Estate Planning for Medicaid Long-term Benefits-part Ii
| Publication year | 1989 |
| Pages | 2109 |
1989, November, Pg. 2109. Estate Planning for Medicaid Long-Term Benefits-Part II
Part I of this article, published in the October issue of The Colorado Lawyer,(fn1) discussed the need to consider Medicaid benefits in estate planning and reviewed the Medicaid rules concerning income and asset limitations. The second and concluding part of this article explains the new rules regarding allocation of income and assets between spouses, the use and treatment of trusts and the recovery by the state of correctly paid Medicaid benefits.
The Medicare Catastrophic Coverage Act ("MCCA")(fn2) made significant changes to the manner in which income and resources are to be allocated between spouses. These changes became effective on September 30, 1989.(fn3)
With respect to income, the old rule was that, in most situations, almost all of an individual Medicaid recipient's income was used to contribute to the cost of his or her care. Only $34 monthly was reserved as a "personal needs" allowance (this amount remains practically the only disposable discretionary income left to a Medicaid recipient). The difference between the remaining amount of income contributed by the recipient to the cost of care and the Medi-
The MCCA changes in this area now guarantee the community spouse a certain level of monthly income. This will consist of the community spouse's income, along with a possible contribution from the institutionalized spouse's income. If the contribution is made by the institutionalized spouse, the Medicaid program will be forced to make an additional payment to the nursing home for the cost of the recipient's care.
The community spouse's guaranteed level of income is referred to as the community spouse monthly income allowance ("CSMIA"). It is calculated by taking the federal government's poverty guideline for a household of two and multiplying it by 1.22 (for 1989, the CSMIA equals $815 monthly). Income received by the community spouse from other sources is then subtracted from the CSMIA, to determine the amount that the institutionalized spouse is allowed to contribute to support the community spouse. The CSMIA can be revised on a showing of high shelter costs or exceptional circumstances which would cause significant financial duress if the revision were not allowed. A family allowance may also be reserved out of the institutionalized individual's income for support of a dependent or minor child, dependent parent or dependent sibling of either spouse, any of whom are residing with the community spouse.(fn4) It is important to note that the deduction of these allowances cannot be used as a device to bring the institutionalized spouse's income below the Medicaid maximum income level. These deductions are made after eligibility has been established, by comparing the individual's gross income with the income maximum.(fn5)
An important change in MCCA affects the manner in which all Medicaid recipients allocate their income, whether married or not. Under pre-MCCA law, if an individual wished to obtain certain medical care not covered by Medicaid (e.g., dental care), the individual would have to pay for it out of the personal needs allowance or out of his or her limited resources. The new MCCA provision, 42 U.S.C. § 1396a(r)(1), by contrast, allows an individual to purchase these services with his or her monthly income. The result is that the Medicaid program must pay an increased cost for a person's nursing home
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