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New Medicaid Case Revisits Spousal Income Diversion

A newly released unpublished opinion of the Court of Appeals looks again at the authority of the probate court to issue a protective order in the context of a married person in a nursing home who is receiving Medicaid benefits, when that order impacts how much of the income of the nursing home resident can be diverted to support their spouse in the community. The case is called In Re Michael DeClerck.  Click on the name to read the case.

This case follows the Vansach decision which was published in May 2018, and which I blogged about at that time.  That post was called Medicaid Planners Get Rare Win from COA Click on the name to read that post.

As would be expected, this panel of the COA remands the case to be decided in the context of Vansach, which basically requires the probate court to make certain findings about the needs of the parties in order to support the diversion of income granted.  What is interesting, and perhaps helpful, about this opinion, is that it also directly addresses the argument of the appellant (the Michigan Department of Health and Human Services), that the probate court lacks jurisdiction to issue these orders unless and until the appellee exhausts their administrative remedies.  The COA rejects this argument, which is good news for Medicaid planners.

The issue is important to planners and to the State for the reason that the more income that is diverted to the community spouse, the less that is paid to the nursing home by the Medicaid beneficiary as their “patient pay amount,” and the more the State has to pay for the nursing home resident’s care.

DHHS policy provides a formula for determining how much of the income received by a married Medicaid beneficiary in a nursing home is contributed toward their own care (the “patient pay amount”), and how much, if any, can be diverted to support their spouse in the community (the “community spouse income allowance”). DHHS policy offers two alternate processes for obtaining an exception to the default formula.  One way is to file an administrative appeal, the other is to obtain a court order.   Medicaid planners almost always take the probate court route, because the administrative route is perceived to be bias against them to the point of futility.

In this case, the COA rejects the DHHS argument that the Medicaid recipient must first go through the administrative process, and lose, before they can petition a probate court for relief.  The COA holds that, pursuant to Medicaid policy, a court order and an administrative appeal are simply alternative options, and that there is no requirement to go through the administrative process before petitioning a probate court.  This result is certainly implicit, if not express, in the Vansach opinion.  Arguably, in Vansach, the DHHS argument focused only on the proposition that the probate court simply lacked jurisdiction and that the administrative process was the exclusive process.  In this case, the issue is framed slightly differently, but the result is the same. Probate Courts may issue these orders, and DHHS must accept the probate court’s decisions.  Per Vansach, the probate courts must base their orders on certain findings regarding the needs of the parties involved.

Thanks to our friends at the Mannor Law Group for their work on this matter.