As clients of our firm well know, we are strong advocates for planning for not only our inevitable passing but also for the possibility for the need for some form of long term care. It’s a fact of life that the longer we live, the greater is the likely need for long term care. Paying for that care can be very expensive. The five basic methods to pay for such care are: 1.privately with one’s one assets; 2. with long term care insurance; 3. with Medicare, which is a limited benefit; 4. with benefits available through the Veterans Administration; and 5. with Medi-Cal benefits.
Medi-Cal (California’s version of the national Medicaid program) can be very beneficial to many folks but if you fail to plan ahead you may not meet the eligibility guidelines. For example, if you run afoul of Medi-Cal’s “look-back” period because you did not plan ahead, you could be forced to wait out a period of ineligibility. In this article, we will shed some light on the California Medi-Cal look-back period.
Will You Need Long-Term Care?
Your need to qualify for Medi-Cal in the future is directly related to the possibility that you will need long-term care (LTC) at some point during your retirement years. When you reach retirement age, around age 65, you will already stand more than a 50 percent chance of needing some type of LTC services before the end of your life. Every year, those odds increase. Keep in mind as well that if you are married, your spouse is facing the same odds that you are. If either of you ends up in LTC, the cost of that care won’t be cheap. The average annual cost of a nursing home in California is now over $100,000.Given that the average time spent using LTC services is about 2.5 years, it becomes easy to see how your entire retirement nest egg could disappear if you had to pay out of pocket for LTC.
How Will You Pay for LTC?
Before you dismiss the thought of having to pay out of pocket for LTC, consider the fact that Medicare will not cover most LTC expenses nor will most health insurance plans, including Medicare HMOs and Medi-Gap policies. In fact, unless you purchased a separate long-term care insurance policy at an additional cost, you could very well be stuck covering your LTC expenses out of pocket. The good news is that Medi-Cal, California’s Medicaid program, does cover LTC expenses in a skilled nursing facility. You must first qualify for Medi-Cal benefits though. This is where seniors who failed to plan ahead run into problems because of the strict Medi-Cal eligibility guidelines.
Medi-Cal Eligibility and the Look-Back Period
Because Medi-Cal is a needs-based program, an applicant’s income and “countable resources” are taken into account when determining eligibility. If your income or resources exceed the program limits your application will be denied. Long gone are the days when an applicant could simply transfer assets out of his/her name in anticipation of applying for Medicaid. Medi-Cal imposes a “look-back” period that prohibits doing so. The look-back period in most states is now 60 months; however, in California, it remains 30 months for the time being. However, even California’s look back period is scheduled to increase to 60 months at some as yet undetermined future date.
As of now, Medi-Cal will review your finances for that 30 month period preceding your application. 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 excess assets you have and the average monthly cost of LTC in your area. For example, imagine that you gifted a $150,000 asset to a family member a year prior to applying for Medi-Cal. Consequently, your countable resources exceed the allowable limit by that $150,000 and with the average cost of LTC as calculated by Medi-Cal at $8,841, your penalty period as calculated under the current rules would be 16 months ($150,000/$8,841) rounded down to the next whole number.
How Can I Avoid Problems with the Look-Back Period?
The best way to ensure that you do not run into a problem because of the look-back period, or with any of the other Medi-Cal eligibility guidelines, is to include Medi-Cal planning in your comprehensive estate plan well ahead of the need for long-term care. If you suddenly need to qualify for Medi-Cal, yet did not plan ahead, there are still some last-minute Medi-Cal planning strategies that may still be able to help reduce the length of the penalty you face. We are fully aware of these strategies and use them often to assist our clients. However, the pending rule changes concerning Medi-Cal may prevent their use when they come into effect.
If you have concerns about either immediate or long term Medi-Cal benefit eligibility and would like assistance in determining your options, feel free to contact our office.