You may have heard that many seniors turn to Medi-Cal for help covering their health care expenses. You may also know about the asset limit used to determine eligibility for Medi-Cal. If you believe that your assets exceed the limit, you may be wondering why you can’t simply transfer those assets to an adult child. In this article, we will explain why transferring assets can cause Medi-Cal to impose a waiting period.
Will You Need to Qualify for Medi-Cal?
If you have never before needed to rely on Medi-Cal (California’s Medicaid program), you may wonder why you would need to as a senior. The answer lies in the likelihood that you (or a spouse) will need long-term care (LTC). Actually, it is the cost of tat care that may have you turning to Medi-Cal for assistance. When you enter your retirement years you will already stand a 50 percent chance of eventually needing LTC. In California, the average annual cost for nursing home care for 2019 is over $120,000. What really makes tat high cost problematic is the fact that neither Medicare nor most health insurance policies will cover the costs associated with long-term care. It is for tis reason that so many seniors end up turning to Medi-Cal for help, because Medi-Cal does cover long-term care.
Medi-Cal Eligibility Requirements
Medicaid is a healthcare program that is predominantly funded by the U.S. federal government; although, each individual state has the option to supplement the federal funding. Medicaid is also administered by the individual states, meaning that there are slightly different eligibility requirements as well as benefits offered from one state to the next. In California, the Medicaid program is known as “Medi-Cal.” Medi-Cal is intended to provide healthcare coverage for low income individuals and families. As such, the program uses both an income and an asset test when determining eligibility. The assets test limits the value of your non-exempt assets to just $2,000. If your assets exceed that limit, your application will be denied and you will need to “spend-down” your assets before you re-apply. In essence, your retirement nest egg could be at risk.
Transferring Assets to an Adult Child
There was a time when you could simply transfer assets out of your name in anticipation of applying for Medi-Cal. That strategy, however, no longer works because Medi-Cal now imposes a “look-back” period that prohibits doing so. The look-back period in most states is 60 months; however, in California the look-back period is currently just 30 months. Therefore, if you are a California resident applying for Medi-Cal, the program will review your finances for the 30 month period preceding your application and any assets transfers made for less than fair market value during the look-back period could result in your application being denied and a penalty period being imposed. The length of the penalty period will depend on the value of the assets you transferred and the average monthly cost of LTC in your area. For example, let’s say you gifted an asset to your adult child a year prior to applying for Medi-Cal and the asset was worth $200,000. Your countable resources would exceed the allowable limit by $198,000 ($200,000 -$2,000 = $198,000). If the average monthly cost of LTC in your area is $10,000. Your penalty period would be 20 months ($198,000/$10,000=19.8) after rounding up. During that 20 month penalty period you would have to cover the costs associated with your LTC expenses.
Contact Sacramento Medicaid Planning Attorneys
Please download our FREE estate planning checklist. If you have additional questions or concerns about Qualifying for Medi-Cal, or about Medi-Cal planning, contact us at the Northern California Center for Estate Planning & Elder Law by calling (916)-437-3500 or by filling out our online contact form.