What Is a Medicaid Divorce?

When one spouse becomes ill, it can strain a marriage financially. While divorce may be a last thought, it could provide help by qualifying the ill spouse for Medicaid health care benefits.

What is a Medicaid divorce?

Medicaid divorce, also known as a "caregiver divorce," refers to the process of legally ending a marriage in order to create Medicaid eligibility for a spouse who requires nursing home care. 

In such cases, one member of a married couple requires extensive medical care that would quickly deplete their marital assets. A Medicaid divorce can help protect the healthy spouse's assets from being used to pay for the sick spouse's medical bills. Ending the marriage creates two separate incomes and asset calculations, allowing the sick spouse to qualify for Medicaid assistance.

How does a person become eligible for Medicaid?

Medicaid is a needs-based government health insurance plan that is designed to help people with limited income and resources. In order to become eligible, individuals must meet certain requirements before filling out a Medicaid application:

  • Be a U.S. citizen or a qualified non-citizen
  • Meet the income and asset requirements set by their state laws
  • Have a medical condition or disability, or be responsible for the care of a child or other family member with a medical condition or disability
  • Meet any other eligibility criteria set by their state, such as being pregnant, being over a certain age, or having a certain medical condition

Who benefits from a Medicaid divorce?

A Medicaid divorce, also sometimes known as a caregiver divorce, can benefit the spouse who needs nursing home care by making them eligible for Medicaid assistance. Medicaid can help cover the high cost of their medical care. It can also benefit the healthy spouse by protecting their assets from being depleted by sky-high medical bills.

A couple may consider a Medicaid divorce if one spouse requires expensive long-term medical care they cannot afford and the healthy spouse wishes to protect their joint assets from being used to pay for this care. By divorcing, the couple's assets and income are separated, which can allow the spouse requiring care to qualify for Medicaid without having to spend down their shared assets.

It's important to note that while a Medicaid divorce may provide financial benefits and health insurance coverage, it is a complex legal process. Thus, it should be undertaken with the help of an experienced attorney who can guide the couple through the process, making sure all legal requirements are met. 

What’s more, this process entails a legal and actual divorce. The couple must be comfortable with legally ending their marriage and becoming ex-spouses.

What are spousal impoverishment rules?

Spousal impoverishment rules are a set of Medicaid regulations. They were designed to protect the financial well-being of the healthy spouse of a Medicaid beneficiary when the beneficiary is in long-term care. In essence, these rules prevent the healthy spouse from being made destitute by the high cost of the ill spouse's medical care.

Under these rules, if one spouse requires nursing home care and is eligible for Medicaid, the healthy spouse is allowed to keep a portion of their shared assets and income to meet their living expenses. The exact amount that can be retained varies by state. Typically, it ranges from a minimum of around $25,000 to a maximum of around $120,000.

In addition, the healthy spouse is allowed to retain a portion of the couple's income for living expenses – typically up to around $3,000 per month. This income is not counted toward the Medicaid eligibility requirements of the ill spouse.

Spousal impoverishment rules may diminish the frequency of Medicaid divorces because they provide a way for the healthy spouse to protect their assets while allowing the ill spouse to qualify for Medicaid. In fact, the rules were put in place specifically to address the issue of Medicaid divorce.

Community Spouse Resource Allowance (CSRA)

The Community Spouse Resource Allowance (CSRA) is a set amount of assets that the healthy spouse of a Medicaid beneficiary can retain without affecting their partner's eligibility for Medicaid. This allowance helps prevent the healthy spouse from becoming impoverished due to their partner's high medical bills, allowing them to maintain a reasonable standard of living despite any costs associated with medical expenses for the ill spouse. 

It also ensures that couples do not have to consider divorcing in order to meet Medicaid eligibility requirements, helping to promote marital stability and protect both spouses from financial hardship.

Minimum Monthly Maintenance Needs Allowance (MMMNA)

The Minimum Monthly Maintenance Needs Allowance (MMMNA) is an allowance of income that the well spouse can retain outside of Medicaid eligibility for their loved one. The MMMNA helps the non-applicant spouse meet their basic living needs by ensuring some level of income that's not counted toward Medicaid eligibility.

Who can I talk to about a possible divorce?

Getting a Medicaid divorce is complex and requires a keen eye for detail and process. Hello Divorce can help you determine if a Medicaid divorce is right for you and help you locate a qualified and experienced attorney, if necessary. Schedule a free 15-minute call to learn more.