What is Medi-Cal?
Medi-Cal is a benefits program which is primarily funded by the federal government and administered by the State of California. Medi-Cal is a needs based program that provides for a number of needs but here we will discuss the use of Medi-Cal to pay for long term care and answer some of the common questions we hear.
Why Seek Advice for Medi-Cal?
As life expectancies and long term care costs continue to rise, the challenge quickly becomes how to pay for the care you may need. Many people cannot afford to pay $5,000 per month to more that $7,000 a month or more for the cost of a nursing home, and those who can pay for a while may find their life savings wiped out in a matter of months, rather than years.
Fortunately, the Medi-Cal program is there to help. In fact, in our lifetime, Medi-Cal has become the default “long term care insurance” of the middle class. However, eligibility to receive Medi-Cal benefits requires that you pass certain tests on the amount of income and assets that you have. The reasons for Medi-Cal planning is simple:
- You want to preserve your assets for your loved ones rather than have them unnecessarily go to pay extremely large nursing home bills.
- It is better to be safe than sorry. The rules of Medi-Cal are extremely complicated and confusing. Consulting an expert can save you thousands of dollars.
- With planning and advice from an expert, you will continue to ensure your family’s security to the best of your ability.
While the Medi-Cal rules themselves are complicated, it is safe to say that a single person will qualify for Medi-Cal as long as they have only $35 in income every month and non-exempt assets of up to $2,000. Exempt assets don’t count when you are trying to qualify for benefits but are taken into account when Medi-Cal later seeks recovery.
CAUTION: DO NOT TRANSFER ASSETS WITHOUT CONSULTING WITH AN ELDER LAW ATTORNEY THIS INCLUDES THE PURCHASE OF AN ANNUITY. THERE CAN BE SERIOUS UNINTENDED CONSEQUENCES, EVEN CAUSING DISQUALIFICATION FOR MEDI-CAL IF TRANSFERS ARE NOT DONE PROPERLY.
Is Medi-Cal the same thing as Medicare?
No. Medicare is an entitlement program which almost everyone qualifies for once they become 65. Medicare pays for many of our seniors’ medical needs but with a few exceptions we will talk about below, it does not pay for long term care.
Does Medi-Cal pay for long term care?
Yes, but you must qualify to receive Medi-Cal. Also, many people do not realize that not all long term care is the same. Medi-Cal only pays for stays in a skilled nursing home. At this time, with the exception of a few experimental projects, Medi-Cal is not paying for assisted living or board and care homes.
Won’t Medicare pay for my long term care?
Yes and no. If you have been hospitalized and need skilled nursing care to rehabilitate, Medicare will, in many cases, pay for a stay in a skilled nursing facility (SNF) for a period of time, up to 100 days. However, during this time, you must be getting progressively better. If your condition becomes stationary or becomes worse, Medicare can deny coverage from that point.
How do I qualify for Medi-Cal?
In order to qualify for Medi-Cal for long term care, first, you must need a skilled nursing facility. Also, you must meet income and asset requirements.
Does this mean that I have to give all my things away?
NO. In fact, giving things away can disqualify you for Medi-Cal for a period of time, called a penalty period. We will talk about that later. Often this practice is called “spending down”. DO NOT SPEND DOWN WITHOUT THE ADVICE OF AN ATTORNEY who is trained in this area. Some insurance/annuity groups claim to help people qualify for Medi-Cal and may do this but their primary goal is to sell a product which may not be in your best interest. It is important to have an attorney look at the big picture for you, including your family situation and personal goals and values. True estate planning requires knowledge of the law in a variety of areas and should not be done in a vacuum. When you are considering longterm care for yourself or your loved one, it is essential to have as many options as possible and to know that you have someone with a duty of loyalty to you or your loved one helping you to find the way through the legal maze.
How much income can I have and still qualify for Medi-Cal?
If you are single, you are only allowed $35.00 in income per month. If your income is over this amount, that portion becomes a share of cost. This means that the amount over $35.00 is used to pay for the nursing home and Medi-Cal picks up the rest of the tab if you meet the other requirements.
What if I am married and my wife is still living at home?
In California the at-home spouse is allowed to keep a monthly income of $2,739, as of January 2010. Any amounts in excess of $2,739 will be applied as a share of cost. Every year, this amount changes however, this year, it remained the same as in 2009.
If the well spouse does not have at least $2,739.00 in income, then he or she is allowed to take the income of the ill spouse in an amount large enough to reach the Minimum Monthly Maintenance Needs Allowance. The ill spouse remaining income goes to the nursing home. Hopefully, this avoids the necessity for the at-home spouse to dip into savings each month, which would result in gradual impoverishment.
How much can I have in assets?
If you are going into a nursing home, you can only have $2000 in countable assets and $109,560 if you are married. It is important to know that all assets are not countable. Here is a partial list of assets that are NOT countable for qualifying for Medi-Cal:
- A home, with value up to $750,000 in equity. The home must be the principal place of residence. The nursing home resident is required to show some “intent to return home” even if this never actually takes place.
- One car or truck.
- Income-producing real estate, in some cases.
- Burial spaces and certain related items for applicant and spouse.
- Irrevocable prepaid funeral contract.
- Value of life insurance if face value is $1,500 or less. If it does exceed $1,500 in total face amount, then the cash value in these policies is countable.
What is a countable asset?
Basically, all money and property, and any item that can be valued and turned into cash is a countable asset unless it is one of those assets listed above as exempt. This includes:
- Cash, savings and checking accounts, credit union share and draft accounts.
- Certificates of deposit.
- U.S. Savings Bonds.
- Nursing Home Accounts.
- Prepaid Funeral contracts which can be cancelled.
- Trusts (depending on the terms of the trust).
- Real Estate (other than the residence).
- More than one car.
- Boats or recreational vehicles.
- Stocks, bonds, or Mutual funds.
- Land contacts or mortgages held on real estate sold.
Can I create a trust and protect my assets from Medi-Cal?
If you create a revocable living trust, the basic rule is: if you can get your assets so can Medi-Cal. Also, putting our assets in an irrevocable trust can create a penalty period, that is a period during which you will not qualify for Medi-Cal. There is estate planning that can be done for those needing Medi-Cal but the planning is very specific to the individual’s situation and should be done by an estate planning attorney experienced in this area of the law.
Does this mean they can take my home?
Yes and No. If you indicate on your Medi-Cal application, when you apply for Medi-Cal that you intend to return home, in most cases, Medi-Cal will not take your home at that point. After you (and your spouse, if you are married) pass away, if you have not done adequate estate planning, Medi-Cal can force your home to be sold and the proceeds will go to repay Medi-Cal for the expenses they paid. This is called Medi-Cal Recovery. Appropriate planning with a qualified attorney should include planning not only for qualifying for Medi-Cal but also for the recovery process. Depending on the client’s wishes, a great deal of assets can be protected from the recovery process with adequate planning.
What about a division of assets?
Division of assets is the name commonly used for the Spousal Impoverishment provisions of the Medi-Cal Catastrophic Act of 1988. It applies only to married couples. The law changes the eligibility requirements for Medi-Cal when the ill spouse needs nursing home care while the other spouse remains at home. It makes no sense to impoverish both spouses when only one needs Medi-Cal to pay for nursing home care.
The 1988 law allowed for a “division of assets,” where the couple gathers all their countable assets together and then divide them so that the at-home spouse keeps one half of the countable assets to a maximum of $109,560 (as of January 2009). The other half of the countable assets must be “spent down” to less than $2,000.
I have added my kids names to our bank account. Do they still count?
Yes. The entire amount is counted unless you can prove some or all of the money was contributed by the other person who is on the account. This rule applies to cash and other assets such as:
- Savings and checking accounts
- Credit union share and draft accounts
- Certificates of Deposit
- U.S. Savings Bond
This list does not include everything but generally, if you can get to it, Medi-Cal wants you to use it to pay for long term care. Putting another person on your accounts also exposes you to the possibility of having that person or anyone that sues that person take your money. It also can create a taxable event and is definitely not advised.
What if I have longterm care insurance and it runs out? Do I have to do all this planning to save my assets?
It depends. The State of California has partnership program. If you have insurance that has been approved by this program, you can save dollar for dollar, the amount that your insurance has already paid out for your care. This means that if you have insurance through an approved plan that has paid out $3,000,000 for your care and now there are no benefits left, you can save $3,000,000 of your estate. Please note, we do not sell insurance and before you buy insurance, we strongly suggest that you contact HICAP to determine what insurance is appropriate for your needs. This is a state funded program that helps seniors evaluate insurance plans to find plans that are appropriate for them. HICAP is independent and does not sell insurance.
CAUTION: MANY PEOPLE SEEKING TO QUALIFY FOR MEDI-CAL AND/OR VETERANS BENEFITS ARE OFTEN VICTIMS OF ANNUITY SALES PEOPLE. THE STATE OF CALIFORNIA HAS VERY STRICT RULES ABOUT THE USE OF ANNUITIES. ANNUITIY SALES PEOPLE NORMALLY GET 10% OF THE VALUE OF THE ANNUITY AS AN UP FRONT COMMISSION AND THERE CAN BE STRICT PENALTIES FOR TERMINATING THE ANNUITY EARLY.