Difficult Decisions: Disability Payments Impacting Divorce Options

Divorce, nowadays, is surprisingly common; approximately 827,000 divorces happen every year. As healthcare costs climb across the United States, many happily married couples have to make a seemingly impossible decision: stay married and lose major healthcare benefits, or divorce to keep disability payments. Insurance is a universally complicated matter to begin with. Now, complications between private health insurance and government benefits are pushing happy couples into separation.

Disability Difficulties Shockingly Common

While many Americans consider disability to be a distant subject they don’t personally need to consider, the reality is that disability is surprisingly common among the general population. Specifically, disability tends to become more prevalent with age, as aging can lead to physical and psychological restrictions. Arthritis is one of the most common causes of joint pain in older adults. The CDC predicts that by the year 2040, an estimated 78.4 million American adults will be diagnosed with arthritis. Depending on the severity, arthritis can prevent an individual from participating in daily life or even holding a full-time job.

However, disabilities occurring at a younger age can be even more challenging. A person with a disability is far more likely to earn less than peers without a disability. In fact, people with disabilities reported earning as much as 70% less annually than those without disabilities. This income gap can pose a multitude of problems when it comes to marriage and partnership, and it’s largely the financial difficulties that are pushing many couples with disabilities to divorce.

The Sources Of Divorces: Insurance Struggles

Because many people with disabilities rely on government assistance to pay for medical care, their household financial status matters greatly. A spouse’s raise may seem like a benefit initially; however, the resulting increase to household income may disqualify someone from receiving government assistance for a disability. Faced with a challenging situation created by insurance, many couples are choosing to separate in order to keep the benefits that make medical payments possible.

Typically, while a small household income increase may help with some payments, the adjustment is usually not enough to cover the needs of medical payments. This creates a gap for households relying on Medicaid particularly. While they may be wealthy enough to be ineligible, they are still poor enough to be unable to afford medical payments. Meanwhile, the pharmaceutical and medical industry in the United States is thriving. The United States alone holds over 45% of the global pharmaceutical market, and prices for medications are higher in the United States than in most other developed nations.

Resulting Financial Stress

Divorcing for the sake of Medicaid eligibility may technically be the best option for these couples in the short term. However, divorce can have a devastating impact on a couple’s financial situation over time. This is particularly true when it comes to the relocation of assets such as real estate. The spousal right of election entitles a spouse to claim one-third of the estate of his or her spouse. Making the right decision on who owns what financial assets during a divorce is already complicated. It becomes even more complicated when forced to consider eligibility for financial assistance. Residential real estate as an asset class is a $29 trillion market, and the commercial sector adds another $10 trillion. A decision during divorce proceedings as simple as who owns the couple’s former home could change eligibility for assistance.

Divorce is always a complicated issue, but it’s incredibly painful for couples who genuinely want to remain married. Unfortunately, due to the structure of government health assistance combined with private insurance, many people must choose either marriage or health coverage. Without serious adjustments to the handling of Medicaid and other health insurance, as well as acknowledgment of the Medicaid gap, this trend will likely continue.