Why would Medi-Cal be relevant to someone that will qualify for Medicare?
While it is true that most people will qualify for Medicare when they reach the age of 65, there is an enormous gap in the coverage. This program will not pay for a stay in a nursing home or assisted living facility. Medi-Cal will cover the costs if you can gain eligibility, and this is why it is relevant in an elder law context.
Medi-Cal is only for people with significant financial need, right?
Yes, it is a need-based program. As a result, the limit on assets is just $2000.
So you cannot qualify for Medi-Cal if you own a home?
The $2000 limit is for countable assets, but some resources are not counted if you were to apply for Medi-Cal to pay for long-term care. Your home is one of them, but there is an equity limit that is much higher than the median home value in Cincinnati. We are not sharing an exact number because it changes year-by-year as inflation is taken into account. In addition to your home, there are some other assets that are exempt, including your vehicle, wedding and engagement rings, heirloom jewelry, your personal effects, and the items that you have around the house. You can have unlimited term life insurance and up to $1500 worth of whole life insurance. The same amount can be set aside for final expenses, and prepaid burial plots are not counted.
If a married person is applying for Medi-Cal, can the healthy spouse keep any of the countable assets?
Yes, there are provisions for a healthy spouse that can still live independently. This person would be referred to as the “community spouse” for Medi-Cal terms. First, there is no limit on home equity, and the independent spouse would be entitled to a Community Spouse Resource Allowance. This is equal to half of the shared assets that are considered to be countable, but there is a limit. Once again, it is adjusted annually to account for inflation, but you can use a figure of around $130,000 as a general rule of thumb. There is also a minimum allowance that is about 20% of the maximum. The Medi-Cal program will absorb almost all of the income that is brought in by a person that is using the program to pay for long-term care, but there is one exception. When a healthy spouse is relying on the income, they may be entitled to a Monthly Maintenance Needs Allowance. This would allow the community spouse to continue to receive income that is earmarked for the institutionalized spouse.
Can you just give your loved ones assets that are countable?
You could definitely do this, but timing is key, because there is a five-year look back period. All gift giving must be completed at least 60 months before you submit your application for Medi-Cal coverage. If you violate this rule, you would not necessarily be permanently disqualified, but you would be subject to a period of ineligibility. The interim would be calculated based on the amount that you gave away as it compares to the cost of nursing home care in Ohio. To explain through the utilization of a simple example, if you gave away enough to pay for two years of nursing home care, your eligibility would be delayed by two years.
Most people will never need long-term care, right?
When you have always been able to handle your own day-to-day needs, it’s hard to imagine a time when you will need help with your activities of daily living. However, when you reach your 80s, life can be very different than it was when you were younger. The United States Department of Health and Human Services has stated that 52 percent of senior citizens will incur long-term care expenses eventually. Over one third will actually reside in nursing homes, so there is a very realistic chance that you will need living assistance.
How much does it cost to stay in a nursing home?
According to Genworth Financial, the median annual charge for a private room in a nursing home in 2020 was $126,838. This was a 15.83 percent increase over the 2019 figure, so costs have been rising. The median annual rate for an in-home health aide was over $66,000. Just over 50 percent of people that require paid care need the assistance for more than a year, and 13 percent accumulate expenses for more than five years. A married couple should be prepared to address two different sets of nursing home bills, so the numbers can get rather large.
What is the Medi-Cal asset limit?
It is just $2000, but there are some assets that do not count. Your home is one of them, and a motor vehicle is exempt. Wedding and engagement rings and heirloom jewelry are not counted along with your household items and personal belongings that are not especially valuable. Unlimited term life insurance is acceptable, and $1500 can be saved for final expenses. The same amount of whole life insurance is exempt as well, and prepaid burial plots are not counted.
Can you give your children their inheritances in advance to qualify?
You can do this, but you cannot gain eligibility immediately after you give large gifts. There is a 30 month look back period in California, so you are ineligible for 30 months after you divest yourself of assets.
How can you qualify for Medi-Cal under these circumstances?
If you want to prepare yourself for future Medi-Cal eligibility, you can establish and fund an irrevocable trust before you actually need long-term care. You would no longer be able to access the principal after you fund the trust, but you could accept distributions of the trust’s earnings. A lot of people rely on income that they receive from their invested savings, and they have no intention of spending the principal that is creating the income. If you are in this category, nothing will change if you convey the assets into a trust. Your home is not a countable asset, but it could be attached by Medi-Cal after your passing if it is part of your estate. As a response, you can convey your home into the trust, so it would not be part of your estate after your passing.
Take Action Today!
We are here to help if you would like to work with a Burbank, California elder care planning lawyer to develop a nursing home asset protection plan. This question-and-answer session has covered the basics, and we can answer additional questions when you come in for a consultation.
Each situation is different, and the ideal way to proceed will depend on the circumstances. When we meet in person, we can gain a full understanding of your situation and make the appropriate recommendations.
If you are ready to get started, you can set up a consultation appointment if you give us a call at 818-937-2335. There is also a contact form on this site you can use if you would prefer to send us a message.