While you may prefer not to think about it, the reality is that you, or a spouse, may need long-term care at some point in the future. If you do end up needing long-term care (LTC) you may find yourself turning to Medicaid (known as Medi-Cal in California) for help covering the cost of that care. Because you may need to qualify for Medi-Cal, and the eligibility guidelines are complex, LTC expenses are something that should be addressed within your comprehensive estate plan to ensure that you don’t end up facing the Medicaid spend-down requirements. The Medi-Cal planning staff at the Northern California Center for Estate Planning & Elder Law explains what you need to understand about Medi-Cal spend-down.
What Will LTC Cost You?
Nationwide, a year of LTC averages over $100,000 for 2020. If you live in California, however, you can expect to pay more for LTC. The average cost of a year in a California LTC facility was just over $127,000. With an average length of stay of three years, your LTC bill could easily run close to $400,000. Although you may be accustomed to counting on your health insurance to cover medical expenses, most health insurance policies specifically exclude LTC expenses. Likewise, although you may be looking forward to Medicare coverage for healthcare when you retire, Medicare will only cover LTC expenses under very narrow circumstances – and then for only a short period of time. For over half of all seniors currently in an LTC facility, the only viable option for help covering LTC expenses is Medi-Cal, California’s Medicaid program.
Qualifying for Medi-Cal
When you apply for Medi-Call as a senior, both your income and the combined value of all your non-exempt assets will be considered. If your assets exceed the limit – which is easy to do given that the limit is as low as $2,000 – your application will initially be denied. At this point, you will enter what is referred to as the “spend-down” period, during which you will be expected to “spend-down” your assets until they reach the level at which you will qualify for benefits. In other words, you are expected to rely on your non-exempt assets (often your retirement nest egg) to cover your LTC expenses until those assets are depleted to the point where you meet the Medi-Cal asset limit requirements. Understandably, this is not the desired result – and it can be avoided with proper Medi-Cal planning.
How Can Medi-Cal Planning Help?
The key to both protecting your assets and ensuring that you are eligible for Medi-Cal if you need it in the future is to incorporate Medicaid planning strategies into your comprehensive estate plan. Because Medi-Cal also currently uses a 30 month “look-back” period, you should have your Medi-Cal planning component in place long before eligibility becomes an issue. The look-back period essentially prohibits any assets transfers for less than fair market value during the 30 month period prior to applying for Medi-Cal. A well thought out Medi-Cal planning component can ensure that your assets are not at risk and that you will qualify for benefits when you need them in the future. This may even include lawful transfers within the 30 month look back period.
Please download our FREE estate planning checklist. If you have additional questions or concerns about the Medi-Cal spend-down requirements, contact the Medi-Cal planning staff at the Northern California Center for Estate Planning & Elder Law by calling (916)-437-3500 or by filling out our online contact form.