“Long-term care” describes the group of services that help people who cannot care for themselves for long periods of time. Long-term care is usually not covered under insurance policies, including Medicare, and costs about $5,500 per month in Arizona, on average. However, the Arizona Long-Term Care System (“ALTCS”) is a “means-tested” program managed by Arizona’s federally funded Medicaid agency, the Arizona Health Care Cost Containment System (“AHCCCS”), and pays for the long-term care of its members. “Means-tested” means eligibility is determined based upon whether (with reference to certain theoretical standards) the person has sufficient income and assets to pay for long-term care without financial assistance from the government.
Perhaps one of the most important considerations associated with membership in ALTCS is how financial eligibility requirements will affect a spouse who is not enrolled in ALTCS, often called a “community spouse” while the ALTCS member is alive and after the ALTCS member’s death.
Financial Eligibility Requirements
ALTCS imposes substantial eligibility restrictions on the resources and income of an ALTCS member; however, such restrictions are often not applicable to ALTCS member’s community spouse.
As of 2013, an ALTCS member may receive a maximum monthly income of $2,130 while maintaining eligibility for ALTCS. Income restrictions, however, are not applicable to a community spouse. AHCCCS Manual 611.03. For example, if a community spouse is employed, the community spouse’s salary is not counted when determining the income eligibility of the ALTCS member.
As of 2013, an ALTCS member may own a maximum of $2,000 of countable resources while maintaining eligibility for ALTCS. However, these same resource restrictions are not applicable to a community spouse who may retain one-half of the couple’s countable resources up to $115,920, called the community spouse Resource Deduction (“CSRD”). Despite the use of the word “community” in the context of resources, ALTCS pools a married couple’s community property and the separate property of each spouse when making resource determinations.
There are several types of non-countable resources that are not included in the calculation of the CSRD, but usually the most important non-countable resource is a couple’s residence with less than, as of 2013, $525,000 of owner’s equity.
“Spend Down”
While the community spouse may continue to own countable resources up to the amount of the CSRD, the ALTCS member must reduce his/her countable resources to $2,000. The process of reducing the assets of the ALTCS member is commonly known as “spend down” or “spending down.”
An alternative strategy to avoid spending down assets, while not violating the transfer restrictions, is converting countable resources into a qualifying annuity, which is treated as income, rather than a resource. Although most transfers of resources made for less than fair value during a 5-year look-back period can result in a period of ineligibility, transfers of resources to a community spouse are exempt from such transfer restrictions. AHCCCS Manual 706.05(C) & AHCCCS Manual 708.02(C). Because a community spouse is not permitted to retain resources in excess of the CSRD, the transferred resources must be converted to income, which is not restricted or limited. However, the process through which a resource converted to income or “annuitized” must conform to both federal and state guidelines. In practical terms, this means that the community spouse can benefit from all of the couple’s resources without affecting the resource eligibility of the ALTCS member.
Estate Recovery
After a member of ALTCS passes, AHCCCS is required to recover funds that it expends to care for an ALTCS member via a process known as “estate recovery.” However, both federal statutes and state regulations prohibit estate recovery, including the placement of a Tax Equity and Fiscal Responsibility Act (“TEFRA”) lien upon an ALTCS member’s residence, when the ALTCS member is survived by either: a spouse, a child under 21, or a child of any age who meets SSA or SSI disability and is blind or disabled. AHCCCS Manual 1902.02(B) & AHCCCS Manual 1903.00(E).
Notwithstanding the foregoing, there may be potential for AHCCCS to pursue in estate recovery upon the death of a community spouse, however, the legislative history of the federal law that mandated estate recovery, the Omnibus Budget Reconciliation Act of 1993, can be interpreted as prohibiting recovery from the estate of a surviving spouse. Further, it appears that AHCCCS interprets the legislative history as requiring AHCCCS to waive recovery from the estate of a surviving spouse.
This brief overview of some important considerations associated with ALTCS and Medicaid eligibility is by no means comprehensive. Always seek the advice of a competent professional when making important financial and legal decisions.
