Elder Law: One plus one equals one

When applying for Medicaid Nursing Home Benefits, the Michigan Department of Health and Human Services (DHHS) has divided the assets of a married couple into two categories: The protected asset amount and the spend-down.

The protected assets amount is one-half of the spouses’ countable assets up to a limit. The limit for 2017 is $120,900.

For example, a couple with $100,000 countable assets has a protected asset amount of $50,000. The community spouse can keep $50,000 and must spend $50,000 to qualify for Medicaid for the sick spouse.

For years, DHHS allowed the community spouse to shelter the spend-down in an Irrevocable Trust. 

The trust had to provide that the assets in the trust had to be paid out to the community spouse over a period of time that did not exceed the community spouse’s life expectancy. 

The trust was established solely for the benefit (SBO) of the community spouse.

In August 2014, DHHS rescinded this policy without a rule change.

Three individuals (two in Livingston County and one in Washtenaw) were denied benefits based on this new policy of DHHS in 2014. 

All three appealed the decision to an administrative law judge, who upheld the determination of DHHS. All three decisions were reversed in Circuit Court.

DHHS appealed, resulting in the Court of Appeals Decisions 329508, 329511 and 331242 issued on June 1, 2017. The Court of Appeals reversed the Circuit Court decisions, reinstating the original denial of benefits. 

The court disregarded the appellants’ argument that since the SBO Trust benefited the community spouse only and not the institutionalized spouse, the applicable State and Federal Law and Regulations allowed protection of the spend-down in the trust.

 On page 11 of the decision the court held that:

“In our view, it is apparent from this clear legislative language that Congress intended that when making an initial eligibility determination, states are to consider assets held by the institutionalized spouses — in this case, the plaintiffs — and the community spouses — in this case, the plaintiffs’ husbands.  42 USC 1396r-5(c)(2).

“The Legislature has clearly indicated that an institutionalized individual’s assets includes not only those that he or she has, but also that his or her spouse has, 42 USC 1396p(h)(1) and that remains true even when those assets are placed into a trust by the spouse, 42 USC 1396(d)(2)(A)(i)-(ii). 

“That is precisely the case here.  While we appreciate that there are several statutory subsections that, when reviewed in isolation, could arguably support the plaintiffs’ claim that SBO Trust assets in these types of situations should not be considered, we are simply not willing to overlook what is, in our view, a clear indication by Congress to the contrary.

“As far as the court is concerned, the community spouse and the institutionalized are one and the same person.”

It should be noted that community spouses can use commercial annuities to achieve the same purpose since DHHS no longer requires that such annuities name the State of Michigan as contingent beneficiary.

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Alan F. Polack specializes in elder and probate law and practices out of Shelby Township. He is a former president of the Macomb County Probate Bar Association.