In 1988 Congress responded to the national outrage that the Medicaid program was forcing community spouses — often women with no work history — to seek termination of a long-term loving marriage by divorce or be reduced to abject poverty with insufficient savings and income to pay rent.1 The rationale, which was articulated since the beginning of the Medicaid program, was that community spouses had the duty of support.2 With the enactment of the Medicare Catastrophic Coverage Act of 1988 (MCCA), Congress corrected this one-way obligation with the recognition that the institutionalized spouse still had a duty to support the community spouse. The Congressional plan to end spousal impoverishment included two parts. The first amended administrative eligibility provisions to provide for community spouse income and asset allowances. The tightly controlled administrative process evidences an unstated intent that bureaucrats should not determine how people should live. The second part was the unrestricted judicial remedy of a court order of support.
Has Spousal Impoverishment Become Inevitable?
Since enactment, events unanticipated by Congress have transpired to threaten the return of spousal impoverishment and spouses seeking divorce. A quick survey finds many articles observing that retirees do not have sufficient savings for retirement due to factors including increased life expectancy, the loss of pensions, and the national focus on spending rather than saving for retirement.3 In the Medicaid context, the problem is exacerbated by inflation in the cost of health care, which has outpaced the consumer index since at least 1987.4 The effect of these changes cannot be fully appreciated without a review of the MCCA and its subsequent misinterpretation by state courts.
Against this background, the Congressional assurance that the “community spouse has a sufficient — but not excessive — amount of income and resources available”5 becomes a hollow promise.
MCCA, 42 USC 1396r-5
The Administrative Provisions to End Spousal Impoverishment
1396r-5(d) Income Allowance
The Medicaid agency makes a determination of a “minimum monthly maintenance needs allowance” (MMMNA). It is composed of a basic income allowance, which is 150% of the “official” poverty line, plus current expenses of shelter including utilities. It is subject to a maximum6 and is adjusted for inflation by the consumer price index.7
Expenses for many common necessities are not included, such as health care insurance, co-pays, and deductibles; communication expenses such as phone and internet; and transportation expenses such as vehicle lease, insurance, maintenance, and fuel.
1396r-5(e)(2)(C) CSRA Increase to Produce Income to Meet MMMNA
If the income of both spouses is inadequate to raise the community spouse’s income to the MMMNA, either may ask for a fair hearing to increase the Community Spouse Resource Allowance (CSRA) for the purpose of generating enough income to meet the MMMNA.
1396r-5(f)(2)(A) Community Spouse Resource Allowance
The CSRA allows the spouse a set amount of assets, which the MCCA calls resources. In addition to “excluded assets” such as the marital home and personal property including a car, the spouse may retain half of the couple’s cash assets from a minimum of $30,828 to a maximum of $154,140 in 2024.8 States may choose to allow all spouses to retain assets up to the maximum.9 However, there is no way to increase it beyond the maximum in the administrative process.
42 U.S.C. 1396r-5(g) The Congressional Allowance for Inflation
The Congressional plan allowed for inflation by annual adjustments to the income and asset allowances based on the consumer price index.10 Since enactment, the allowances have increased almost 260%. The relationship between the cost of health care and the spousal allowances was a key factor in the plan. The House Energy and Commerce Committee Report demonstrated how the law would end spousal impoverishment.11 A hypothetical assumed a private pay nursing home rate of $2,000 a month.12 The spousal minimum asset allowance of $12,000 was equal to six months of nursing home care.13 We note here that the current spousal asset minimum of $30,828 will not pay for four months of care. In 2023 the national average monthly cost of a semi-private nursing home room was $8,669.14 Six months of care cost $52,014.
1396r-5(e)(2)(B) Fair Hearing to Increase Income Allowance
The community spouse may seek an increase in the MMMNA by requesting a fair hearing.15 If the spouse proves “the existence of exceptional circumstances determined to be the cause of extreme financial duress,” the administrative law judge (ALJ) may award further spouse income allowance, provided that the ALJ determines that the expenses or amounts are not those that the spouse could be expected to pay from amounts already recognized for maintenance or amounts held in resources. The State Medicaid Manual defines “exceptional circumstances resulting in extreme financial duress” as those expenses, not otherwise covered, necessary to maintain themselves in the community.16 The allowance is for current expenses only and the agency must continue to “monitor cases to assure that the exceptional circumstances continue to exist and that necessary adjustments in maintenance allowance is made when the special conditions no longer exist.”17
Built-In Shortfalls in the Congressional Plan
There are fundamental problems with the administrative plan vis-à-vis spousal impoverishment. The inadequacy of the administrative asset and income allowances to address common issues in retirement has long been recognized. In 2005, a U.S. Department of Health and Human Services policy statement observed that the administrative process does not allow for common problems such as loss of income on the death of the health-impaired nursing home spouse.
Couples seek to avoid serious and potentially long-lasting financial harm to the community spouse, who is likely to outlive the institutionalized spouse. In addition, income support from the institutionalized spouse may decrease or even end at death.18
When life expectancy of the spouse is considered, the future needs of the spouse loom large. According to the Social Security Administration Actuarial Life Table,19 a man age 80 has 7.92 years and a woman 9.38 years. If a client has longevity in the family, the figures can be significant underestimates.
The Judicial Role in the MCCA Plan
1396r-5(d)(5) Income, (f)(2)(A)(iv) Court Order of Support
In contrast with the tightly controlled administrative process, Congress added provisions for a judicial determination of spousal needs that would supersede administrative determinations. There were no conditions or requirements that such determinations reflect the Medicaid program. This deference to the judicial system was tacit recognition of the hundreds of years of experience the courts have with determinations of spousal need.
Factors of a Support Order
While there are no uniform standards for support orders,20 there are common factors used by courts considering spousal support in the instance of divorce. These include length of marriage; whether the claimant spouse needs the support; ability to pay by the spouse against whom order applies; the duration of the support ordered; and maintaining the standard of living of the supported spouse.21
It is self-evident that a court determining a support order should not limit its consideration to such administrative eligibility considerations as the current basic needs22 of the spouse. It must consider the spouse’s lifetime needs to remain independent in the community.
The Court Support Order Brings 1396r-5 in Harmony With Other Spousal Transfers Allowed by 1396p(c)
Permissible transfers to the spouse under 1396p(c) impose no limit, such as the CSRA or the MMMNA or consideration of current basic needs. If the transfer is to an immediate annuity, the only limitation is that the distribution period may not be longer than the spouse’s life expectancy.23 If the transfer is in trust for the sole benefit of the spouse, it must be structured so that the spouse is the sole lifetime beneficiary.24 If the spouse is a recipient of means-tested benefits and was disabled by or before age 65, the transfer may be to a (d)(4)(c) pooled trust which has no limit on transfer or distribution requirements except that any amount remaining in the trust at the spouse’s death is subject to payback.25 The clear intent of these requirements is that the spouse will have lifetime benefit, as is the intent of providing for a court order of support.
The Mistaken Interpretation of the MCCA By State Courts Has Undermined Its Protections
The cases below are examples of misunderstanding of the MCCA plan and the role of the court order of support. The decisions have limited the parameters of support orders to those factors used in the administrative eligibility determination process. The result effectively penalizes those who seek a judicial determination in favor of less controlled and perhaps riskier plans. For example, what if a community spouse has cognitive impairment, cannot handle money, and relied upon the institutional spouse? Should they purchase an immediate annuity rather than a judicial remedy that provides for financial security for the community spouse?
Sufficient But Not Excessive Resources
Many cases have echoed the words from the legislative history of the spousal impoverishment provisions, notably beginning with Blumer: “the community spouse has a sufficient — but not excessive — amount of income and resources.”26 While the statement may be an accurate summary of Congressional intent, it provides little guidance to a court considering an order for spousal support for the spouse’s lifetime needs. What is a sufficient but not excessive amount of income and resources in the face of long-term care? An applicant will be eligible with marital home equity of $713,000 or less, contents27 and other personal property (including a motor vehicle), and the community spouse’s retention of cash assets (after spend-down) of $154,140,28 even though the couple’s net worth is over $1 million dollars. How can a court deciding a support order rule that a couple with substantially less net worth has an excessive amount of resources?
Examples of Mistaken Interpretation by Courts
The comments below are not case summaries but are chosen to give examples of how courts have limited the utility of the court order of support.
Confusion in the Applicant’s Petition Produces Confusion in the Court
The following decisions interpreted the petition as one for an increase in the CSRA or MMMNA, rather than for a support order based on state law.
- Arkansas Department of Health and Human Services v. Smith:29 Applicant petitioned for an order increasing the CSRA and MMMNA based on the Medicaid program instead of a support order based on state law. The court correctly held that only the Medicaid agency could make those determinations. However, in dicta the court stated one “cannot do an ‘end run’ around that process by seeking a preemptive court order of spousal support.”
- See also Oanh Thile Huynh v. King,30 a case involving a similar claim and resolution; Alford v. Mississippi Division of Medicaid,31 “We conclude that the plain language of the MCCA does not confer jurisdiction upon our state courts to increase the MMMNA and CSRA prior to an exhaustion of administrative remedies.”
Injection of Medicaid Administrative Limitations in Judicial Proceedings for Support Orders
- H.K. v. Division of Medical Assistance and Health Services:32 The court observed “permit[ting] a community spouse to obtain an unlimited increase in the spousal (income) allowance by obtaining a court order for support … would nullify the statutory and regulatory limitations on the community spouse allowance.” The court affirmed the agency’s refusal to honor a court order of support because it provided excessive income to the spouse.
- M.E.F. v. A.B.F.:33 In a lengthy and considered opinion, the court reviewed the legislative history of 1396r-5 and the role of support orders. The court recognized the question of whether the administrative fair hearing and judicial proceedings to determine spousal support present two parallel alternatives for relief. However, the court did not resolve the question given that the community spouse began but did not complete the administrative appeal procedure. The court did not want to encourage “forum shopping” and “parallel litigation.” While considerations of judicial economy are within the purview of the courts, the decision continues confusion about the substance of the two processes.
- R.S. v. Division of Medical Assistance and Health Services and Union County Board of Social Services:34 The court held that the Medicaid agency would not have to defer to a court order if it decided that the order “was designed to circumvent the regulations governing the CSMIA,” which we note is the very purpose of a court order of support. The agency could disregard the court order to better effectuate “the broad federal and state goals of preventing the impoverishment of community spouses, while ensuring limited Medicaid resources are allocated prudently among those most in need.” The purpose of avoiding spousal impoverishment was not a consideration. Finally, the court noted that if the institutionalized spouse paid less, then the difference would be “at the taxpayer’s expense.” We note that according to a CDC report, over half of nursing home residents are over age 80.35 These residents have been “taxpayers” longer than judges have been alive. The appeals court in neighboring state Connecticut found R.S. rationale “unpersuasive.”36
- Vansach v. Department of Health and Human Services (In re Estate of Vansach):37 In this case, the trial court directed the institutionalized spouse’s income to the community spouse. In a long and considered opinion, the appellate court held that a trial court cannot enter a support order allowing the community spouse to maintain their current lifestyle, leaving the institutionalized spouse entirely destitute and unable to meet their own needs. The court erred in focusing on the community spouse’s current, rather than lifetime, needs. As for the institutionalized spouse, the court ignored the fact that Medicaid requires them to be “destitute” and that nursing homes are required to meet the needs of residents under the Nursing Home Reform Act of 1987.38 The court rejected a “fallacious assumption” that the institutionalized spouse should receive 100% free medical care under Medicaid. In so opining, the court created the fallacious assumption that Medicaid paid care is free. The court evidently was unaware of Medicaid estate recovery.
- Schroeder v. Department of Health and Human Services (In re Estate of Schroeder):39 The court followed Vansach and held that, before an applicant or spouse can petition a court for a support order, there must actually be a Medicaid determination regarding eligibility and patient-pay amounts, which is contrary to the plain language 1396r-5. The court further indicated that the support order could only apply to assets that the applicant could transfer. The court apparently was unaware of the Medicaid concept of asset deeming and that, unless subject to a protective order, assets of either spouse are considered available to the institutionalized spouse.40
Recommendations for Advocacy
Advocates must make clear to the courts the difference between the limited administrative determinations of MMMNA and CSRA concerning a spouse’s current needs and the broader considerations a court must make in determining a lifetime support order. Courts should not look at the needs of Medicaid agencies to keep budgets down, but rather review the financial need of couples facing the reality of long-term care. In doing so, courts will give effect to the Congressional purpose of avoiding spousal impoverishment, and transfers made under such orders will bring the interpretation of 1396r-5 into harmony with provisions of 1396p(c), allowing for transfers that support spouses and dependents for their lifetime needs.
1. See e.g. Ronald Sullivan, Nursing Costs Force Elderly to Sue Spouses, N.Y. Times (Mar. 6, 1986).
2. Schweiker v. Gray Panthers, 453 U.S. 34, 101 S. Ct. 2633 (1981); Wis. Dept. of Health & Family Servs. v. Blumer, 534 U.S. 473, 479 (2002).
3. John Scott, America Has a Retirement Crisis. We Need to Make It Easier to Save., The Pew Charitable Trusts (Jan. 18, 2024), https://www.pewtrusts.org/en/about/news-room/opinion/2024/01/18/america-has-a-retirement-crisis-we-need-to-make-it-easier-to-save (accessed July 29, 2024); Christopher Rowland, Senior Care Is Crushingly Expensive. Boomers Aren’t Ready., Wash. Post (Mar. 18, 2023), https://www.washingtonpost.com/business/2023/03/18/senior-care-costs-too-high/ (accessed July 29, 2024).
4. See e.g. Jeffrey A. Rhoades, Ph.D., and John P. Sommers, Ph.D., Trends in Nursing Home Expenses, 1987 and 1996, 25(1) Health Care Fin. Rev. (2003); Shameek Rakshit et. al., How Does Medical Inflation Compare to Inflation in the Rest of the Economy? KFF (May 17, 2024), https://www.kff.org/health-costs/issue-brief/how-does-medical-inflation-compare-to-inflation-in-the-rest-of-the-economy/ (accessed July 29, 2024).
5. Wis. Dept. of Health & Family Servs. v. Blumer, 534 U.S. 473, 480 (2002).
6. 42 U.S.C. 1396r-5 (d)(3)(C).
7. 42 U.S.C. 1396r-5(g).
8. 42 U.S.C. 1396r-5(g). The statute uses a minimum resource (asset) allowance of $12,000 and a maximum of $60,000 in 1989 dollars. The figures in the text are adjusted for inflation.
9. The states include Alaska, Colorado, Florida, Georgia, Hawaii, Illinois, Mississippi, and Vermont. See Natl. Acad. of Elder Law Attys., New York NAELA 50-State Medicaid Chart (2023), https://naela.org/50StateMedicaidChart (accessed July 29, 2024). Since January 1, 2024, California has no asset limit. See Calif. Dept. of Health Care Servs., Asset Limits, https://www.dhcs.ca.gov/Get-Medi-Cal/Pages/asset-limits.aspx (accessed July 29, 2024).
10. 42 U.S.C. 1396r-5(g).
11. House Energy and Commerce Committee, H.R. Rpt. 100-105 pt. 2 at 76–78 (1987).
12. Id. at 76.
13. Id. at 76–77.
14. Genworth, Cost of Care Survey, Genworth Financial, Inc. (Dec. 2023), https://www.genworth.com/aging-and-you/finances/cost-of-care (accessed July 29, 2024).
15. 42 U.S.C. 1396r-5(e)(2). Some states allow the spouse to keep the $154,140 maximum, for example Florida, Georgia, Minnesota, and Mississippi. See Natl. Acad. of Elder Law Attys., New York NAELA 50-State Medicaid Chart (2023), https://naela.org/50StateMedicaidChart (accessed July 29, 2024).
16. Ctrs. for Medicare & Medicaid Servs., The State Medicaid Manual § 3710.1, https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021927 (accessed July 29, 2024).
17. Id. at § 3714.2.
18. U.S. Dept. of Health & Human Servs., Spouses of Medicaid Long-Term Care Recipients, Medicaid Eligibility for Long-Term Care Benefits Policy Brief #3 (Apr. 2005), https://aspe.hhs.gov/sites/default/files/private/pdf/74086/spouses.pdf (accessed July 29, 2024).
19. Soc. Sec. Administration, Actuarial Life Table, https://www.ssa.gov/oact/STATS/table4c6.html (accessed July 29, 2024).
20. J. Thomas Oldham, An Overview of the Rules in the USA Regarding the Award of Post-Divorce Spousal Support in 2019, 41 Houston J. of Intl. L. 525 (2019).
21. Id. 529–531.
22. Blumer, supra n. 5, at 481–482.
23. 42 U.S.C. 1396p(c)(1)(g)(ii)(II).
24. Hughes v. McCarthy, 734 F.3d 473 (6th Cir. 2013).
25. 42 U.S.C. 1396p(d)(4)(c).
26. Blumer, supra n. 5, at 480.
27. The coverage is generally 50 to 70 percent of the insurance on the structure of the house. Insurance Information Institute, What Is Covered by Standard Homeowners Insurance?, https://www.iii.org/article/what-covered-standard-homeowners-policy (accessed July 29, 2024).
28. The statute uses $12,000 as the minimum resource (asset) allowance of $12,000 and a maximum of $60,000 in 1989 dollars. The figures in the text are those adjusted for inflation. 1396r-5(g).
29. Arkansas Dept. of Health & Human Servs. v. Smith, 370 Ark. 490, 262 S.W.3d 167, 174 (Ark. 2007).
30. Huynh v. King, 269 S.W.3d 540 (Mo. Ct. App. 2008).
31. Alford v. Mississippi Div. of Medicaid, 30 So. 3d 1212, 2008 CA 1984 (Miss. 2010).
32. H.K. v. Div. of Med. Assistance & Health Servs., 379 N.J. Super. 321, 323, 878 A.2d 16 (App. Div. 2005).
33. M.E.F. v. A.B.F., 393 N.J. Super. 543, 925 A.2d 12 (App. Div. 2007).
34. R.S. v. Div. of Med. Assistance & Health Servs. & Union Cnty. Bd. of Soc. Servs., 83 A.3d 868, 434 N.J. Super. 250, 264, 267 (App. Div. 2014).
35. National Center for Health Statistics, U.S. Nursing Homes Profiled in a New Report (page last reviewed Oct. 6, 2006), https://www.cdc.gov/nchs/pressroom/00facts/nurshome.htm#:~:text=To%20meet%20the%20needs%20of,are%2085%20years%20or%20over (accessed July 29, 2024).
36. Valliere v. Commr. of Soc. Servs., 328 Conn. 294, 321 n. 22, 178 A.3d 346, 363 (Conn. 2018).
37. Vansach v. Dept. of Health & Human Servs. (In re Estate of Vansach), 324 Mich. App. 371, 396, 922 N.W.2d 136 (Mich. Ct. App. 2018).
38. 42 U.S.C. § 1395i–3.
39. Schroeder v. Dept. of Health & Human Servs. (In re Estate of Schroeder), 335 Mich. App. 107, 110, 966 N.W.2d 209 (Mich. Ct. App. 2020).
40. 42 U.S.C. 1396r-5(c)(2)(A).
