Medicaid and Divorce: The Health Insurance Connection

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Recently, NPR featured a segment on a fascinating study of the impact of the Affordable Care Act on divorce. Given all of the heated debate about health care in the news and in our body politic, we thought it a good idea to detail the findings of the study.

As people pass retirement age, they generally must live on fixed incomes derived from retirement savings and Social Security. For health insurance, depending upon income, either Medicare or Medicaid provides coverage. However, the government tries to save money in both programs for people with means. So, for example, Medicare covers only 80% of costs in various ways, requiring recipients to obtain a secondary insurance policy to handle the shortfall or risk becoming responsible for potentially high medical bills.

Medicaid had one particularly difficult restriction:  if a married couple had a spouse who became ill, even though they qualified for Medicaid based on income, if the couple had assets that could go toward payment of medical care, those assets had to be spent down to a certain level before Medicaid would provide coverage. As you can imagine, this policy had the perverse effect of encouraging older couples to divorce, give the healthy spouse the bulk of the assets and little to the sick spouse so that individually the sick spouse would receive full Medicaid benefits and the savings of the couple over time would not all be used to pay medical care.

With the passage of the Affordable Care Act, this Medicaid policy was amended so that income still had to qualify for Medicaid but asset expenditure was eliminated. As some may recall, the Affordable Care Act provided federal funds to states that participated in the program; a majority of states did participate, but a minority refused the expansion funds because they did not want to participate fully in the new health insurance program. This split created two sample groups, one with the new asset waiver, one with the old requirement.

Social scientists studied the impact the different policies had on divorce. Not surprisingly, in states that refused expansion funding, the divorce rate continued to rise by at least 5% compared to states that accepted funding.

As the health care debate rages on, hopefully lawmakers will give more attention to the impact high medical costs have on the overall financial stress on an aging couple and not force a couple to divorce simply to survive an illness.

If you have questions about divorce and health coverage, contact us – we can help.