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Medicaid is a healthcare program that is predominantly funded by the United States federal government; however, the individual states have the option to supplement funding and expand on the coverage mandated by the federal government. Medicaid is also administered by the individual states, meaning the eligibility guidelines and benefits offered will differ somewhat from one state to another. California’s Medicaid program is known as Medi-Cal. Basic Medicaid typically covers things such as:
- Doctor visits
- Prescriptions
- Hospital stays
- Emergency care
- Preventative care
- Nursing home care
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People often confuse Medicaid and Medicare and/or use the two names interchangeably. Although both offer healthcare benefits, they are two very different programs. Like Medicaid, Medicare is funded by the U.S. government but is also administered by the federal government. Medicare is an entitlement program, meaning that as long as you paid into the program during your working years, you are automatically entitled to benefits when you turn 65. Medicaid, on the other hand, is a “needs based” program, meaning you must demonstrate a financial need for the benefits offered by the program.
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Many people go through their entire working years without ever needing to turn to Medi-Cal for help with their healthcare expenses; however, as a senior, the likelihood that you will need long-term care (LTC) goes up every year and the cost of that care is exorbitant. As of 2019, you can expect to pay almost $10,000 a month, on average, if you are a California resident. Because neither Medicare nor private health insurance will cover LTC expenses, as a general rule, over half of all seniors in nursing homes rely on Medi-Cal to help with their LTC expenses. Although Medi-Cal does cover LTC costs, qualifying for Medi-Cal can be problematic because of the income and asset limits. Medi-Cal planning helps ensure that you will be eligible, should you need to qualify, while also protecting your assets in the process.
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Along with basic requirements, such as citizenship and residency, your eligibility for Medi-Cal is determined, in part, by the income and asset limits imposed by the program. The income limits are tied to the Federal Poverty Level, or FPL. The FPL, in turn, changes each year and is determined by your household size and geographic area. The “countable resources” limit refers to the value of your non-exempt assets. In most states the countable resources threshold is only $2,000 for an individual, meaning if you have non-exempt assets valued over that limit your application will be turned down.
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When determining your eligibility, only non-exempt assets are considered. Examples of exempt assets include:
- Your primary residence
- Household goods and furnishings
- One vehicle
- Term life insurance
- Burial plot
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If your assets do exceed the limit, your application for Medi-Cal will be denied. At that point you will have to “spend-down” your excess assets. In essence, you will have to use your assets to cover your LTC bills until your assets are depleted enough to qualify. Your retirement nest egg you spend a lifetime accumulating could be gone in a matter of months.
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Because people regularly took advantage of this loophole, the Medicaid program implemented a “look-back” period. In most states, the look-back period is 60 months; however, California currently imposes a 30 months look-back period. The look-back rule allows Medicaid to review your finances for the designated period leading up to your application. Any asset transfers made during that time period for less than fair market value may trigger an eligibility waiting period.
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The length of the waiting period is determined by dividing the amount of your excess assets by the average monthly cost of LTC in your area. For example, if you transferred an asset valued at $200,000, your assets exceed the limit by $198,000. If the average monthly cost of LTC in your area is $10,000, you would divide $198,000 by $10,000 which gives you a waiting period of 19 months (19.8 rounded down). During the waiting period, you will be expected to rely on your own assets to cover your LTC expenses.
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There was a time when this was the case; however, the Medicaid Spousal Impoverishment Rules now prevent that from happening. The Spousal Impoverishment rules allow a community spouse to keep some of the marital assets and, in some cases, some of the nursing home spouse’s monthly income to ensure that the community spouse is not left without sufficient income and/or resources.
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Medi-Cal planning uses legal tools and strategies to protect your assets and ensure that you will be eligible for Medi-Cal if the need arises in the future. If you have not yet discussed the benefits of Medi-Cal planning with your estate planning attorney, now is the time to do so.
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-
Medicaid is a healthcare program that is predominantly funded by the United States federal government; however, the individual states have the option to supplement funding and expand on the coverage mandated by the federal government. Medicaid is also administered by the individual states, meaning the eligibility guidelines and benefits offered will differ somewhat from one state to another. California’s Medicaid program is known as Medi-Cal. Basic Medicaid typically covers things such as:
– Doctor visits
– Prescriptions
– Hospital stays
– Emergency care
– Preventative care
– Nursing home care
-
-
People often confuse Medicaid and Medicare and/or use the two names interchangeably. Although both offer healthcare benefits, they are two very different programs. Like Medicaid, Medicare is funded by the U.S. government but is also administered by the federal government. Medicare is an entitlement program, meaning that as long as you paid into the program during your working years, you are automatically entitled to benefits when you turn 65. Medicaid, on the other hand, is a “needs based” program, meaning you must demonstrate a financial need for the benefits offered by the program.
-
-
Many people go through their entire working years without ever needing to turn to Medi-Cal for help with their healthcare expenses; however, as a senior, the likelihood that you will need long-term care (LTC) goes up every year and the cost of that care is exorbitant. As of 2019, you can expect to pay almost $10,000 a month, on average, if you are a California resident. Because neither Medicare nor private health insurance will cover LTC expenses, as a general rule, over half of all seniors in nursing homes rely on Medi-Cal to help with their LTC expenses. Although Medi-Cal does cover LTC costs, qualifying for Medi-Cal can be problematic because of the income and asset limits. Medi-Cal planning helps ensure that you will be eligible, should you need to qualify, while also protecting your assets in the process.
-
-
Along with basic requirements, such as citizenship and residency, your eligibility for Medi-Cal is determined, in part, by the income and asset limits imposed by the program. The income limits are tied to the Federal Poverty Level, or FPL. The FPL, in turn, changes each year and is determined by your household size and geographic area. The “countable resources” limit refers to the value of your non-exempt assets. In most states the countable resources threshold is only $2,000 for an individual, meaning if you have non-exempt assets valued over that limit your application will be turned down.
-
-
When determining your eligibility, only non-exempt assets are considered. Examples of exempt assets include:
– Your primary residence
– Household goods and furnishings
– One vehicle
– Term life insurance
– Burial plot
-
-
If your assets do exceed the limit, your application for Medi-Cal will be denied. At that point you will have to “spend-down” your excess assets. In essence, you will have to use your assets to cover your LTC bills until your assets are depleted enough to qualify. Your retirement nest egg you spend a lifetime accumulating could be gone in a matter of months.
-
-
Because people regularly took advantage of this loophole, the Medicaid program implemented a “look-back” period. In most states, the look-back period is 60 months; however, California currently imposes a 30 months look-back period. The look-back rule allows Medicaid to review your finances for the designated period leading up to your application. Any asset transfers made during that time period for less than fair market value may trigger an eligibility waiting period.
-
-
The length of the waiting period is determined by dividing the amount of your excess assets by the average monthly cost of LTC in your area. For example, if you transferred an asset valued at $200,000, your assets exceed the limit by $198,000. If the average monthly cost of LTC in your area is $10,000, you would divide $198,000 by $10,000 which gives you a waiting period of 19 months (19.8 rounded down). During the waiting period, you will be expected to rely on your own assets to cover your LTC expenses.
-
-
There was a time when this was the case; however, the Medicaid Spousal Impoverishment Rules now prevent that from happening. The Spousal Impoverishment rules allow a community spouse to keep some of the marital assets and, in some cases, some of the nursing home spouse’s monthly income to ensure that the community spouse is not left without sufficient income and/or resources
-
-
Medi-Cal planning uses legal tools and strategies to protect your assets and ensure that you will be eligible for Medi-Cal if the need arises in the future. If you have not yet discussed the benefits of Medi-Cal planning with your estate planning attorney, now is the time to do so.
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The Northern California Center for Estate Planning & Elder Law has created some frequently asked questions and questions related to Medi-Cal to help get you started. If you have specific questions about succession planning for your business please contact our office to schedule a consultation.
If you have specific questions regarding Medi-Cal planning, contact us at Northern California Center for Estate Planning & Elder Law by calling (916)-437-3500 to schedule your appointment today.
