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By John M. Bigler This month I want to update the readers on certain developments that will affect spouses applying for Medicaid. As regular readers know, New York is the most liberal state when it comes to spouses applying for Medicaid in either a nursing home or for community care. New York is the one state that takes advantage of the provision in the federal law that allows unlimited transfers from one spouse to the other without the normal period of ineligibility for nursing home care that would be imposed for transfers to a third party. The community spouse can then refuse to contribute his or her assets and Medicaid will be approved for the spouse in the institution. Community Medicaid also has provisions for spousal refusal.
That decision caused a significant concern amongst elder-law attorneys that the tactic of spousal refusal might be severely compromised. But recently, there have been several court cases, as well as an apparent reversal of policy in the City of New York, that have given us cause for optimism.
In re John XX, the Appellate Division of the State of New York stated that "current law rewards prudent Medicaid planning" and rejected the argument that transfers of assets were fraudulent. In In re Shaw, the Court of Appeals stated that an individual has the absolute right to give assets away for any reason or for no reason.
In that case, an incapacitated spouse was allowed, through his guardian who happened to be his wife, to make transfers to his wife so as to be eligible for Medicaid coverage in the nursing home. Prior to its affirmation in the Court of Appeals, the case was at the Appellate Division and that Court found that an incapacitated person has a fundamental right to plan and should not lose that right merely because of incapacity.
The Court also used some very encouraging language in its decision. It found that "the complexities of the Medicaid eligibility rules, not to mention the complexities of State and Federal law, concerning gift and estate taxation which often come in to play as hapless middle class Americans seek to save themselves from financial ruin as the result of astronomical nursing home costs should never be allowed to blind us to the essential proposition that a man or a woman should normally have the absolute right to do anything that he or she wants to do with his or her assets, a right which includes the right to give those assets away to someone else for any reason, or for no reason".
The Court added a statement at the end of its decision which should be used whenever there's an attack on elder law planning as the result of catastrophic illness: "No agency of the government has any right to complain about the fact that middle-class people confronted with desperate circumstances choose voluntarily to inflict poverty upon themselves, when it is the government itself which has established the rule that poverty is a prerequisite to the receipt of government assistance in the defraying of the costs of ruinously expensive, but absolutely essential medical treatment."
There was serious concern in the elder-law community that In re Shaw might be overturned at the Court of Appeals thereby jeopardizing the entire strategy of spousal refusal. The Court of Appeals affirmation was not only a great relief but made it clear that spousal refusal was a viable tool for spouses facing catastrophic illness.
Spousal refusal has been in effect in New York since 1989. Implied in the law was the possibility that the Department of Social Services could attempt a recovery of benefits paid by department by filing a lawsuit against the community spouse. Neither Suffolk nor Nassau County has ever filed such an action but the City of New York has been bringing lawsuits against community spouses since the law was first passed.
The City became even more aggressive after the Appellate Division decision in 1998, which found in favor of the City in bringing this type of lawsuit. But after a rash of unpleasant publicity, the City has recently backed down from these lawsuits and hasn't been that aggressive in commencing new actions against spouses.
Regular readers know that I tend towards optimism, and here's some more: It's my hope that these recent court decisions as well as the city's change in policy may be the beginning of a swing back in support of catastrophically ill elderly and the people who take care of them. Maybe sooner rather than later, the government will develop a system where the ill won't have to choose to inflict poverty upon themselves, and will receive the benefits they're entitled to simply because they need them.
Reprinted with permission of the Suffolk Times © 2000
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In the recent past there have been challenges in the courts to spousal refusal. In May 1998 I reported on a case which went to the Court of Appeals, the highest court in the state. That case held that it was permissible for the local departments of social services to file a lawsuit against the community spouse to recover assets paid by the local Medicaid department.