How a Medicaid divorce can save you millions.

Leave it to the scions of Washington D.C. to break up middle class marriages.

Under current law if your spouse enters a nursing home, both of you are obligated to pay for care. With an average monthly Social Security check at $1,413, the cost of a nursing home is impossible to pay out of current income. Most folks dip into savings.

But even a family with say, $400,000 saved over a lifetime, will see that money rapidly disappear because nursing home care is not covered by Medicare. You have to pay 100% of the costs.

To give you better sense of these expenses the states with the most expensive median annual rate for a single person’s private room bed in a nursing home:

1. Alaska – $259,515
2. Connecticut – $158,775
3. Massachusetts – $139,430
4. New York – $136,510
5. Hawaii – $135,050

The states with the least expensive median annual rate for a single person’s private room bed in a nursing home:

1. Oklahoma – $60,225
2. Missouri – $60,955
3. Louisiana – $62,050
4. Kansas – $65,700
5. Arkansas – $65,700

Double all the above numbers for two persons.

The table below shows the range of costs by state in 2015 of the daily rate for a private room.

Private rooms cost only about a thousand or two more a year, compared to semi-private rooms. Medicaid will not pay for private rooms, but even though the price difference to the cash customer is minimal, nursing homes can charge Medicaid recipients as much as they want for upgrades, and they do. Semi-private, by the way, can be four patients in a room, not just two.

An excellent Genworth study of nursing home costs  can be downloaded here.

That $400,000 the two of you saved will last a few years, but then it runs out and you have to apply for Medicaid – and be assigned to the “poor” wing of the nursing home. The government now actually decides how much the two of you can own – about $120,000, and until that limit is reached, you have to pay all the bills yourself.

When the remaining spouse enters the nursing home, only assets of less than $3,000 can remain before qualifying for Medicaid. In short, the family has become impoverished. In addition, if they still own a home it can be sold at their death to pay past Medicaid care, and not just inherited by the beneficiaries.

On the other hand not being married changes everything. Divorce ends the couple relationship. Your assets cannot be seized to pay for non-spouse nursing home care. Former spouses can have as much money in the bank as possible – instead of the $120,000 mandated for the remaining spouse in a marriage.

Divorce is also used by many seniors to reduce income taxes, since about $32,000 total income is the limit for couples to receive Social Security, while singles can go up to $25,000 each.

Seniors generally get hit hard by government rules. For example, they are not eligible for Obamacare, which ends exactly at age 65, even though those plans are better and cheaper. Another example is the Earned Income Tax Credit, which pays you for low earnings up until the age of 65, but not one day more, even if you are still working and not even claiming Social Security.

This discrimination has been wrongly attributed to seniors being the major beneficiaries of programs like Medicaid and the need to cut expenses.

The truth, of course, doesn’t always match the claims made to calm our senior anger.

Medicaid now has 72.5 million recipients. Of these, only 4.6 million are seniors – the vast majority of them in nursing homes.