Spousal Refusal or “Just Say No”
Federal Medicaid law permits the community spouse to keep all of his or her assets even if they exceed the standard spousal allowance of $120,900 (in 2017) by simply refusing to support the institutionalized spouse as long as the institutionalized spouse assigns his or her rights to spousal support to the state. This portion of the law, usually referred to as “just say no” or “spousal refusal,” is generally not used except in New York where the state elder law bar has adopted it as its principal crisis planning strategy for spouses of nursing home residents. In addition, in 2005 a federal appeals court upheld the right of the wife of a Connecticut nursing home resident to refuse to support her husband. The husband was able to qualify for Medicaid coverage, and assets that he had transferred to his wife were not counted in determining his eligibility.
In other states, the spousal refusal strategy sometimes is used in second-marriage situations where the healthy spouse truly refuses to support the nursing home spouse or where the spouses have separated but are not divorced, in other words, where the facts of the case seem to fit with the intent of the law. When it is used, it’s often necessary to educate the Medicaid workers since they are likely not familiar with the applicable law and regulations.
Under spousal refusal, after awarding Medicaid benefits to the institutionalized spouse, the Medicaid agency then has the option of beginning a legal proceeding to force the community spouse to support the institutionalized spouse. However, this is rarely done, and when such cases do go to court, those in New York generally allow the community spouse to keep enough resources to maintain her former standard of living. A prenuptial agreement is a good defense when and if the state does bring such an action.