New York State is one of the best states for long term care asset protection. Its eligibility rules for community-based and institutional (nursing home) Medicaid permit middle-class families to retain a significant amount of their assets, whereas other states require a spend-down of all but the Federal minimums. And many states, such as New Jersey, interpret the Federal laws so strictly that there have been many legal challenges to their practices.

However, the Medicaid budget for New York State is also extremely high, and, according to some, contributes significantly to the budget deficit. That is why in 2011 Governor Cuomo empaneled a Medicaid Redesign Team, consisting of stakeholders in the different industries that administer and use and benefit from Medicaid.

Back in 2011, the most alarming proposals that the MRT made were:

• Elimination of Spousal Refusal

One of the biggest benefits that New York has is “Spousal Refusal”. This allows the spouse of a Medicaid applicant/recipient to refuse to contribute assets toward the care of his or her spouse. Because Federal law permits unlimited assets to be transferred to a spouse without impacting a person’s Medicaid eligibility, the technique of transferring assets to the spouse, and having the spouse sign and submit a Spousal Refusal is quite commonly used. This permits a married couple to protect virtually all of their assets when one spouse requires some form of long term care. If the spouse’s assets are in excess of $128,640 (as of 2020), the county administering the Medicaid can request that the spouse contribute some of that overage. If the spouse refuses entirely, the county technically could sue the spouse on behalf of his or her own spouse, under a theory of spousal support more commonly seen in divorce/family law cases. However, the likelihood that the county will do so depends on the county. In the Hudson Valley, some counties do ask, but are not aggressive about pursuing it. Regardless of what specific reforms are put into place, and due to the fact that the counties are responsible for 25% of the Medicaid costs, I would not be surprised to see more counties become more aggressive in pursuing over-resourced spouses. Luckily there are ways to still ensure that the amount of assets paid to the county are minimal, and an experienced Elder Law attorney can guide families in that process.

The 2011 MRT proposed that the Spousal Refusal option be eliminated for Community Medicaid cases. It is unclear whether that would also apply to Assisted Living Facility Medicaid cases, since technically Assisted Living Program (ALP) Medicaid is administered under the Community Medicaid umbrella. If it is eliminated in any case, it would make it much more difficult to protect assets if a spouse needs long term care coverage.

•  Imposition of the 5-year look back for Community Medicaid

For Nursing Home Medicaid, any transfers made within the five years prior to making the application could cause a “penalty period”–a period where Medicaid will not cover the cost of a nursing home. This is described in more detail in our blog on last minute asset protection. Currently, there is no 5-year look back for Community Medicaid cases (including ALP). The rationale for this is primarily twofold: firstly, the NYS legislature recognizes the importance of being able to age in place, and stay with family. Permitting Medicaid better access to Medicaid coverage in that setting allows people to do so. Secondly, from a fiscal standpoint, that the state would rather have Medicaid cover in-home care, which is typically less costly, because it often prevents the future need to go into a nursing home, and the cost to the state of nursing home coverage is much higher. However, the 2011 MRT proposed imposing this look-back period for Community Medicaid as well.

• Expanded Estate Recovery

Current law provides that Medicaid can only require a person pay them back for the cost of its coverage from a person’s assets that pass through probate. The only assets that pass through probate are those assets that are solely in a person’s individual name. Examples of non-probate assets are: joint accounts, accounts with a “payable on death” (POD)/”transfer on death” (TOD)/”in trust for” (ITF) designation, life insurance*, retirement accounts*, and assets held in a trust. And remember, in order to receive Medicaid a person can only have up to $15,750 (as of 2020) in his or her name. So, the maximum amount that Medicaid could recover from a person is $15,750–and that is assuming they do not simply have that money in a joint account, or account with a death beneficiary, or a trust account–all relatively simple solutions.

The 2011 MRT proposed that the definition of “estate” for the purpose of Medicaid recovery include non-probate assets as well. While we suspect that with proper Medicaid planning, likely an irrevocable Medicaid trust, even this expended power to take people’s assets could be avoided, it is still concerning for those families that have not done this planning. Also, as more thoroughly detailed in the blog post “Re-Thinking Retirement Accounts”, a person cannot simply put a retirement account into a trust. Therefore, expanded estate recovery could mean that the county can pursue people’s retirement accounts upon their death.

Luckily, despite the MRT having been empaneled and making these proposals in 2011, none of them every ended up being signed into law. It is of concern that this has come up again. At least for now, it is too early to speculate on what they may or may not propose, but it seems likely that they won’t start from scratch–that they will resurrect the proposals from 2011 and start there. We at DuBois Law Group, PLLC are committed to advocating for the benefit of middle-class families that are dealing with, or may deal with long term care concerns, and are in contact with our local legislators and the New York State Bar Association Elder Law and Special Needs Section, to ensure that the options New Yorkers have to protect assets stay in place.