Each of Governor Andrew Cuomo’s six Executive Budgets has proposed to repeal a provision of Medicaid known as “spousal refusal;” each time the proposal has been rejected by the Legislature.  This provision permits a spouse or parent to “refuse” to provide financial assistance for the spouse or child, enabling a family member to receive Medicaid funded services regardless of the family’s wealth or income. The Legislature should end this costly and unfair practice.

Medicaid Eligibility and the Spousal Refusal Loophole 

Medicaid is intended to help low-income individuals receive needed medical and long-term care. Eligibility is based on family income and wealth. For couples over 65, the eligibility limits are $21,984 in annual income and $21,750 in assets such as a bank account.¹ A home, automobile, personal property including household items, and funds for burial expenses are not included within the asset limit, and further exemptions may be granted under specific circumstances.  In addition, federal and state laws increase these limits when someone faces institutionalization, recognizing it would be callous to force a couple to liquidate assets and exhaust their life-savings to pay for such care.  The federal  guidelines for situations in which one spouse requires institutionalized care (or home care that substitutes for nursing home care) and one spouse remains in the community raise the income limit to $35,760 and the asset limit to $119,220 annually.² Only income or assets above these limits need be used to help pay for necessary long-term care.  

Despite these income and asset allowances, New York State does not enforce the rules if a spouse living in the community refuses to provide the required financial support. The “spousal refusal” provision in state law requires that Medicaid pay for the needed long-term care even if the spouse refuses to comply with the law. Families who utilize spousal refusal may eventually be subject to a lien for the cost of care; however, recoveries are sparse due to legal costs and other complexities. In effect, the spousal refusal provision allows the institutionalized spouse to become eligible for Medicaid regardless of the family’s wealth or income. Allowing families who can afford all or part of the cost of care to gain special advantage over individuals who may not have as much legal or estate planning knowledge is unfair and unnecessarily costly.

How and Why to End Spousal Refusal

Under the Executive Budget proposal, those already receiving services could continue to do so, but Medicaid would not be required to pay for services to a newly eligible spouse or child in a noncompliant family.  (Estranged family members would remain exempt.) Due to this phase-in, savings from the proposal are estimated to be approximately $10 million annually in fiscal years 2016-2017 and 2017-2018, but would grow in subsequent years.

The case for ending spousal refusal goes beyond direct Medicaid savings. The spousal refusal loophole discourages families from appropriately planning for their long-term care needs by buying long-term care (LTC) insurance.  Broader coverage through LTC insurance would substantially reduce the future Medicaid cost for those services. Accordingly, New York State offers a personal income tax credit equal to 20 percent of LTC insurance premiums in order to encourage the purchase of LTC insurance. Spousal refusal is at odds with that goal. Families who might otherwise purchase LTC insurance do not do so, knowing that Medicaid will eventually cover the cost.