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Obtaining a Court Order in North Carolina to

Increase the Spousal Income Allowance

By:  Sharon A. Thompson

Elder law attorneys often have to give their community spouse clients a "good news/bad news" speech. The "good news" is that their spouse, who now needs nursing home care, will qualify for Medicaid. The "bad news" is that the funds available to the community spouse from the couple’s joint monthly incomes may be significantly decreased and thereby leave the community spouse without sufficient funds to pay all of his or her monthly expenses. However, I have been able to turn this usual speech into a "good news/good news" one, much to the relief of my client.

The section of the North Carolina Medicaid Manual which implements the community spouse income protection provisions of 42 U.S.C. Section 1396- 5(d), discussed above, is MA-2270, VI. The provisions regarding methods available to adjust the community spouse allowance are contained in MA-2270, VI.C.4, which states: The community spouse allowance can be adjusted up to the amount available from the income of the a/r when: (1) a court order exists which establishes a different income amount or (2) through county or state appeal, a decision is made that the community spouse needs additional income because of exceptional circumstances creating significant financial hardship.

The only case that I am aware of using the administrative appeal method provided for in this regulation is one decided in Mecklenburg County in 1996. The hearing officer in that case found that the community spouse was suffering a financial hardship and ordered the institutionalized husband’s entire Social Security income be allocated to his wife. I was successful in increasing the community spouse income allowance (CSIA) through a court order, thereby requiring the local Medicaid office to follow the first method provided for in this regulation. There is no definition of what type of "court order" is needed and thus, presumably any court order which establishes an income amount is sufficient. I chose to bring an action in District Court seeking support and alimony, but not a divorce, for my client whose husband was about to enter a nursing home. Another possible type of court order that would seem to qualify would be an order in a guardianship requiring the guardian to give the community spouse all of the incompetent institutionalized spouse’s income.

I am not aware of any other cases of this nature in North Carolina, but as noted above, the issue has been addressed in other states. One other example is the decision of the Court of Appeals for the Middle District of Tennessee in Blumberg v. Tennessee Dept. of Human Services, 2000 Tenn. App. LEXIS 709 (Tenn. Ct. App. 2000). In that case, the court reversed a lower court ruling that the support order was not properly adjudicated because of lack of notice to DHS. The court first held that "DHS was without authority to ignore the Circuit Court Order of spousal support" and that the couple did not have to give notice to DHS because it was a lawsuit between the couple and no notice was required by the Medicaid regulations. "Although it would be good policy to give notice and DHS would prefer such a rule, no authority exists stating notice as a requirement." The court also found that DHS had the option of filing a Rule 60 motion to set aside the order and ask to intervene if they elected to do so. A copy of the complaint I filed, and the order I obtained, will be available on the Elder Law Section’s Web site at www.ncbar.org/legal_prof/sections/el/index2.asp. You may need to log in to access the forms. The complaint set forth facts such as:

• the parties,
• their monthly income and expenses,
• their assets and debts,
• detailed facts regarding the institutionalized spouse’s need to qualify for Medicaid, and the effect it would have on the monthly income available to the community spouse if she did not have an order for support.

I also set forth the standard allegations needed to support a claim for postseparation support and alimony pursuant to N.C.G.S. Sections 50-16.2A and 16.3A. There were two additional issues in my lawsuit. First, since the institutionalized spouse was already in a nursing home, she was in need of a court order as soon as possible so she could then apply for Medicaid. I made arrangements with the judge assigned to the case and the husband’s attorney-in-fact to have a hearing the day I filed the lawsuit. Before filing, I also left messages with both Durham DSS and the county attorney who handles DSS matters informing them that I would be filing such an action and requesting that they contact me if they wanted to be heard in court. Although I had prepared a Notice of Hearing, I didn’t file it because I never heard back from either DSS or the county attorney. Since notice is not required by the Medicaid regulations, it is a strategy decision whether or not to give notice based on your relationship with the local DSS and county attorney and at what point you might want to formally deal with DSS’s attempts to get involved with your case—at the initial hearing or after an order has been entered. In any event, DSS would have to file a motion to intervene in order to be heard.

Second, although there was no judicial determination of incompetence, my client’s husband was not competent, but he had previously executed a short form power of attorney which incorporated the powers enumerated in N.C.G.S. Section 32-27. N.C.G.S. Section 32-27(23) includes the power to "compromise, adjust, arbitrate, sue on or defend, abandon or otherwise deal with and settle claims. . . ." The husband’s attorney-in-fact acted on behalf of the husband pursuant to this authority, as well as the other powers conferred by the statutory short form power of attorney such as powers related to personal relationships and affairs.

The court order which was entered awarded the community spouse all of the institutionalized spouse’s monthly income and any future increases. The order also stated that there were exceptional circumstances resulting in significant financial duress to the community spouse. (Although such a finding is not necessary for a court order that qualifies under MA-2270, VI.C.4c(1), I added this ruling just to signal DSS that this judge would probably find exceptional circumstances in the event this order was not upheld and I had to try qualifying under MA-2270, VI.C.4c(2).) The order remains in effect for so long as the institutionalized spouse is in a nursing home and receiving Medicaid assistance. In order to increase the comfort level of the judge issuing the order, I added a provision that Durham DSS could be heard on the matter within 10 days if they requested. The next day the community spouse applied for Medicaid for her husband and provided DSS with a copy of the court order. I never heard from DSS or the county attorney regarding the court order, and eventually the application was approved. My client is now entitled to all of her husband’s income so long as he receives Medicaid. I wish you all as much success in your efforts to increase the community spouse income allowance for your clients as I had in this initial endeavor. It isn’t every day that you get to convey double "good news" to your clients!

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