Case Study: Medicaid Planning for Married People, Part 1

Ralph and Alice were high school sweethearts. Two years ago, Ralph and Alice celebrated their 50th anniversary.  Shortly after that, Ralph was diagnosed with Alzheimer's disease and his health has gradually deteriorated.  Yesterday, Ralph wandered away from home. The police found him, hours later, sitting on a street curb, talking incoherently. They took him to a hospital. Now the family doctor has told Alice that she needs to place Ralph in a nursing home. Ralph and Alice grew up during the Depression. They always tried to save something each month. Their assets, totaling $120,000, not including their house, are as follows:

Savings account.. . . . . . . . . . . . $35,000.00

CDs. . . . . . . . . . . . . . . . . . . . . . 65,000.00

Money Market account . . . . . . . . . 17,000.00

Checking account. . . . . . . . . .  . . . 3,000.00

Residence (no mortgage). . . . . . . . 150,000.00

Ralph gets a Social Security check for $800.00 each month; Alice’s check is $300.00. Her eyes fill with tears as she says, “At $6,300 to the nursing home every month, our life savings will be gone in less than two years!” What’s more, she’s afraid she won’t be able to pay her monthly bills, because a neighbor told her that the nursing home will be entitled to all of Ralph’s Social Security check.

There is good news for Alice. It’s possible she will get to keep everything, all of their assets and all of the income, and still qualify for Medicaid to pay Ralph’s nursing home costs. The process may take a little while, but the end result will be worth it.

To apply for Medicaid, she will have to go through the Department of Human Service (DHS). If she does things strictly according to the way DHS tells her, she will only be able to keep about half of her assets plus she will be entitled to a minimum monthly income to pay her expenses (See number 7 in the Top Nine Mistakes People Make with Medicaid Qualification in Michigan). But the result can actually be much better than that.

Michigan law allows her to seek an increase in her income allowance. Based on a 6% rate of interest, their entire savings, plus their Social Security, will not general enough income to bring her up to the current allowable minimum monthly income of $1,750. However, she must proceed properly, and if so, Alice may be entitled to keep their entire savings, and Medicaid will pay for Ralph’s nursing home.

The challenge is that this cannot be accomplished at the case worker level. It can only be done by seeking a court order awarding Alice more of the assets then Medicaid's default minimums. She will have to get advice from someone who knows how to navigate the system.   But with proper advice, she’ll be able to avoid the spend-down and keep everything she and Ralph have worked so hard for.

This is possible because the law does not intend to impoverish one spouse because the other needs care in a nursing home. This is certainly an example where knowledge of the rules, and how to apply them, can be used to resolve Alice’s dilemma.

Continue to Case Study:  Medicaid Planning for Married People, Part 2