Demystifying Medicaid: What is “Spousal Refusal”?

“Spousal Refusal” is a technique to avoid having the assets and income of the “well” spouse count when the “ill” spouse applies for Medicaid.  If the “well” spouse submits a statement to Medicaid stating that he or she is unwilling to contribute financially toward the medical costs of “ill” spouse, then Medicaid is not permitted to include the “well” spouse’s assets in determining eligibility for the Medicaid applicant.

Spousal Refusal is legal and recognized by the legislature and courts as a valid Medicaid planning tool.  However, just because it is legal, does not mean that there are no consequences to Spousal Refusal.  Medicaid has a right of recovery against the refusing spouse.  It doesn’t always pursue the refusing spouse, but the right to do so is there. 

So a common question is:

If the “well” spouse can be sued by Medicaid, why execute a Spousal Refusal?

Here’s why:  Medicaid obtains better rates for services than you would if you private paid.  So repaying Medicaid will be more affordable than private paying, even if you have to repay Medicaid 100%.

Also, Medicaid doesn’t always pursue every spouse, so there is a chance that a demand won’t be made.  Morever, if a demand for reimbursement is made, with proper legal advocacy, you can negotiate down significantly the final amount due.

In summary, here are the benefits and drawbacks to Spousal Refusal:

Pros:

• Applicant (“ill spouse”) can transfer all assets to spouse and immediately qualify for Medicaid
• Spouse will not have to relinquish rights to any assets
• Even if have to repay, rate for services will be less expensive rate paid by Medicaid, not more expensive private pay rate

 

Cons:

• Spouse may receive a demand for repayment from Medicaid, during the lifetime OR against the probate estate of the spouse
• Could jeopardize spouse’s eligibility for future Medicaid benefits.  The “well” spouse’s health would need to be reviewed to determine if this is an appropriate planning strategy

To discuss Spousal Refusal as a Medicaid planning strategy for you, contact attorney Moira Laidlaw at (914) 767-0646 or email Moira at mlaidlaw@laidlawfirm.com.