Perhaps you have heard of the term “medical divorce,” and wondered, what exactly is that? It has nothing to do with married medical professionals divorcing, but much to do with health care, getting older and survival.
First, a little background. When a married couple experiences an illness, they usually rely on their health insurance to cover the bulk of the costs. But when the illness becomes dire and requires extensive care, health insurance may not cover all of the costs, leaving the couple with potentially hundreds of thousands of dollars in medical bills – a sum that would financially devastate most Americans.
Some people started seeing a loophole in Medicaid. For couples too young for Medicare, the only other public health insurance program is Medicaid, reserved for those with incomes too low, by government standards, to pay for health insurance. A middle class couple where one spouse works and the other spouse, now sick, does not, on paper seems capable of securing health insurance. But in cases of catastrophic illness, the concept of affordability makes little sense if couples have to drain their savings and accrue debt to cover that which the insurance policy will not. A lower income family on Medicaid, however, in the same circumstances, would not face this dilemma because Medicaid covers these costs without pushing the family into lifetime debt.
At this point, enter the medical divorce. A desperate couple could divorce in a way where one spouse receives all of most of the assets so that the ill spouse would fall into the Medicaid qualification category. In this way, the earning spouse does not go bankrupt caring for the ill spouse, and Medicaid covers the expenses of the ill spouse. Of course, the couple can no longer remain married.
If this outcome seems incongruous to completely unfair to you, you were not alone. Those who wanted to reform our healthcare system also noticed. When Congress passed the Affordable Care Act, it did several things to reduce the incentive to get a medical divorce. First, it required all insurance companies not discriminate based on preexisting conditions, including charging a high premium. Second, it capped deductibles so that in cases of catastrophic illness a person would not have ridiculous sums still left to pay. Third, it eliminated lifetime caps on policies so in cases of catastrophic illness, a person would not hit that cap and remain responsible for all uncovered medical care for that illness. For persons with severe and/or chronic illness, this last benefit in particular has been a literal lifesaver. Finally, the ACA raised the bar for Medicaid qualification to any income that is below 138 percent of the poverty line for the ill spouse with no adverse impact on the well spouse. This means that a husband earning $60,000 a year would not have to tap into retirement accounts or accrue other debts to pay for the cancer-stricken wife who earns $25,000, as she can claim Medicaid benefits with no consequence to the husband.
Not surprisingly, the number of medical divorces have dropped significantly since the enactment of the ACA, particularly in the 50-64 age range.
Will the calls for repeal of the ACA mean a rise in medical divorce? That remains to be seen. But certainly, if the four changes noted above are eliminated, medical divorces will rise because spouses will find themselves unable to purchase suitable insurance that protects them from covering the large unpaid amounts resulting from catastrophic illness.
If you have questions about medical divorce, contact us – we can help.