Spouses have a legal duty to support each other. However, the astronomical costs of long-term care, such as home care or nursing home care, can bankrupt a “well” (i.e., healthy) community spouse. To protect community spouses from impoverishment themselves, New York law allows an ill spouse to freely transfer his or her assets to the community spouse and be eligible for Medicaid benefits immediately. If after making those transfers, the community spouse has assets above the resource allowance prescribed by New York State, the community spouse can sign “spousal refusal” whereby the well spouse refuses financial responsibility for the other, leaving Medicaid to pay for the care. In this way, community spouses need not become penniless paying for an ailing partner’s care and do not have to divorce their spouse to avoid impoverishment.
To secure Medicaid eligibility, married couples transfer assets from the Medicaid applicant spouse to the community spouse. There are no restrictions or penalty periods imposed on transfers of assets between spouses. For example, a New York Medicaid applicant with $200,000 in assets may transfer the whole amount to his spouse and be eligible for Medicaid benefits right away.
The catch is that the local Departments of Social Services retain the right to sue the community spouse for the cost of the care paid for by Medicaid. Because local Departments have different approaches to spouses who execute a spousal refusal, varying from aggressive pursuit of recovery of benefits including commencement of legal action to sporadic or non-existent recovery efforts, you must consult with a New York Elder Law attorney regarding your options and risks. When faced with the prospect of impoverishment and essential long-term care, many community spouses choose spousal refusal with the understanding that at some point, the local department may seek reimbursement for monies expended under the Medicaid program on behalf of their spouse. Because Medicaid is only permitted to seek reimbursement at the Medicaid rate (versus the private pay rate), it is less expensive for your spouse to continue to receive long-term health care via Medicaid rather than for you to pay out of pocket for such care, even if such a lawsuit is pursued.
There are several tools available for dealing with spousal refusal lawsuits, which may enable the well spouse to negotiate the Medicaid lien. It is important to seek representation by a New York Elder Law firm that handles litigation and specifically spousal refusal litigation if recovery is sought.