What you are describing is called "spousal impoverishment" because the idea is to keep the spouse who is not in the nursing homes from becoming impoverished. Whether the so-called “community" spouse may keep the nursing home spouse’s income depends on the level of her income. The Medicaid agency calculates how much she needs to live on under an arcane formula. If her income is less than this amount, she can keep as much of her husband’s income as is necessary to get her income up to this level. For instance, if her income allowance is $2,500 a month and her own income is $1,500 a month, she can keep $1,000 a month of her husband’s income. The rest of his income has to go to the nursing home. But if her own income were $3,000 a month, she could keep it all even though it’s more than her income allowance, but all of her husband’s income would go to the facility. If the wife’s income is low enough that she gets to keep some or all of her husband’s income, she can spend it as she wishes and does not have to account to anyone about her spending.
For more information about the healthy spouse's income, see: Medicaid's Attempt to Ensure the Healthy Spouse Has Enough Income: The MMMNA.