A common concern for many clients who are Medi-Cal recipients is that if they use Medi-Cal to pay for long-term care, they will lose everything they have. There is a misconception that Medi-Cal will take their homes or leave their healthy spouses penniless. Another concern is that once a Medi-Cal recipient passes away, Medi-Cal will come after their estate. We are here to explain how estate recovery works.
What does “estate recovery” mean for Medi-Cal recipients?
It is a requirement that, when a Medi-Cal recipient age 55 or older passes away and has received certain types of Medi-Cal benefits, the state of residence must seek recovery of payments from that person’s estate. This is known as “estate recovery.” However, because of the eligibility requirement that Medi-Cal recipients have no more than $2,000 in countable assets, recovery payments from an estate is often a complicated endeavor.
Unfortunately, health insurance often does not cover the expense of long-term care
Unfortunately, far too many people misjudge the real cost of long-term care, which is typically rather expensive. The average annual rate of long-term care in California is more than $100,000. Add to that the likelihood that many California citizens age 65 and older need long-term care for approximately five years. That can be overwhelming enough. Yet, there is a common misconception that Medicare and private health insurance will be sufficient to cover the costs of long-term care. In reality, they cover very little of these costs.
Understanding how the California Medi-Cal program operates?
One of the primary differences between Medicare and Medicaid (or Medi-Cal as it is known in California) is that Medi-Cal is an income-based or needs-based healthcare assistance program. Federal, state and local tax funds are used to aid eligible individuals with paying their medical expenses. Generally, many Medi-Cal recipients are only required to pay a small co-payment for covered medical expenses, if anything at all.
Medi-Cal will occasionally pay for some in-home services, but only if a physician certifies that home care services are actually needed for specified medical reasons. The purpose of Medi-Cal benefits is to assist low-income California residents in paying for medical services. Because Medi-Cal is a needs-based program, recipients can have no more than $2,000 in assets. The goal of Medi-Cal planning is to keep you from exhausting all of your resources in order to be eligible for benefits.
Medi-Cal planning helps to avoid fraudulent transfers and penalties
One issue that requires consideration is the potential for fraudulent transfers. If an applicant for Medi-Cal gives away property or assets right before submitting an application, those transfers of property can be seen as fraudulent and result in your benefits being delayed or denied. However, with careful Medi-Cal planning, you can avoid the penalties and problems associated with fraudulent transfers.
Medi-Cal planning attorneys can help with your nursing home planning
One of the major concerns most people have in nursing home planning is how to protect their assets from being completely exhausted by nursing home expenses. Although a trust can be a great strategy, not every type of trust provides the asset protection you need. If you engage in proper nursing home planning, including the use of the right type of trust, you may be able to avoid exhausting your assets just to pay for nursing home costs. We can help with these efforts.
An exception to estate recovery for those with surviving dependents
As with most things, there are a few exceptions to the estate recovery requirement. First, some estates are exempt from the estate recovery process because the deceased Medi-Cal recipient has certain dependents. In fact, states are prohibited from attempting to recover from an estate where a spouse, a child under the age of 21 or a disabled child have survived the recipient.
An exception to estate recovery for undue hardship
Another exception that may apply is based on undue hardship. If it can be shown that estate recovery efforts would result in an undue hardship on the heirs, then estate recovery would be improper. For example, if a surviving dependent makes a living from an estate asset, such as a family business or farm, then those assets cannot be recovered.
Certain assets may be exempt from estate recovery
There are various types of estate planning tools used to preserve a person’s estate. Depending on which types of estate planning instruments are used, a good portion of the estate may not be subject to recovery. For instance, savings bonds are often exempt from estate recovery because they are governed by U.S. Treasury regulations. Other assets may be exempt due to other factors.
Each estate is different so seek the advice of Sacramento Medi-Cal attorney
It is possible to do effective planning so that an entire estate is exempt from estate recovery. With the assistance of an experienced and qualified Medi-Cal attorney, you will be better able to plan for the future. With appropriate planning, you may be able to minimize or eliminate the worst of the consequences during your lifetime and after death.
If you have questions regarding estate recovery, or any other Medi-Cal planning issues, contact the Northern California Center for Estate Planning and Elder Law for a consultation, either online or by calling us at (916) 437-3500.