Many seniors enter their retirement years knowing little about Medi-Cal, California’s Medicaid program, because they were covered by employer-sponsored or privately funded health insurance throughout their working years. That lack of knowledge can be problematic – and costly – if you are one of those seniors and you now need to qualify for Medi-Cal. In fact, you may find yourself subject to a lengthy waiting or “look back” period during which Medi-Cal will not cover any of your health care costs. Let’s seewhat it means if Medi-Cal imposes a waiting period.
Why Might I Need to Qualify for Medi-Cal as a Senior?
When you enter your retirement years you stand a 50 percent chance of needing LTC at some point before the end of your life. If you are married, your spouse faces the same odds as you. The longer you both live, the better the likelihood that one of you will eventually need LTC. If you are fortunate enough to still be here at age 85, your chances of needing LTC will have increased to 75 percent. In California, the average cost of a semi-private room in LTC is about $120,000 per year. In California, as you might imagine, LTC costs average considerably more than the national average. Making matters worse is the fact that most health insurance plans will not cover LTC expenses nor will Medicare. Consequently, over half of all seniors currently in LTC rely on Medi-Cal to help with the high cost of that care.
To qualify for Medi-Cal benefits, you will need to meet Medi-Cal’s eligibility requirements for seniors, meaning you must meet the income and asset tests. The income limit is tied to the Federal Poverty Level and will change depending on which Medi-Cal category you apply under, your geographic location, and household size. The income limit is not where most seniors encounter a problem though. It is the extremely low asset limit that typically poses a problem for seniors. An individual applicant cannot own “countable resources” valued at over $2,000. A married couple faces an asset limit of just $3,000 if both apply for Medi-Cal. Medi-Cal does exempt certain assets, such as your primary residence and a vehicle; however, many seniors have accumulated a retirement nest egg full of non-exempt assets that easily exceed the countable resources limit. If your assets exceed the limit, your application will be denied, and you will have to “spend-down” your assets before applying again.
The Medi-Cal Waiting Period Penalty
Transferring assets out of your name and into the name of an adult child may sound like a great way to resolve your eligibility issues; however, Medi-Cal uses a “look-back” period to prevent such transfers. In all other states, the look-back period is 60 months, but California currently only has a 30-month look-back period. If you apply for Medi-Cal, your finances will be subject to scrutiny for the 30-month period prior to the date of your application. Any asset transfers completed during that time for less than fair market value could trigger waiting period. The length of the waiting period is calculated by dividing the value of your excess assets by the average monthly cost of LTC in your area. By way of illustration, imagine that you own assets that exceed the countable resources limit by $300,000. The average monthly cost of LTC in California for 2020 is $12,167. Dividing $300,000 by $10,298 you get 29.13, meaning you would incur a 29 month (rounding down) waiting period before Medi-Cal would start helping you pay your LTC expenses. In essence, your entire retirement nest egg could be depleted if you need long-term care and failed to plan for that possibility. The good news, however, is that by incorporating Medi-Cal planning into your comprehensive estate plan you can avoid such an unwanted outcome.
Please download our FREE estate planning checklist. If you have additional questions or concerns about Medi-Cal, 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.