There is currently proposed legislation being considered by Congress that would make an important change to the Medicaid income rules for married couples. Specifically, if H.R. 1771 (114th Congress) is enacted into law, it would mean that all income derived from certain annuities, whether payments are made solely to the community spouse or paid to both the community spouse and the spouse in the nursing home, will automatically be treated as if one half of that income is available to the institutionalized spouse. As a practical result then, more of that income will be paid to the nursing home. (This legislation, as currently drafted, does not affect various types of qualified retirement annuities.)
What would be the impact of this change? The Medicaid rules for married couples are in many ways set up to make it a little easier for community spouses to remain financially independent and to avoid eventual nursing home care for themselves. Converting assets into an income stream via the purchase of an annuity has been a viable strategy for community spouses to plan for their own financial cash flow needs, especially in cases where the higher-income spouse is in the nursing home and the lower-income spouse is now carrying more of the burden of maintaining the family home. If the pending legislation passes, the value of using an annuity by the community spouse is significantly eroded.
If H.R. 1771 passes, there also would be an even stronger emphasis on engaging in Medicaid protective planning long before benefits are needed. By cutting in half the amount of annuity income a community spouse can receive, the changed rules would expedite the rate at which the community spouse’s savings are exhausted. For some community spouses, that change would ultimately result in the need to move into a nursing home themselves if their own need for care increases and they lose the financial means to remain independent.
H.R. 1771 is currently pending before the House Committee of Energy and Commerce’s Subcommittee on Health. You can track the progress of the legislation at https://www.congress.gov/bill/114th-congress/house-bill/1771/all-actions-with-amendments and you can find contact information for your congressional Representative at http://www.house.gov/representatives/#state_ct.
Please call us at 860-769-6938 if you have any questions about the issues presented above or if you care to discuss any other planning issues with us.