NCPA - National Center for Policy Analysis

Divorce, Medicaid Style

November 16, 2001

According to analysis from the Center for Long-Term Care Financing, divorce is a tried and true method to qualify for Medicaid nursing home benefits. Medicaid is the primary government funded program for the long-term care of poor persons. To qualify, the participant must have an income that does not exceed subsistence level.

Older couples with higher than subsistence level income who want these benefits often employ creative Medicaid financial planning tools to achieve eligibility. This is usually done after private insurance is no longer available and paying for one's own care is not the most desirable choice.

Medicaid planners sometimes use the tool of divorce to impoverish an ill spouse and enrich a well spouse, thus allowing the ill spouse to qualify for Medicaid coverage for long term care assistance. Under current law, this is one strategy that is available to enable elderly.

However, according to The Elder Law Journal, there are ramifications of using the divorce loophole.

  • The proceeds from existing life insurance may not go to the surviving spouse.
  • Divorce by an elderly couple may disrupt estate planning schemes and cause unanticipated negative emotional, financial and social problems.
  • Congress should eliminate the divorce loophole in the Medicaid statute by expressly forbidding the use of divorce to concurrently preserve assets and qualify for Medicaid benefits because it is detrimental to the social fabric of the nation.

Source: "Divorce, Medicaid Style," LTC Bullets, Center for Long-Term Care Financing, November 9, 2001.


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