Whether it was your estate planning attorney, or a well-meaning family member or friend, you have likely been told that including a Medi-Cal planning component in your estate plan is a good idea. The reason for this advice is that there is a good chance you may need to qualify for Medi-Cal (California’s version of the national Medicaid program) at some point in the future and if you failed 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 post, the staff at the Northern California Center for Estate Planning & Elder Law sheds 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. 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. 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 60 months; however, in California, it remains 30 months for the time being. 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 an asset to a family member a year prior to applying for Medi-Cal. Consequently, your countable resources exceed the allowable limit by $150,000 and the average monthly cost of LTC in your area is $10,000. Your penalty period would be 15 months ($150,000/$10,000).
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 some last-minute Medi-Cal planning strategies that may still be able to help reduce the length of the penalty you face. Talk to an experienced Medi-Cal attorney about your options.
Contact Qualified and Experienced Elder Law Attorneys
Please download our FREE estate planning checklist. If you have additional questions regarding Medi-Cal, contact us at the Northern California Center for Estate Planning & Elder Law today by calling (916)-437-3500 or by filling out our online contact form.