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?
Those who have been diagnosed with a degenerative disease, such as Alzheimer’s disease;
Elderly individuals concerned that if they have a stroke or some other disability afflicts them, they do not want their 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 in a skilled nursing facility, and only then if they have come from an acute care hospital.
What are the asset limits of Medi-Cal?
The “non-exempt” assets of the ill individual (the “applicant”) 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. This includes a mobile home or even an apartment building 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, 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 $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 irrevocable 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 an amount called the Community Spouse Resource Allowance (the “CSRA”), $123,600 in 2018. (Note: the exempt assets of a spouse are not counted, such as their jewelry.)
May I Give Away Assets?
Gifting is an area in long term care planning that is presently very advantageous. However, we will quite frankly not discuss it in detail 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 we share a few hints to demonstrate the power of gifting. First, these rules only apply to qualifying for long term care paid by Medi-Cal, they do not apply regarding the normal payment of medical bills by Medi-Cal. Second, the general rule is that if an individual gives away more than an amount called the “average private pay rate” ($8,515 through March 2018) it will cause one month of ineligibility for nursing home care paid by Medi-Cal. Hence, if the applicant gives away in one lump $85,150, it will cause you 10 months of ineligibility. 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 will significantly close when the regulations discussed below become final. 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.)
What are the Issues Regarding a 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 well 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”), $3,090 in 2018. 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.
Can Medi-Cal Take My Assets After I Am Gone?
It is a common misconception that if an individual receives aid from 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). Medi-Cal cannot recover against an IRA or other retirement plan or life insurance. On the other hand, for decedents who have passed away before 2017, Medi-Cal 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. However, beginning in 2017, Medi-Cal can only recover for long term care expenses (such as nursing home expenses) only in a probate; hence, they cannot claim against living trusts and other common estate planning devices. However, Medi-Cal can recover against annuities purchased on or after September 1, 2004.
Are Some Loopholes Closing? Do I Need to Consider Acting Now?
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 has done). It does away with rounding down on partial months of ineligibility. It tightens up some on annuities.
However, California has yet to implement the DRA. More than 10 years have passed and Medi-Cal has implemented little of the DRA. However, California is finally showing signs of moving forward. Senate Bill 483 passed in September 2008 did the Legislature’s part. However, it on its face says it would be effective until Medi-Cal (technically the Department of Health Care Services) issues regulations. DHCS finally issued proposed regulations in 2012. However, they will not become final for a number of months. However, we can see that the end is coming for staggered gifting and some of the other great loopholes we have been able to take advantage of. 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 give away certain assets and take other actions is limited.
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