The 1988 Medicare Catastrophic Coverage Act included the addition of spousal impoverishment protections to the Medicaid program. These protections apply when one spouse is seeking Medicaid coverage for long-term services and supports (LTSS), and the other spouse plans to continue residing in the community (the community spouse). Prior to the enactment of these spousal impoverishment protections, the community spouse of a Medicaid recipient was often left with few resources due to strict income and asset limits, forcing a difficult choice between the long-term care needs of one spouse and the basic financial needs of the other.
Spousal impoverishment protections are rooted in the belief that it is unconscionable to allow a spouse to be reduced to poverty to provide long-term care services to the other spouse. For married couples, one spouse would have to live with the consequences of a spend-down into poverty. Spousal impoverishment protections allow the community spouse to retain a significantly larger share of income and assets than would otherwise be permitted to allow the other spouse to qualify for Medicaid eligibility. However, without a comprehensive, affordable solution for long-term care needs in the United States, spending nearly the entirety of your life savings to access Medicaid coverage is still the only option for many individuals.
Under current protections, when one spouse applies for Medicaid LTSS, the income of the applicant spouse is considered on its own, but the assets of the couple are considered to be jointly owned. If the community spouse has minimal income, spousal impoverishment protections allow a portion of the income of the spouse seeking Medicaid coverage to be allocated to the community spouse. Additionally, the protections allow the community spouse to retain a defined share of jointly owned assets, rather than spending down nearly all shared assets to finance the long-term care of the spouse needing LTSS (see exhibit 1 below).
Each year, the minimum and maximum permitted income (known as the Minimum Monthly Maintenance Needs Allowance or MMMNA) and assets (known as the Community Spouse Resource Allowance or CSRA) are adjusted to account for changes in the Supplemental Security Income federal benefit rate and the Consumer Price Index. Both the income and resource protections were included in the 1988 law. As of 2021, the MMMNA is at least $2,177 in all states except Alaska and Hawaii, and cannot exceed $3,259. The minimum CSRA is $26,076, and the maximum is $130,380. The exhibit below provides examples of the CSRA under different resource scenarios.
Exhibit 1: Community spouse resource allowance in practice
Source: Authors’ analysis based on 42 USC Section 1396r-5.
As enacted in 1988, the spousal impoverishment protections were limited to individuals seeking services in institutional settings, such as a nursing facilities. States also had the option to extend spousal impoverishment protections to certain individuals who were eligible for home and community-based services (HCBS) under 1915 waiver authority. Decades later, section 2404 of the Affordable Care Act (ACA) extended spousal impoverishment protections to all major categories of Medicaid HCBS beneficiaries for a five-year period, from January 2014 to December 2018. This shift reflected a trend toward decreasing the focus on institutionalization in Medicaid and increasing the availability of home and community-based LTSS services. Between 1988 and 2018, the share of Medicaid LTSS spending on institutional care dropped from approximately 90 percent to only 44 percent, and HCBS spending rose from 10 percent to 56 percent over the same period.
Over the years, Congress has added a number of new HCBS authorities to the Medicaid statute, creating new options for states to expand HCBS offerings. In 1981, states were permitted to serve individuals who would otherwise require an institutional level of care in the community under 1915(c) waiver authority. Today, all states offer some form of HCBS to Medicaid enrollees, and 48 states have at least one 1915(c) waiver in operation. These 1915(c) waivers were the largest share of the $92 billion of Medicaid HCBS spending in 2018. The 2005 Deficit Reduction Act and the ACA created and enhanced opportunities for states to offer HCBS through state plan authority, which allows states to add optional Medicaid services without going through the waiver approval process. In 2018, state plan services were an estimated 32 percent of total Medicaid HCBS spending.
A majority of adults have a strong preference for aging in place rather than moving to institutional care. According to 2018 survey data, at least 68 percent of adults want to remain in the community, and 63 percent of adults want to remain in their current residence for as long as possible. To make community living sustainable as individuals age and require higher levels of care, a variety of home and community-based services are needed, including home modifications and assistance with carrying out activities of daily living such as bathing, dressing, and eating.
Since initially passing as part of the ACA and having been set to expire in 2018, HCBS spousal impoverishment protections have been brought back from the brink of expiration by Congress numerous times. These short-term renewals keeping the protections in place have lasted as few as seven days and as long as almost two years. The legislative language proposed in the Build Back Better Act is the latest proposal to permanently extend the HCBS spousal impoverishment provisions.
Since 2014, there have been eight congressional extensions of the HCBS spousal impoverishment protections, and all have passed with bipartisan support. It is true that there are costs associated with protecting eligible spouses from financial ruin. So far, spousal impoverishment protections have cost $200–$300 million annually between 2014 and 2019. While not insignificant, these costs pale in comparison to the huge investment Congress has made in rebalancing long-term care spending to allow seniors to age in place. We believe that extending the 32-year-old spousal impoverishment provisions afforded to spouses of loved ones who are placed in nursing homes or who continue to live in the community reflects both the policy platforms and the basic values of the majority of Republicans, Democrats, and Independents.
Allowing HCBS spousal impoverishment protections to lapse would not only harm those individuals currently relying on those protections, it would also be a step backward for the Medicaid program, which has spent the past several decades striving to provide greater access to HCBS options. As with any policy, enforcement and compliance are essential to ensure the program is protecting those it is intended to protect, while eliminating fraud and abuse. Regardless of the outcome of the FY 2022 federal budget proposals and the survival of certain provisions of the Build Back Better Act, Congress should accept the reality of the need for sustained investment in HCBS spousal impoverishment protections and make them permanent.