legal document

Protection Through Protective Orders for Medicaid Planning

By Jadranko Tomic- Bobas, J.D., Managing Hotline Attorney, and Ashley Jayne, Legal Hotline Intern. 

The Michigan Court of Appeals came down with an opinion last month that will have a significant impact on Medicaid planning.   

Protective orders are a commonly used tool by Michigan Medicaid planners. Married couples often face difficulties in spending down their assets, so that one spouse may qualify for Medicaid benefits. Also, the loss of the institutionalized spouse’s income creates an extreme hardship on the spouse still living in the community (“community spouse”). Once Medicaid eligibility is obtained, the community spouse is left, as the Court of Appeals in In re Estate of Joseph VanSach Jr. and In re Estate of Jerome R. Bockes put it, “pauperized,” or to be made very poor, because most of the couple’s joint assets must be spent.   

To combat this, the Medicaid statutes allow for an income allowance for community spouses, which is taken from the institutionalized spouse’s income and lowers the amount that the institutionalized spouse is expected to pay towards their care which is called the “patient pay amount.” Michigan Department of Health and Human Services (MDHHS) uses a formula to calculate the patient pay amount. Protective orders can divert a larger part of the institutionalized person’s income to the community spouse – which results in more income for the community spouse to cover costs of living and maintenance.  

MDHHS, represented by the Michigan Attorney General, challenged the probate court’s jurisdiction, among other things, to divert income to the community spouse in In re Estate of Joseph VanSach Jr. and In re Estate of Jerome RBockes. In both cases, one spouse was still living in the community, and the other spouse was living in a senior care facility and receiving Medicaid benefits. The community spouses were awarded 100 percent of the institutionalized spouse’s income by a probate court issued support order.   

Refuting challenges from MDHHS, the Court of Appeals determined that probate courts have the authority to issue support orders and that the community spouse must demonstrate a need for the income by clear and convincing evidence. The Court of Appeals also noted that it is insufficient that the community spouse merely wants the income to maintain a particular lifestyle. Further, the Court of Appeals reasoned that the money should be diverted to assist the community spouse in covering costs of living and maintenance, but that this should not come at the price of impoverishing their institutionalized spouse.   

The results of this opinion are two-fold. Before now, there has not been court precedent stating explicitly that it is within the probate court’s authority to issue support orders. Now, Medicaid planners will have this opinion to back them in seeking such actions. However, it will also be more difficult for a community spouse to obtain a support order because they now bear a higher burden of proof. Community spouses who wish to obtain a support order will have to show clear and convincing evidence of a need, in contrast to the standard of reasonableness that was applied before.   

In sum, Medicaid planners are now more empowered by the decision, but will ultimately have to work harder to obtain the support order they seek. 

For more information about services for seniors, please contact the Legal Hotline for Michigan Seniors at 800-347-5297.