Under the Affordable Care Act, a provision allows each state to choose whether or not to offer a Medicaid expansion for people who cannot afford insurance but do not typically qualify for Medicaid benefits. The federal government subsidized the majority of the additional cost. A clear advantage for state residents was that this expansion also did away with the assets test qualification. Previously, someone with a low income but a fair amount of financial assets (retirement savings, etc.) would fail to qualify for Medicaid benefits.
With new changes coming to our national healthcare system, it’s important to look at what will happen to Medicaid and how these changes affect divorce rates.
The Link Between Medicaid & Divorce
When someone enrolls in Medicaid, the benefits for which they qualify takes into account the net worth of the entire household. What that means is that it’s much harder for people to have an income low enough to qualify for Medicaid if they are married to a working spouse. Therefore, some people choose to divorce to meet the enrollment requirements, though they continue their relationship with their spouse in all other ways. We call this a “medical divorce.”
Retirement Savings & Benefits
Another reason why spouses may choose to divorce if one becomes severely injured or disabled is to hang onto retirement and other savings. For example, say a relatively wealthy couple in their early 60s (still eligible for Medicaid but not Medicare) has been saving for retirement and amassed a nice nest egg. Unexpectedly, one spouse suffers a catastrophic head injury and needs full-time medical care for the remainder of their life. The other spouse would need to spend the majority of the couple’s savings intended for retirement for their disabled spouse to qualify. However, doing so means that he or she will have to work for the rest of their life because their nest egg is gone.
Divorcing gives this couple a chance at preserving at least half of their retirement savings. They can split their assets so that the disabled spouse can qualify for Medicaid without the healthy spouse having to forfeit all of their retirement savings.
What’s Happening to Medicaid?
Congress recently approved the 2018 federal budget with deep cuts to Medicaid funding. The new administration also seeks to end ACA-era state Medicaid expansions. It also wants to stop funding any new Medicaid enrollees beginning in 2020. These factors indicate a marked decrease in the amount of available Medicaid funds over the next few years — as well as an increase in the number of benefits-related divorces.
Studying Divorce Data
During the years the ACA was fully intact, states that chose to expand Medicaid coverage saw a decrease in the divorce rate of approximately six percent among people aged 50 to 64. States that did not adopt expanded coverage saw no such decline. Experts expect to see the number of “medical divorces” increase significantly if the federal government follows through with phasing out Medicaid.
Proceed with Caution
If you feel that you and your spouse need to divorce for medical and financial reasons, it is crucial that you retain the counsel of an experienced family law and estate planning attorney. Divorce attorney Lee Tyler can ensure that you handle your medical divorce in such a manner that it pays off instead of devastating you emotionally and financially.