If your estate plan does not include a Medi-Cal planning component, it probably should. Like many people, you may have never before needed to turn to Medicaid (Medi-Cal in California) for help with your healthcare expenses – but that could change when you are older. Because you may eventually need to rely on Medicaid, let’s see what you need to know about Medi-Cal
- You May Need Medi-Cal Even If You Are Covered under Medicare. At age 65, you will likely be automatically enrolled in Medicare. While Medicare will cover many of your basic healthcare expenses, it will not cover long-term care (LTC) expenses – and those expenses will be substantial. As of 2020, an average year of LTC in California cost over $100,000. Moreover, if you have private health insurance, your policy likely excludes LTC expenses. Medi-Cal does cover LTC expenses which is why many seniors rely on both Medicare and Medicaid.
- Qualifying for Medi-Cal May Not Be Easy. Because Medi-Cal LTC is a “needs-based” program that is intended to help low-income individuals and families with healthcare expenses, the program uses both income and assets limits when determining eligibility. The asset limit could be as low as $2,000 for an individual applicant. If the value of your countable resources exceeds the program limit, your application will be denied and you will be forced to “spend down” those assets, effectively requiring you to rely on your retirement nest egg to pay for healthcare expenses before Medi-Cal will help.
- You Can Own a Home and Qualify for Medi-Cal. Most states, including California, exempt a primary residence. Your home could still be at risk after you are gone if you rely on Medi-Cal to cover LTC expenses. The Medi-Cal Estate Recovery Program (MERP) can file a claim against your estate after your death to seek reimbursement for expenses paid on your behalf while you were alive. This is yet another reason why Medicaid planning is important.
- Your Spouse Is Protected If You Need Medi-Cal. The Medi-Cal Spousal Impoverishment Rules protect your spouse if you need to rely on Medi-Cal. A “community spouse” is entitled to retain a significant portion of a couple’s countable resources as well as sufficient income of his/her own or even some of the institutionalized spouse’s income, if necessary, to provide a basic standard of living. This means that you could receive help from Medi-Cal without worrying that your spouse will be stuck without enough income and/or resources to live comfortably.
- The Medi-Cal “Look-Back” Rule Prevents Last Minute Transfers. At one time it was possible to transfer assets to adult children or other adults you trusted in anticipation of applying for Medi-Cal; however, Medi-Cal now uses a 30-month “look-back” rule that prevents those asset transfers. Note: Most other states use a 60-month look-back period. The rule allows Medi-Cal to review your finances for the 30-month period prior to applying. Any assets transfers made for less than fair market value could result in the imposition of a waiting period before Medi-Cal will start helping. The length of the waiting period will depend on the value of the assets in question and the cost of LTC in your geographic area.
Please download our FREE estate planning checklist. If you have additional questions or concerns about Medi-Cal, or you wish to update your estate plan to include a Medi-Cal planning component, 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.