Long Term Care and Qualifying for Medi-Cal
Introduction
Many people have worked their whole lives saving and preparing for retirement. They are not rich but have accumulated a nice little nest egg in order to provide a decent retirement. One of their most heart-felt concerns is never to be a burden on anyone; not to their spouse, family, or friends. Then the unthinkable happens: a disabling health problem.
The extra costs associated with caring for such a disabling illness is far beyond the income stream of most retirees. As a result, income producing assets may have to be sold and the proceeds consumed. Before long neither income nor assets are left, leaving the remaining spouse or recovering patient destitute. It is hard enough dealing with the emotions caused by long-term health problems. Compounding the problem with financial worries makes the situation doubly cruel. Qualifying for Medi-Cal for Nursing Home Care can help preserve those needed assets and income.
Medi-Cal
Medicaid was renamed “Medi-Cal” in California. Medi-Cal is designed to help pay for medical care for public assistance recipients and other qualifying persons. Although Medi-Cal recipients may receive Medicare, the Medi-Cal program is not related to the Medicare program. Medi-Cal is a need-based program and is funded jointly with state and federal Medicaid funds. In addition to covering basic medical related expenses, Medi-Cal is designed to assist those living in a long term care facility (skilled nursing, intermediate care and the like) from becoming impoverished. You do not have to be poor in order to obtain these benefits – there is a long list of assets, such as your home, which are considered exempt.
Three Gates in Order to Qualify
In order for an older person living in a care facility to obtain long term care benefits via Medi-Cal he or she must pass through three key gates: First, the person must be age 65 or over, blind or disabled; Second, the person must be in a qualified facility; and, Third, all of the person’s assets must be exempt.
In order to be “qualified” the facility must be “medically necessary”. In other words, Medi-Cal does not cover independent or assisted living type arrangements which are considered merely room and board. Skilled nursing facilities, intermediate care facilities and the like will qualify.
Medi-Cal classifies property as "exempt" and "non-exempt." Exempt property is not counted in determining eligibility; non-exempt property is counted. If the applicant has more than $2,000 in non-exempt property, he/she will not be eligible, unless the property is converted into an exempt category (or otherwise spent) before the end of the application month. Examples of conversion/spending include purchasing a new refrigerator, replacing the old clunker with a new car, installing new carpet, painting the home, roof repairs and the purchase of a qualified annuity, to name a few.
Exempt Assets
The following property is generally exempt and, therefore, not counted in determining eligibility:
The Home: totally exempt, if it is the principal residence.
Other Real Property having a net value of $6,000 or less
Household furniture, furnishings and personal effects: totally exempt
One Motor Vehicle is exempt
Whole Life Insurance with a face value (not cash value) of $1,500 or less is exempt
Term Life Insurance: totally exempt
Burial Plots: totally exempt
Pre-Paid Irrevocable Burial Plans: No limit on amount and totally exempt
IRAs, Keoghs and other Work-related retirement accounts: totally exempt provided applicant is receiving periodic payments of principal and interest
Qualified Annuities: totally exempt
Property used in whole or in part as a business or as a means of self-support is exempt.
$2,000 in other assets is totally exempt
In addition, a spouse my retain up to $120,900 in other assets
Medi-Cal Myths
Unfortunately, misinformation about Medi-Cal is prevalent. The five most common myths about Medi-Cal, especially when it involves long-term care planning, are:
[if !supportLists]Myth 1: [endif]I was told that I had to be “poverty stricken” to qualify for Medi-Cal. Not true. The list of exempt assets is long and generous. Your home, car, retirement accounts, annuities, personal belongings, funeral arrangements and a host of other assets are not counted in determining eligibility.
[if !supportLists]Myth 2: [endif] I must “spend down” my assets to qualify. No. the term “spend down” is a misnomer. The first rule of Medi-Cal planning is determining what assets are not exempt and then moving those assets into one or more of the exempt categories. If there are additional assets remaining which cannot be made exempt then a gifting program can be implemented, a qualified annuity purchased or other, more sophisticated options engaged. We are recognized experts in this process.
[if !supportLists]Myth 3: [endif]I have too much income to qualify. Wrong. Your income is only relevant in determining your monthly “share of cost” (co-pay). It has nothing to do with qualifying for benefits.
[if !supportLists]
Myth 4: [endif]I can’t qualify because I have already been declined. Not true. Even if you have previously applied and been declined there is nothing to stop you from re-applying once your assets are within the umbrella of the exemptions. You will qualify.
[if !supportLists]Myth 5: [endif]I can give away all my non-exempt assets and then apply for Medi-Cal. If you give your assets away without adequate consideration the Department of Social Services will determine and impose a penalty period equal to the amount given divided by the “average monthly nursing home care costs”. Which means you can qualify but only after the penalty period has expired (which could be many, many months). There are strategic ways to avoid this penalty period and there are better options available which will not trigger a penalty. Our job is to guide you through the minefield of pre-planning your assets so qualifying without a penalty is the result.
