Spousal Impoverishment Tennessee — CSRA and MMNA Protections for 2026

What Spousal Impoverishment Protections Are

When one spouse applies for TennCare CHOICES to cover long-term care, the Medicaid eligibility rules don't require the other spouse to impoverish themselves in the process. Federal spousal impoverishment protections — codified in the Medicare Catastrophic Coverage Act of 1988 and applied through Tennessee's TennCare LTSS rules — allow the non-applicant spouse (called the "community spouse") to retain a significant portion of the couple's combined assets and income.

Without these protections, a married couple would have to spend down virtually all their savings before the spouse who needs care could qualify for Medicaid. The community spouse would be left with almost nothing to live on. The spousal impoverishment rules create a floor below which the community spouse cannot be required to fall.

The Community Spouse Resource Allowance (CSRA)

The CSRA determines how much of the couple's combined countable assets the community spouse can keep. For 2026, the numbers are:

• Maximum CSRA: $162,660
• Minimum CSRA: $32,532

Here's how the calculation works. On the date the applicant spouse is institutionalized (or the date of the TennCare application, whichever is later), all of the couple's countable assets are totaled. The community spouse is entitled to keep half of the combined total, up to the maximum of $162,660. If half of the combined total is less than $32,532, the community spouse keeps the full minimum of $32,532 regardless.

What counts as a countable asset: Cash, bank accounts, CDs, stocks, bonds, mutual funds, life insurance cash value, investment real estate, and vehicles beyond the one exempt car.

What doesn't count: The primary residence (exempt up to $752,000 in equity if the community spouse lives there), one vehicle, personal belongings, household furnishings, prepaid burial plans (up to $6,000), and term life insurance with no cash value.

The applicant spouse must reduce their own countable assets to $2,000. Everything above the combined total of the applicant's $2,000 plus the community spouse's CSRA is considered excess and must be spent down before eligibility begins.

The Minimum Monthly Maintenance Needs Allowance (MMNA)

The CSRA protects assets. The MMNA protects income.

When the applicant spouse enters a nursing facility or enrolls in TennCare CHOICES Group 2, nearly all of their income goes toward the cost of care (the "patient liability"). But the community spouse needs income to live on. The MMNA ensures they receive a minimum monthly income:

• Minimum MMNA (effective July 1, 2026): $2,705
• Maximum MMNA: $4,066.50

If the community spouse's own income (Social Security, pension, investment income) is less than $2,705 per month, a portion of the applicant spouse's income is diverted to make up the difference before the rest goes to patient liability. If the community spouse's own income already exceeds $4,066.50, no income diversion is allowed.

The MMNA can be increased above $4,066.50 through a fair hearing or court order if the community spouse can demonstrate that their actual living expenses (mortgage, property taxes, insurance, medical costs not covered by insurance) exceed the standard allowance.

How the Income Split Works in Practice

Only the applicant spouse's income is counted toward TennCare's $2,982 monthly income limit. The community spouse's income is completely exempt from this calculation — it doesn't matter if the community spouse earns $50,000 per year. The income cap applies only to the person seeking long-term care coverage.

If the applicant spouse qualifies for TennCare CHOICES and enters a nursing facility (Group 1), their income is distributed each month through a specific priority sequence:

1. Personal Needs Allowance: $70 (retained by the applicant for personal expenses)
2. Spousal Income Allocation: Up to the MMNA amount needed to bring the community spouse's total monthly income to at least $2,705 (and no more than $4,066.50)
3. Medicare Part B and supplemental insurance premiums
4. Patient Liability: Everything remaining goes to the nursing facility or the MCO

If the applicant's income exceeds the $2,982 cap, a Qualified Income Trust (QIT) must be established, and all income flows through the trust before being distributed in this same sequence.

Common Mistakes That Cost Families Money

Spending down too aggressively before applying. Some families, panicked by the asset limits, rush to spend down the couple's savings before applying for TennCare. But the spousal impoverishment rules allow the community spouse to keep up to $162,660. A couple with $300,000 in combined countable assets only needs to spend down $135,340 — not the entire amount. And the spend-down can be accomplished through legitimate, non-penalized purchases: paying off the mortgage, making home repairs, purchasing a newer vehicle, prepaying burial plans, and paying off legitimate debts.

Transferring assets to children during the look-back period. Tennessee enforces a 60-month (5-year) look-back on all asset transfers. Any gifts or transfers made by either spouse for less than fair market value during this window trigger a penalty period of Medicaid ineligibility. The penalty is calculated by dividing the transferred amount by the state's average monthly nursing home cost (approximately $8,580 to $8,846 in 2026).

Not asserting the CSRA at application. The CSRA isn't automatically applied — it's calculated based on the financial documentation submitted with the TennCare application. If the couple's asset documentation is incomplete or poorly organized, the CSRA calculation may be wrong, and the community spouse may be told to spend down more than necessary.

Ignoring the MMNA fair hearing option. If the community spouse has high fixed expenses — a mortgage, property taxes, medical costs — that exceed the standard $2,705 MMNA, they can request a fair hearing to increase the allowance. Many families don't know this option exists and accept the standard amount without challenge.

Protecting the Home

Tennessee is one of the more home-protective states during the applicant's lifetime. The primary residence is exempt from countable assets as long as the community spouse lives there, regardless of the home's value (up to the $752,000 federal equity cap). Tennessee does not file pre-death TEFRA liens against the home.

After the applicant spouse dies, the home becomes potentially vulnerable to the Tennessee Medicaid Estate Recovery Program (MERP). But Tennessee uses a "probate-only" definition — MERP can only recover from assets that pass through the probate process. If the home is held in tenancy by the entirety (the standard form of joint ownership for married couples in Tennessee), it passes automatically to the surviving spouse outside of probate and is completely shielded from MERP.

For families where the home ownership structure is more complex, or where the applicant spouse is the sole owner, an elder law attorney should review the title and recommend the appropriate protective strategy before the TennCare application is filed.

For a complete walkthrough of Tennessee's Medicaid eligibility rules, QIT requirements, asset protection strategies, and spousal protections, our Tennessee Dementia & Memory Care Guide covers every financial planning step in detail.

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