If such is the case, and the couple has simple wills, the assets of the refusing spouse s estate would be inherited by the institutionalized spouse, disqualifying the institutionalized spouse from Medicaid. b. However, disinheritance of the institutionalized spouse is not an appropriate planning technique since Medicaid has the right to assert the institutionalized spouse s right of election of up to one-third (1/3) of the refusing spouse s estate. c. A waiver of the right of election by the institutionalized spouse may preclude Medicaid from exercising the institutionalized spouse s right of election against the refusing spouse s estate. This is true if the waiver is done in whole or in part, whether executed by one or both spouses and whether the waiver is executed with or without consideration. EPTL section A(e). d. However, it is possible that the waiver of the right of election will be deemed an uncompensated transfer by Medicaid and the penalty period for such transfer shall not begin to run until the death of the refusing spouse as opposed to the time that the waiver was actually executed. 18 NYCRR (c)(i)(ii)(c)(2). Estate of Dionisio v. Westchester County Department of Social Services, 655 N.Y.S.2d 904 (2d Dept. 1997). A copy of the Dionisio case is annexed as Exhibit P.