Your father has advanced Parkinson's and needs nursing home care. Your mother, 79, still lives in their house. Their savings won't last long at nursing home costs, and she's terrified that applying for Medicaid will leave her with nothing to live on.
Federal law was written for exactly this situation. Here's how spousal impoverishment protections work.
What spousal impoverishment rules are
Before 1988, a spouse at home could be left nearly penniless when their husband or wife entered a nursing home and qualified for Medicaid. The Medicare Catastrophic Coverage Act of 1988 created spousal impoverishment protections to prevent this1. The rules are in federal law2, and every state Medicaid program must follow them for nursing home care.
The spouse who needs care is often called the institutionalized spouse. The spouse who remains at home is called the community spouse1. The rules decide how much of the couple's savings and income the community spouse can keep. For the basics of Medicaid nursing home coverage, see how to apply for Medicaid for a parent.
Who the rules apply to
The protections apply to married couples when one spouse is likely to stay in a nursing home or other medical institution for at least 30 days in a row and applies for Medicaid2. Many states also apply similar rules to married people who get long-term care at home or in the community through Medicaid waivers1. Ask your state Medicaid agency how the rules apply to home and community-based services. See Medicaid waivers for home care.
The resource snapshot
When one spouse begins a continuous stay in a nursing home, the state looks at all of the couple's countable resources as of the start of that stay, no matter whose name they're in2. This is often called the snapshot. Countable resources usually include bank accounts, investments, retirement accounts in many states, cash value life insurance, and property other than the home.
From that total, the state figures out how much the community spouse can keep. The remainder must generally be spent down before the institutionalized spouse qualifies. Keep records of balances as of the date the stay began.
The community spouse resource allowance
The community spouse resource allowance, or CSRA, is the share of the couple's combined resources the community spouse may keep2. Federal law sets a minimum and a maximum, which are adjusted each year for inflation2. States choose how to calculate it within those limits; some let the community spouse keep half of the couple's resources up to the maximum, while others allow the maximum regardless. Check your state's current figures with the Medicaid agency or an elder law attorney.
Resources above the allowance count toward the institutionalized spouse's eligibility. Families often use them for allowable purposes, such as paying debts, home repairs, or buying exempt items, rather than giving them away. See Medicaid spend down.
What doesn't count
Some property generally doesn't count toward the limit. The couple's home is usually exempt while the community spouse lives there. One car, household goods and personal belongings, and certain burial funds are typically excluded too. Rules on retirement accounts, annuities and life insurance vary. An elder law attorney can explain your state's rules. For what happens to the house later, see can a nursing home take your house and Medicaid estate recovery.
Protecting the community spouse's income
Income is treated differently from assets. In general, income in one spouse's name belongs to that spouse2. The community spouse keeps their own Social Security, pension and other income. They don't have to use it for the other spouse's nursing home care.
If the community spouse's own income is low, they can receive part of the institutionalized spouse's income. This is called the community spouse monthly income allowance, which brings the community spouse's income up to a minimum level set by federal rules and updated each year2. An extra amount may be allowed for high housing costs2. Other family members who depend on the couple may also get an allowance2.
What the nursing home spouse keeps
After allowances for the community spouse and dependents, most of the institutionalized spouse's remaining income goes toward the cost of nursing home care. They keep a small personal needs allowance each month for things like clothing, haircuts and personal items. The amount varies by state.
Asking for a higher allowance
If the standard allowances leave the community spouse unable to meet basic needs, they can ask for more. Either spouse can request a fair hearing, and the hearing officer can raise the income allowance if exceptional circumstances cause significant financial duress2. The resource allowance can also be increased if more resources are needed to generate enough income for the community spouse2. Bring documentation of income, expenses and medical costs. See Medicaid denial appeals.
Transfers and the look-back period
Assets can be transferred freely between spouses without penalty. But gifts to children or others within the look-back period, generally five years, can delay Medicaid eligibility. Don't give away money or property without advice. See the Medicaid look-back period.
Steps to take
Gather statements for all accounts as of the date the nursing home stay began, plus deeds, insurance policies, and income records for both spouses. Ask the state Medicaid agency or local office for a resource assessment, which some states offer at the start of a stay even before applying2. Keep copies of everything you submit. Consider consulting an elder law attorney, especially if the couple has significant assets, a business, or complex retirement accounts.
Common mistakes
Families sometimes spend down too much, not realizing the community spouse could keep more. Others give money to children, triggering a penalty. Some don't ask for an income allowance or a fair hearing when the community spouse can't afford to live. Others miss that a divorce, separation or prenuptial agreement doesn't automatically change Medicaid rules. Getting advice early prevents most of these.
After eligibility
After the institutionalized spouse qualifies, the community spouse's own assets generally aren't counted again for that spouse's ongoing eligibility. Resources in the community spouse's name should be moved out of the institutionalized spouse's name within the timeframe the state allows. The community spouse should update their own will and any powers of attorney so assets don't pass directly to the spouse on Medicaid, which could affect eligibility. See living trust vs. will.
Talking about money as a couple and family
Money conversations are hard at the best of times, and harder when a parent is ill. The spouse at home may feel guilty about keeping assets, or afraid of running out. Adult children may worry about their inheritance or feel pressure to step in. Try to start with shared goals: making sure the parent in the nursing home gets good care, and that the parent at home can live safely and comfortably for years to come. Those goals are exactly what the spousal impoverishment rules are designed to support.
Bring the paperwork to one meeting, ideally with a neutral professional such as an elder law attorney or benefits counselor. Write down who is responsible for each next step. If one child is handling finances, agree on how they'll keep everyone informed. Our guide to managing an elderly parent's finances has tips for sharing that work.
When care happens at home instead
Not every couple faces a nursing home. If one spouse needs help at home and the couple is applying for Medicaid home and community-based services, ask the state whether spousal impoverishment protections apply to that program. Many states apply them, which can let the healthy spouse keep the same allowances while the other spouse gets help at home. This can make staying together at home financially possible. If your parents are weighing home care against a move, see aging in place and the PACE program, which serves many people who qualify for nursing home care but live at home.
Planning ahead
Couples who plan before a crisis have more choices. Updating wills, powers of attorney and beneficiary designations, understanding which assets are countable, and keeping good financial records all make a future Medicaid application smoother. Some couples consider long-term care insurance while they're healthy; see long-term care insurance. Others look at whether certain planning tools fit their situation. Rules differ by state and change over time, so check current details with your state Medicaid office or a qualified attorney before acting.
Documents the state may ask for
Expect to provide proof of age, citizenship and marriage; Social Security and Medicare cards; statements for every bank, investment and retirement account; deeds and property tax bills; car titles; life insurance policies; burial contracts; and income records such as Social Security and pension award letters for both spouses. States often ask for several months of statements, and sometimes years, to check for transfers.
An example
When Frank entered a nursing home, he and his wife Joan had their home, one car, and savings and investments. The state took a snapshot of their resources on the day his stay began. Joan kept the house, the car and her allowance of savings, and the remainder was spent on Frank's care and a new roof. Because Joan's own income was low, she also received part of Frank's pension each month as an income allowance. This is an illustration; figures and rules vary by state.
