Is the End of “Spousal Refusal” Really Anything to be Upset About?

money signThe Wisconsin Legislature has changed the way Medicaid works for married people. And one of the changes was intended to attack a Medicaid Planning method used successfully by many elder law attorneys, including myself (although, I have to say I never had reason to use it much.) The thing is, the “attack” only changes the way these cases should be approached, not the end result of being able to obtain Medicaid eligibility for an institutionalized spouse even where the couple’s resources exceed the standard Medicaid limits.

For non-lawyers following this blog, I will explain the history as non-legally as I can. But my analysis of the outcome requires a look at Federal law. So buckle up.

Until the recent change in the law, Wisconsin had a policy that where an institutionalized spouse (please click here for my explanation of basic spousal impoverishment rules and terms) applies for Medicaid and the community spouse refuses to sign the application, the institutionalized spouse is treated as a single person. This meant that as long as the institutionalized spouse’s assets were at or below $2000, he or she would be found eligible for Medicaid. The traditional spousal impoverishment rules did not apply. (Keep in mind, these rules are much more generous than $2000, but not unlimited. This year, the limit for the community spouse is just over $115,000.) This policy was in the administrative materials of the Department of Health Services, in the Medicaid Eligibility Handbook. It was not in the law.

When used appropriately, “spousal refusal” would result in eligibility in cases where the couple’s total resources were more than the allowable amount under spousal impoverishment, or where one spouse could not be located. Where a spouse had children from prior relationships and a prenuptial agreement separating assets, this technique would be a way to preserve that intent. Couples would apply and the community spouse would refuse to disclose assets or sign the application (or in the case of the absent spouse, that information would simply be absent.) The institutionalized spouse would be found eligible if the assets in his or her name were lower than $2000.

Wisconsin’s new law meant to impose dire consequences if the spouse refuses to sign the application or disclose assets. Section 49.455(5)(e) now states:

(e) The department may deny to the institutionalized spouse eligibility for Medical Assistance if, when requested by the department, the institutionalized spouse and the community spouse do not provide the total value of their assets and information on income and resources to the extent required under federal Medicaid law or sign the application for Medical Assistance.

I would hope that by using the word “may,” there is still room for an application to be granted, which would be significant in cases where the spouse is absent or there are other reasons that it is unfair to hold the nursing home spouse responsible for the situation.

In any event, there is still a way to obtain eligibility in this type of situation. Wisconsin law also states, at Section 49.455(5)(c):

(c) The amount of resources determined under par. (b) to be available for the cost of care does not cause an institutionalized spouse to be ineligible for medical assistance, if any of the following applies: 

1. The institutionalized spouse has assigned to the state any rights to support from the community spouse.

2. The institutionalized spouse lacks the ability to execute an assignment under subd. 1. due to a physical or mental impairment but the state has the right to bring a support proceeding against the community spouse without an assignment.

3.The department determines that denial of eligibility would work an undue hardship.

This part of the law has been in place for many years. It is written consistently with the federal spousal impoverishment law at 42 U.S.C. section 1396r-5. Federal law states:

(3) Assignment of support rights The institutionalized spouse shall not be ineligible by reason of resources determined under paragraph (2) to be available for the cost of care where – A) the institutionalized spouse has assigned to the State any rights to support from the community spouse; B) the institutionalized spouse lacks the ability to execute an assignment due to physical or mental impairment but the State has the right to bring a support proceeding against a community spouse without such assignment; or C) the State determines that denial of eligibility would work an undue hardship.

What does this all mean? It means that the idea that the community spouse has to refuse to sign the Medicaid application or to disclose assets is really irrelevant. The federal law, and the consistent state law still in effect, prohibit the institutionalized spouse from being found ineligible due to excess resources as long as he or she assigns support rights to the state.

This is the situation that was raised in the first case addressing the issue of the application of this exception to the spousal impoverishment rules. The case was called Morenz v. Wilson-Coker and it arose out of Connecticut. This case said that the language of the law is plain. Where the institutionalized spouse assigns the right of support to the state, (s)he cannot be found ineligible due to excess resources. In Connecticut, the applicable law provided that the institutionalized spouse could be found eligible where the community spouse was unable to or refused to declare his or her assets (essentially, the way it used to be in WI). The Morenz petitioners fully disclosed their assets and assigned the husband’s rights of support to the State of Connecticut.  The state Medicaid department found that because the couple had fully disclosed their assets, they could not avail themselves of this rule. The couple sued the state in federal court. The federal district court found that the plain application of the law required a finding of eligibility, and the Second Circuit affirmed. Thus, the very first case ever dealing with this issue was based on not refusing to disclose assets!

I have no reason to believe that the courts in Wisconsin would not be similarly able to apply the plain language of the law. This means that now, couples should fully disclose their assets and assign support rights. Of course, it is not quite  as simple as that, and planning should be done ahead of time with the assistance of an attorney who knows the proper procedure to follow. It also means the community spouse could find him or herself subject to a support action, although other caselaw in Wisconsin could impact the success of that.

So, while I think that the Governor and the legislature thought they were closing a loophole in eliminating “spousal refusal,” they really did nothing at all. Federal law controls this issue, and the law is plain.

A good example of a case where this would be a proper technique to use, is one where the husband is in the nursing home, and the wife is at home. Wife has been diagnosed with dementia and is receiving home care services. It is inevitable she will decline. The couple’s assets are $250,000 in a CD that the wife owns, $50,000 in an IRA owned by the wife, and $1000 in the nursing home account for the husband. Their assets exceed the standard limit. His income is $1800 per month, and hers is $1000. In this case, they could choose to spend down to the applicable asset limit under traditional spousal impoverishment, or they could apply, fully disclosing their assets and assigning support rights from the husband to the State of Wisconsin. I would like to see Wisconsin try to sue a wife with dementia for support, and I would like to the government try to find a judge that would ignore the wife’s needs to order her to support her husband when he could get Medicaid. In this case, I would advise the couple to pursue the assignment of support method and apply.

On a related note, a recent memo from the Wisconsin Department of Health Services indicates how it will be handling cases where an individual was found eligible in the past due to “spousal refusal.” It will be re-examining those cases at the individual’s next annual recertification period. It will be treating the individual as a married couple and applying the traditional spousal impoverishment standards. This is illegal.  Federal law says (at 42 U.S.C. 1396r-5(c)(4)):

(4) Separate treatment of resources after eligibility for benefits established During the continuous period in which an institutionalized spouse is in an institution and after the month in which an institutionalized spouse is determined to be eligible for benefits under this subchapter, no resources of the community spouse shall be deemed available to the institutionalized spouse.

I don’t know how much clearer it gets. This would be another situation where it is essential to have the help of a lawyer to challenge this policy.


About Carol J. Wessels

I am an Elder Law Attorney practicing in Wisconsin. I am the owner of Wessels Law Office LLC in Mequon, WI. I handle Medicaid, Long Term Care planning, special needs trusts, guardianship, advance directives, elder abuse and other related issues for elderly and disabled clients and their families. My Mother Velma lived with Alzheimer's for fifteen years until she died on Jan. 24, 2015, which has given me a personal perspective on elder law issues as well.
This entry was posted in Elder Law. Bookmark the permalink.