Medi-Cal Planning for Long Term Care
Please note the following is just general information. It is not advice. Many points, in fact, are almost even a gross simplification. Please do not implement any of the following in your own situation without being properly advised. Please hire us or another competent attorney to assist you. As the commercial says, “please do not try this at home”.
Who should consider planning for Medi-Cal to pay for their nursing home care?
You have been diagnosed with a degenerative disease, such as Alzheimer’s disease;
You are elderly and concerned that if you have a stroke or some other disability afflicts you, you do not want your assets to be used up in paying for possible care in a nursing home.
What is Long Term Care under Medi-Cal?
Medi-Cal is the California state version of what is called Medic-Aid in other states. It is funded primarily by the federal government and is administered by the State. It pays for the medical care of those who do not have much in income or assets. It has no minimum age limit (unlike Medicare). In particular, it will pay for long term care in a skilled nursing facility (but generally not for care in assisted living or a board and care home). Medicare will only pay for part of the cost of the first 100 days, and only then if you have come from an acute care hospital.
What are the asset limits of Medi-Cal?
The “non-exempt” assets must be under $2,000 (at the end of the month of application). What is exempt then is the key.
The primary residence is exempt. That includes a mobile home or even an apartment buidling if the applicant lives in one unit. The applicant does not even have to live there, just must have the intent to return to live there if they could. As of today (May 2008), the home can be of any value. However, please see the discussion below regarding the implementation of the federal Deficit Reduction Act (the “DRA”). Under the DRA home equity would be limited to $500,000 to $750,000.
Motor vehicle (one) (of unlimited value), is exempt if used to benefit the applicant or is needed for medical reasons.. In California, this would presently include even a motor home worth a couple of hundred thousand dollars.
Household items and other personal effects are exempt.
Jewelry is exempt in any amount for a married person. For a single person, wedding rings, heirlooms, and other jewelry up to $100 in value are exempt.
Life insurance is exempt if a term policy or a permanent policy if less than $1,500 in cash value.
Burial plots are exempt. In addition, an iirevocable burial fund of any amount and a revocable burial fund if up to $1,500 are exempt.
IRA’s work-related annuities, and other retirement plans are exempt for the applicant if they are taking distributions of all income and some amount of principal each year. Such plans of a spouse are exempt in any event.
Annuities are exempt if issued on or after March 1, 1996 if payments are to be made over a period not to exceed life expectancy and include both income and some principal. If issued before March 1, 1996, other rules apply.
Business assets are exempt. However, rental real estate is not a business and so is a problem asset for the applicant and their spouse.
Assets of a spouse are exempt if they do not exceed something called the Community Spouse Resource Allowance (the “CSRA”, $104,400 in 2008). (Note: the exempt assets of a spouse are not counted, such as their jewelry.)
Gifts of Assets
This is an area in long term care planning that is presently very advantageous. However, I am quite frankly not going to tell you too much about it because it would be like giving a loaded gun to a five year old, not a good idea. This is a very dangerous area if done improperly.
However, may I share a few hints with you to show you the power of gifting. First, these rules only apply to qualifying for long term care paid by Medi-Cal, they do not apply re the normal payment of medical bills by Medi-Cal. Second, the general rule is that if you give away more than something called the “average private pay rate” ($5,496 in 2008) it will cause you one month of ineligibility. Hence, if you give away in one lump $54,960, it will cause you 10 months of ineligibilty. On the other hand, under the present rules, Medi-Cal cannot “look back” more than 30 months in California. (The DRA would change that to 60 months.) In addition, a gift of an exempt asset will not cause any ineligibility. This is an area of loopholes the DRA would significantly close. Hence, this is an area that some may want to take advantage of while they can. (Again, “don’t try this at home”. Get proper advice.)
Issues re Spouse
As mentioned above, the non-exempt assets of a spouse cannot exceed the CSRA. Getting the countable assets of a spouse down to that limit is the key to planning for a married couple. That is a key part of how we can help.
Another issue is whether the income of the spouse in the nursing home will go to the spouse or to the “share of cost” of the ill spouse in the nursing home. There is something called the minimum monthly maintenance needs allowance (“MMMNA“, $2,610 in 2008). Please note that we can go to court in what is called a 3100 petition to most likely effectively raise the CSRA and the MMMNA.
Another issue is that the assets the well spouse acquires after the ill spouse qualifies for Medi-Cal do not cause a subsequent ineligibility. An inheritance is a good example.
Recovery by Medi-Cal
It is a common misconception that if you go on Medi-Cal they will “take your home” or “put a lien on your home.” However, Medi-Cal can recover for what they have expended after a single person has passed away. Note they cannot recover any amount from a surviving spouse. They also cannot recover against a child who is blind or disabled (or a minor). They cannot recover against an IRA or other retirement plan or life insurance. On the other hand, they can recover against the home if still owned by a single person at death, as well as joint tenancy assets and account payable on death. They can also recover against annuities purchased on or after September 1, 2004.
Many Loopholes Will Be Closing
The DRA, the Deficit Reduction Act, was signed by President Bush in February 2006. For example, it limits home equity to $500,000 ($750,000 if the state so mandates, as California is likely to do). It does away will rounding down on partial months of ineligibility. It tightens up some on annuities.
However, California has yet to implement it. It is possible but highly unlikely California will implement the changes retroactively. We are presently more than two years later and California is finally showing signs of moving forward. Senate Bill 483 would do the Legislature’s part. However, it on its face says it would be be effective until Medi-Cal (technically the Department of Health Care Services) issues regulations. The word is such would not be effective until 2010, late 2009 at the earliest. However, time is passing, and one should consider what can and should be done now before it is too late.
The time is now to consider whether or not to take action to qualify for Medi-Cal to pay for long term care in a nursing home. The window of time to giving away certain assets and taking other actions is becoming shorter and shorter.
How Can I Find Out More?
To learn more about planning for long term care under Medi-Cal, please do not hesitate to contact us at (805) 482-2282, or e-mail us at KGS@Staker.com
By Kevin Staker