In a 6-3 ruling, the justices upheld Wisconsin's interpretation of how a couple's income is evaluated. Most states have similar rules for resolving a couple's assets, so Wednesday's ruling will have far-reaching implications.
At issue in the case is the "spousal impoverishment" provisions of the 1988 Medicare Catastrophic Coverage Act, which are part of the federal Medicaid statute.
Under the provisions, if a couple must live apart because one spouse is confined to an institution, usually a nursing home, the spouse living at home can reserve some assets to meet minimum monthly needs when the institutionalized spouse becomes eligible for medicare.
In order for the home spouse to gain an increase in his or her living allowance, which is sheltered under federal law, the home spouse must show at a state hearing that his or her income will fall short of the minimum allowed under the federal law.
Though it sounds complicated, it's really robbing Peter to pay Paul. A home spouse has to shelter enough assets so that the institutionalized spouse can be poor enough to qualify for Medicare.
Wisconsin, like a majority of the states, uses an "income-first" method in determining whether the home spouse may get a higher living allowance.
Under that method, the state first considers whether an institutionalized spouse can still transfer income to a home spouse, even after the former qualifies for Medicaid.
How this works out is obvious in the case of Irene Blumer, which brought Wednesday's Supreme Court decision.
Irene was admitted to a nursing home in 1994. In December 1996, she applied for Medicaid through her husband Burnett Blumer.
The Green County, Wis., calculated that the couple had total assets of $145,644 in 1994 when Irene was institutionalized. The county set one half of that aside for Burnett's assets -- or his "resource allowance."
However, in 1996, the couple had set-aside assets totaling $89,335 -- more than $14,000 above their "resource allowance" calculated in 1994.
When Irene requested a state hearing to raise the allowance, it was denied. The Blumers were then forced to spend resources that Irene would have preferred to save for her husband before Wisconsin would declare Irene Medicaid-eligible.
Irene went to state court, contending that the state's "income-first" method was out of step with federal law. A state appeals court agreed, and Wisconsin asked the Supreme Court for review.
In her majority opinion reversing the state appeals court Wednesday, Justice Ruth Bader Ginsburg said the court concluded "that neither the (federal) act's text nor its structure forbids the 'income-first' method Wisconsin follows."
(No. 00-952, Wisc. Dept. of Health and Family Services vs. Blumer)