In a landmark decision, the U.S. Supreme Court has ruled that state bans on same-sex marriage are unconstitutional and that states must recognize same-sex marriages performed in other states. Among other implications, the ruling means that gay couples living in states that previously did not recognize their marriage will now be covered by Medicaid’s "spousal impoverishment" protections and asset transfer rules. Of course, marriage is for better and for worse, and the Medicaid implications of getting married or having a marriage recognized can be helpful or detrimental depending on the couple’s financial circumstances.
Medicaid’s impoverishment protections are aimed at keeping the spouses of Medicaid long-term care recipients from becoming destitute, homeless or both. While nursing home residents must spend down to $2,000 (or slightly more in some states) of countable assets before Medicaid will pick up their cost of care, Medicaid law has provisions to avoid forcing the healthy (or "community") spouse to give up the family home and retirement savings, and live in poverty, in order for the nursing home spouse to receive Medicaid coverage.
The community spouse may keep up to $119,220 (in 2015 and 2016) of his assets. If the community spouse has less than this amount, the nursing home spouse may transfer his assets to the spouse to make up the difference. Further, if the community spouse has low income, he may keep some or all of the nursing home spouse’s income as well as his own.
Medicaid’s rules also help married couples protect their home. The state cannot seize or impose a lien on the home of a deceased Medicaid beneficiary if the spouse still lives there, and Medicaid beneficiaries needing long-term care may transfer the title of a home to their spouse, thus allowing the spouse to remain in the home.
In addition, same-sex spouses of long-term care recipients in all states will now be shielded from Medicaid estate recovery. Under Medicaid law, following the death of the Medicaid recipient a state must attempt to recover from his or her estate whatever long-term care benefits it paid for the recipient's care. However, no recovery can take place until the death of the recipient's spouse.
Another advantage to being a married couple is that one spouse may transfer assets to the other without triggering Medicaid’s penalties for asset transfers. Even after entering a nursing home, the institutionalized spouse may transfer any asset to his spouse, although this may not help him become eligible for Medicaid since the same limit on both spouse's assets will apply.
None of the above protections are available to non-spouse partners of Medicaid long-term care recipients. In 2011, when only six states allowed gay and lesbian couples to wed, the federal government gave states the option of extending spousal protections to same-sex domestic partners. With same-sex couples now having the right to marry nationwide, it is unclear whether individual states will continue to offer spousal benefits to same-sex domestic partners. The message may be to get hitched or lose your spousal protections.
These newly available protections can cut both ways, however. The asset and income protections primarily help lower-income seniors. Although under the Medicaid rules non-married seniors may not freely transfer assets to each other, they are not subject to the asset limits, either. The healthy partner can keep all of her assets and the nursing home partner need only spend down her own assets. If the healthy partner in a same-sex couple is well off or has all of the couple's assets in her name, the introduction of spousal protections will mean she may keep less of her assets if her partner is to qualify for Medicaid.
Medicaid agencies in states that did not previously recognize same-sex marriage will have to develop new policies in these areas. It is likely that federal Medicaid officials will be issuing guidance on changes that are needed following the Court's decision.
For more about Medicaid's rules, click here.
For more about Medicaid planning, click here.