San Antonio Express-News
December 9, 2003

Selling Home can Interfere with Medicaid

copyright 2003, Paul Premack

Part of the Medicare Catastrophic Coverage Act (MCCA) of 1987 protects people from "spousal impoverishment." Before then, when one spouse lived in a nursing home and the other lived at home (the at-home spouse is called the "community spouse") the community spouse often went broke before Medicaid would step in to help.

The spousal impoverishment law (which would have been better if labeled the "non-impoverishment" law) provides some protection to the community spouse. The law applies to any married couple, one of whom was in a nursing home on or after September 30, 1989 for any period longer than 29 days. The protection works as follows:

First, a "snapshot" of the couples’ asset value is taken. The value is set as it existed at midnight of the first day of the month in which the ill spouse enters the nursing home. The snapshot is taken only one time and cannot be changed for a nursing home resident, even if the couple’s financial situation changes.

Second, the value of the couple’s exempt (non-countable) assets is deducted. Non-countable assets include the homestead, an automobile, household contents, and with some limits, funds for a funeral.

Third, an exemption is granted to the community spouse for half the countable resources, but not less than $18,132 nor more than $90,660 in 2003. Those allowances are about to increase to $18,552 minimum and $92,760 maximum for year 2004.

This exemption is called the Protected Resource Allowance (PRA). Everything above the allowance is viewed as a resource of the institutionalized spouse, and is counted against his ability to qualify for Medicaid. When the portion allocated to the institutionalized spouse is spent down to the $2,000 limit, he can qualify for Medicaid benefits.

In your parents’ case, their only asset is their home. Thus, your mother’s PRA would have been set very low by the snapshot. If they sell the house now, 100% of the proceeds are countable resources; none of the proceeds are protected by the PRA (since the snapshot established a low PRA and cannot be changed). Thus, sale of the house will disqualify your father from receiving Medicaid benefits, returning all costs of his care to their shoulders.

You do not say why they want to sell, or what plans your mother has made. But if she keeps the house, he can stay on Medicaid; so if she needs better cash flow then she might look into a reverse mortgage. If she does go ahead with the sale, but buys another house within three months, he can stay on Medicaid. Or she could protect some of the sale proceeds by making legal gifts. Shifting assets under Medicaid is always complicated, so she should visit a Certified Elder Law Attorney to be sure to stay within the law.