One strategy used when planning for Medicaid eligibility is called “spousal refusal.” It is authorized under 42 U.S.C. § 1396r-5(c)(3). There, the federal statute provides:

(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.

Only two States expressly permit spousal refusal, but since it’s part of federal law, no State can refuse to allow it unless it has an 1115 Waiver expressly waiving the requirement that it be permitted. Since the State may seek reimbursement from the spouse refusing to provide support (or from his or her estate), the primary planning benefit is when the Medicaid nursing home rate is significantly lower than the private pay rate. Of course, it is also a useful tool when the Community Spouse actually refuses (e.g., strained marriages and second, third, etc. marriages where the Community Spouse has different ideas regarding how to use money).

A strict reading of the statute triggers eligibility when the institutionalized spouse signs an assignment of support rights document and delivers it to the Medicaid agency.