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Do you ever wonder how you're going to age with dignity without having to worry about rising long term care costs? If yes, don't worry because help is available with Medi-Cal...
- But Beware: This area of law is very complicated! In this section, we begin to unravel the always complicated and sometimes convoluted Medicaid (Medi-Cal in CA) rules.
- Here you will learn how, with proper planning you can get qualified for Medi-Cal, possibly reduce your share of long term care costs, and even preserve your estate for loved ones.
CALIFORNIA ELDER LAW, SENIOR CARE OPTIONS, & MEDI-CAL PLANNING
One of the biggest fears of aging Californians is ending up in a nursing home, losing their freedom, and winding up broke. It’s hard to believe that as the world’s wealthiest nation, after a lifetime of hard work, such an outcome is even a possibility for people. But unfortunately, it is not even just a possibility, for many, it is inevitable without advanced planning.
Thankfully though, help is out there for people as long as they get educated and engage in some elder law planning. That is to say that there are many available senior care options. Care ranges, on one end of the spectrum, from in-home care, to assisted living, residential care facilities, continuing care retirement communities, etc., to long term skilled care on the other end. Whether Older Americans need a minimal level of care at home or full time skilled-nursing care, cost is always an overwhelming concern for seniors and their families. Medi-Cal is available to help alleviate these costs.
So how much does it all cost? Well, the least expensive (and intrusive) form of care occurs when a person simply needs a few hours of help at home. This level of care is generally not too expensive and in fact, there are several programs available through in-home support services (IHSS) that will cover these costs for many Californians. But when a greater level of care is needed, costs begin to rapidly rise. That's because the cost of round the clock care at home would easily exceed $10,000/month and when a person moves out of their home and in to some kind of care facility, those costs are also expensive. It's important to note that senior care facilities come in various forms. Residential care facilities, are non-medical facilities which house seniors who don't need 24 hour nursing care. Examples of such are assisted living facilities, board and care homes, rest homes and that component of Continuing Care Retirement Communities (CCRCs) that provide personal care and supervision. Unlike receiving a few hours of help at home at an average cost of $21/hour in Los Angeles, the cost of these facilities tend to range between $3,000 and $6,000 per month. On the other end of the care spectrum, which is skilled-nursing care, the cost is over $8,000 per month in California and probably closer to $10,000 per month in Los Angeles.
But don't fret because Medi-Cal will often pay these costs!
Unfortunately however, there is a widespread myth floating around, that you must go broke in order to receive Medi-Cal benefits. Although this might be what the different government agencies want people to think (because they would rather not bear these costs), it is simply not true. So please do not give into the myth that Medi-Cal is only for the disabled and poor, or that you must go broke in order to qualify for aide.
Instead, please remember the following statement about Long Term Care and Medi-Cal planning:
Do not believe everything you hear about Medi-Cal or simply listen to social workers without question, or file a Medi-Cal application on your own, until you have talked to an Elder Law Attorney.
Ignoring the advice directly above could cost you everything...
WHAT IS MEDI-CAL?
Medi-Cal is a combined Federal and California State program designed to help people pay the costs of long term nursing care for public assistance recipients and other low income persons. Medi-Cal is a need-based program and those who seek its assistance must pass certain eligibility requirements. In essence, to qualify for Medi-Cal you, the recipient, must demonstrate that you have limited resources available.
There are three very important areas to consider in developing a comprehensive Medi-Cal plan:
- Eligibility Planning – First things first, you have to become qualified for Medi-Cal.
- Income Planning – Once qualified, you should plan on reducing or eliminating your “Share of Cost” co-payment so that you and your loved ones can age with dignity while taking cost out of the equation in receiving proper care. In other words Medi-Cal pays for a part of your care costs, while you pay the other part. With proper planning, you may be able to reduce your portion of these costs.
- Medi-Cal Estate Recovery Planning – After you’ve qualified for Medi-Cal and reduced your share of long term care costs, you ought to implement a plan to provide security for your loved one(s) by reducing or even completely eliminating California’s legal recourse to file a claim against your estate or against your loved ones after you’ve passed away.
MEDICARE VS. MEDICAID
It is important for people not to get Medicaid (Medi-Cal in California) and Medicare confused. Medicare is a federal insurance program paid out of Social Security deductions. All persons over 65 and disabled workers under 65 who have made Social Security contributions are entitled to the benefits.
Medicare is divided into two main parts: Part A (Hospital Insurance) and Part B (Medical Insurance). A person eligible for Social Security or Railroad Retirement benefits as a worker, dependent or survivor, is eligible for Part A, Hospital Insurance, when he or she turns age 65. Participants in the Medicare program are liable for co-payments and deductibles as well as for monthly payments for Part B coverage. Medicare is not based on financial need. Anyone who meets the age and/or coverage requirements is eligible. Please note that medicare does not pay for all medical expenses, and usually must be supplemented with private insurance (“medi-gap”) or consumers can enroll in an HMO plan that contracts with Medicare.
So where does Medicaid come in?
Well, first it's important to note that Medicare will NOT pay for long term nursing home costs. On the other hand, after 3 days of prior hospitalization, Medicare WILL pay up to 100% for the first 20 days of skilled nursing care. For the next 21-100 days, Medicare might cover some of the cost, while the patient pays a co-payment. There is no Medicare coverage beyond 100 days at all, but it is rare for Medicare to even pay the full 100 days. After Medicare stops paying, this is the time that Medicaid (or Medi-Cal in California) is needed.
Please note that the Medi-Cal program is a very different program than Medicare...
Medi-Cal is a needs based program and is funded jointly with state and federal Medicaid funds. Thus, a person must be qualified to receive Medi-Cal benefits.
As shown in Example 1 below, you do not want to have the same fate as Gloria. However, you probably are looking at the same situation if you are not lucky enough to have long term care insurance that will pay for long term care costs. I say “lucky” because most people simply couldn't qualify for long term care insurance or if they did qualify, they couldn't afford the premium. In either event, that means most people turn to Medicaid in America, which as stated before is known as Medi-Cal in California.
Gloria falls, breaks her hip, and then enters a “skilled nursing facility.” Medicare Part A might cover up to the first 100 days of treatment. To obtain the coverage is not as easy as it seems however. After 3 days of prior hospitalization, the first 20 days are 100% covered for Gloria. For the next 80 days, Gloria is required to pay a co-payment of $157.50 per day (as of 1/1/2015) and even this amount is only available in certain circumstances. No matter what however, on day 101 Medicare coverage stops completely and now Gloria is required to pay 100% of her care costs. In California these costs tend to range between $8,000 to $10,000 dollars per month. That comes to an average cost of somewhere between $96,000 and $120,000 per year. At this rate, it will not take long for Gloria (or most people) to go broke.
Query: How do people become qualified for Medi-Cal and stave off going broke?
Eligibility for Medi-Cal
SSI (Supplementary Security Income) recipients are automatically eligible for Medi-Cal. These persons are considered to be “categorically eligible.” Others, whose income would make them ineligible for public benefits, may also qualify as “medically needy” if their income and resources are within the “Medi-Cal limits”.
The current resource limit for single individuals is $2,000, while a married couple can have $121,220 (Note-This is the resource limit, plus the Community Spouse Resource Allowance or “CSRA”, as of 1/1/15). This resource limit can sound ominous but keep reading because it's not as bad as it sounds. On the other hand, qualified income limit levels are more complicated and the basics of income limits are explained in the next section.
Please note that there are two types of Medi-Cal coverage:
- At-home, and
- Skilled-nursing care in a facility.
At-home Medi-Cal is provided for a person living at home and it pays for health care services which meet the definition of “medically necessary.” Services include: some prescriptions, physician visits, adult day health service, some dental care, ambulance services, some home health care, X-ray and laboratory costs, orthopedic devices, eyeglasses, hearing aids, some medical equipment, etc. There is not much to establishing At-home Medi-Cal, i.e., getting qualified. But, people must be careful not to run afoul of the Skilled-nursing care in a facility rules when they get qualified with At-home coverage. Please note that qualifying for these two coverages is completely different and the rules for Skilled-nursing care in a facility are far more difficult to understand. This is where Medi-Cal really starts to get complicated.
Thus, the remaining discussion focuses on the coverage for Skilled Nursing Facility (“SNF” or “nursing home”) care, for people not on SSI.
To begin with, to be eligible for Skilled-nursing Medi-Cal, an applicant must be:
- At least 65 years of age, blind, or disabled, and
- Meet the resource limits ($2,000 for an individual, or $2,000, plus the “CSRA” for a married couple. Read above and below for more on the “CSRA”).
Please note that when determining your eligibility, Medi-Cal will look at your assets and determine if they are “exempt” or “non-exempt”. Exempt assets are not counted towards your resource limit. Conversely, non-exempt assets will make you ineligible for Medi-Cal. The following is a list of some exempt assets:
- The Home - Many times, this is totally excluded if it's the principal residence;
- Other real property - where the net value is $6,000 or less and if the beneficiary is receiving yearly income of at least 6% of the market value;
- Business Property - excluded if used in whole or in part as a business or means of self support (must also meet business property guidelines);
- One Vehicle - if used for the benefit of the applicant, or beneficiary, or if needed for medical reasons;
- Jewelry - For a single person, wedding/engagement rings and heirlooms are totally exempt. For at-home spouses (if the other spouse is in a nursing home) there's no limit on exempt jewelry, for determining the nursing home spouse’s eligibility;
- Household Goods and Personal Effects - Totally exempt;
- Term Life Insurance - Totally exempt;
- Whole Life Insurance - Total face value of $1,500 or less is exempt;
- Burial plots - Totally exempt;
- IRAs/Pension Funds - Excluded some of the time;
- Cash Reserve - Applicant or Beneficiary may retain up to $2,000 in liquid assets in savings, checking, or excess cash surrender value of life insurance policies.
- Community Spouse Resource Allowance (CSRA) – the at-home spouse may keep up to $119,220 as of 1/1/15 in liquid assets, not including the home, IRAs and other exempt assets.
As you might surmise, much of Medi-Cal planning is trying to convert non-exempt assets into exempt assets. Thus, if you don't fit into or qualify within the narrow parameters in the aforementioned list, many times you can “rearrange” your assets to make them fit. In certain cases, where non-exempt assets are difficult to convert or rearrange, the limits on Medi-Cal eligibility might be increased through a court order.
PLEASE NOTE THAT THERE IS A LOT OF CONFUSION REGARDING THE POLICIES BEHIND MEDI-CAL. MEDI-CAL PLANNING IS NOT A TOOL TO BE USED BY MILLIONAIRES TO AVOID LONG TERM CARE COSTS. ON THE OTHER HAND, IT IS AN EXTREMELY NECESSARY TOOL TO HELP MIDDLE CLASS AGING AMERICANS RECEIVE THE MEDICAL CARE THEY NEED AS WELL AS TO ENSURE THAT THE SPOUSE OF A SKILLED-NURSING CARE RECIPIENT DOESN'T BECOME IMPOVERISHED.
But what if you have “too much” within the narrow limits of the Medi-Cal rules but not enough assets to actually live on and get the care you need without going broke?
Can You Spend Down Resources?
A skilled-nursing facility (“SNF”) recipient may spend down his or her resources to the $2,000 limit in order to become eligible for Medi-Cal. Resources must be reduced to the $2,000 level by the end of the month in which he or she wants to be eligible. If, for example, he or she applies for Medi-Cal on January 3, 2015, his or her resources must be reduced to $2,000 by January 31, 2015.
Considering the average cost of skilled-nursing care is $8,000+ per month, assets can be spent down rather quickly simply by paying care costs. But a SNF recipient may also spend down his or her assets on any item for his or her own benefit.
Examples: to remodel or repair the home, buy new furniture or pay off a mortgage or car loan, pay off other bills and debts, buy new clothing or medica1 equipment. Someone seeking SNF Medi-Cal can also convert non-exempt assets into exempt assets, e.g., using non-exempt cash reserves to buy a burial plot and/or create a prepaid burial fund. He or she must provide evidence regarding these expenditures to Medi-Cal, so it's important to keep receipts and check stubs.
While spending down is usually easy to do and document, it may be difficult to find a willing nursing home to take a person, if he or she has no resources and must find a place in a Medi-Cal certified facility. The longer a person can pay as a private pay resident, the more options he or she will have when looking for a nursing home. That's because Medi-Cal pays less per day than the amount a facility will charge a private pay resident.
Although "duration of stay" requirements (i.e., making a resident pay privately for a set period of time) are illegal, nursing homes are legally permitted to review potential residents' finances prior to admission. In some cases, even though Medi-Cal discrimination is illegal, facilities are unwilling to accept residents who are eligible for Medi-Cal upon admission. However, since Medi-Cal rates have increased substantially over the past few years, this may not be as much of a problem as it was in the past.
Keep in mind that, once you have been admitted to a Medi-Cal certified facility for 30 days, you cannot be transferred or evicted simply because of a change from private pay to Medi-Cal payment status even when an (illegal) duration of stay contract has been signed. This applies while the Medi-Cal application is pending, as well.
Can You Give Away Assets and Still Be Eligible for Medi-Cal?
The Medi-Cal application includes a question that asks if you gave away or gifted any non-exempt (countable) assets in the previous 30 months (Please note that under the Deficit Reduction Act of 2005, this will soon be increased to 60 months). This 30-month "look-back” period is used to determine if an institutionalized Medi-Cal applicant made a transfer or gift of non-exempt assets to a third party, excluding their spouse. If such a transfer is triggered, a period of ineligibility may be imposed. An “improper” transfer is basically giving away property in order to qualify for Medi-Cal, without receiving something of equal value in return. This does not mean that every gift a person made in the previous 30 months will result in a penalty. Plus, a person can still give away (gift) or transfer property and be eligible for Medi-Cal depending on when he or she gave away the asset, how much he or she gave away, and whether or not he or she entered a skilled nursing home.
The transfer rules will be applied to transfers made during the 30 months (or, as stated above, under the Deficit Reduction Act of 2005, 60 months) prior to the date when a nursing home resident applies for Medi-Cal (usually at the time he or she is in a SNF). In addition, current Medi-Cal beneficiaries who are nursing home (SNF) residents can also be penalized for transfers made for less than fair market value. Fortunately, there are no restrictions on gifting until or unless the applicant enters a nursing home. This gives applicants an opportunity to plan ahead.
How is the Transfer Rule Triggered?
The transfer rule is only triggered when you enter a skilled nursing home and apply for Medi-Cal. The Medi-Cal application (called the Statement of Facts) will ask if you transferred any property or made any gifts within the prior 30 months (please remember that this will soon be 60 months under the DRA). The “Eligibility Worker” will ask to review all of your bank statements, etc., for that period. The transfer rules apply only to non-exempt (countable) assets.
An improper transfer can result in a period of ineligibility, which is the lesser of 30 months (60 months under the DRA) or the value of the transferred asset divided by the monthly average nursing home private pay rate at the time of application. For 2015, this amount is $7,628.
It is vital for a person to know that it is important to be extremely careful when trying to become eligible, so as not to lose any benefits. If a mistake is made while attempting to rearrange or transfer assets in order to gain eligibility then the person in need of long term care could face a penalty of up to 30 months (60 months under the DRA) of ineligibility. Also if a person is not careful, a transfer of assets could potentially trigger adverse tax consequences. Since both the Medi-Cal rules as well as the IRS tax provisions are extraordinarily complicated, it is extremely easy to make a mistake without the proper guidance. For these reasons the prudent course of action in establishing Medi-Cal eligibility is to discuss your specific case with an experienced California elder law attorney, before you do anything.
Although an applicant’s income is not an eligibility factor, Medi-Cal does review an applicant’s income to determine the applicant’s monthly co-payment (“share of cost”). The formula used to determine an applicant’s “share of cost” has many variables and often allows the applicant’s spouse to retain a large portion of the applicant’s income.
Please note that with proper planning it may be possible to reduce one's "share of cost."
Share of Cost
Once a person qualifies for Medi-Cal, and must enter a long term skilled nursing facility, most individuals will have some sort of income and even though income is not important when determining eligibility it is still important because most of this income will be used to pay a person's “share of cost” of the long term care expenses. “Reduction of share of cost planning” is the process whereby a person who is receiving skilled-nursing care tries to reduce their share of these costs, so as to preserve their estate so that he or she has the ability to make prudent medical decisions, preserve assets for a “well” spouse's living standards, and/or otherwise preserve the overall estate for other necessary future expenses.
In all cases, the State sets a "maintenance need standard". The Long Term Skilled Nursing Care maintenance need level (i.e., personal needs allowance when someone is in a nursing home) is $35 per month. (Incidentally, for a person who resides at home and is on At-Home Medi-Cal, the maintenance need standard since 1990 has been $600 monthly.)
Individuals whose net monthly income is higher than the state payment rate may qualify for the program if they pay or agree to pay a portion of their income of monthly medical costs. This is called the share of cost. Individuals eligible with a share of cost must pay or take responsibility for a portion of their medical bills each month before they receive coverage. Medi-Cal then pays the remainder, provided the Medi-Cal program covers the services. This works much like an insurance deductible. The amount of the share of cost is equal to the difference between the "maintenance need standard" and the individual's net non-exempt monthly income.
Example - “At-home” Based Medi-Cal:
Seth is 65 years old, lives alone at home, and receives $1,200/month in pension as well as Social Security benefits. His resources meet the standard set by the State, i.e., $2,000 or less in liquid assets, and his income must be below the “maintenance need standard”. But Seth's income is too high.
|$1,200||= gross unearned income|
|- 20||= any income deduction|
|$1,180||= net non-exempt income|
|- 600||= Maintenance Need Level for a single-person|
|$580||= Seth's share of cost|
Example - Medi-Cal In a Nursing Home:
Seth enters a skilled nursing facility. His income is still $1,200/month.
|$1,200||=||gross unearned income|
|- 35||=||maintenance need for long term care person|
|$ 1,165||=||Seth's share of cost to be paid each month to the nursing home for medical costs not covered by Medi-Cal.|
* The remaining $35 is Seth's Personal Needs Allowance.
Other Deductions from the Share of Cost
In addition to the "any income deduction" and the “personal needs allowance”, any monthly medical premiums can also be deducted before the share of cost is determined such as a persons Medicare Part B premium. Other deductions can also be made, depending on the circumstances.
For example, under a legal settlement, Hunt v. Kizer, recipients may use old, unpaid medical bills for which the beneficiary is still legally responsible to reduce the monthly Medi-Cal share of cost. Some original documentation showing the billing statement is an outstanding balance should be provided to the County eligibility worker. The Share of Cost will be adjusted to reflect the cost of the outstanding balance, which could, for example, mean no share of cost until the old, unpaid bills are paid off. This is not automatic and should be discussed with the eligibility worker upon application for Medi-Cal.
In addition, under the Johnson v. Rank settlement, recipients may use their share of cost to pay for medically necessary supplies, equipment or services not covered under the Medi-Cal program. A current physician's prescription is necessary and must be put in the recipient's record at the facility. This prescription must be a part of the physician's plan of care. After a copy of the prescription and the bill is presented to the facility, the facility will deduct the cost from that month's share of cost, and then bill the resident for the remaining share of cost.
It has been alluded to above, but to be clear, you should know that there are entirely different rules for married couples vs. single individuals. Thankfully, the rules for married couples are actually more lenient both in terms of “exempt assets” as well as income allowance. The reasoning behind this is that the government does not want an at-home or “well spouse” to go broke just because their husband or wife is in a long term care facility. Based on this, the government created the Minimum Monthly Maintenance Needs Allowance (MMMNA) which allows a transfer every month of (part of) the ill spouse’s income to the well spouse. As of 1/1/2015 the MMMNA amount is $2,981.00. In general, anything above that month's MMMNA must be used to pay for the ill spouse’s share of long term care.
But, if the well spouse does not find the MMMNA amount to be sufficient to cover his or her own expenses, he/she may file a “3100 Court Petition” with the Superior Court to increase this amount. Unfortunately the DRA has limited this practice to narrowly defined “hardship” situations. But the point here is that there are options for increasing the MMMNA and it is also possible to retroactively apply for a refund of share of cost benefits that may have already been paid, for up to 90 days prior to the time when Medi-Cal coverage was obtained.
Example - Skilled Nursing Care Case (Married Couple):
|Social Security||$ 1,400||Social Security||$ 900|
|IRA||$ 550||Investment Income||$ 733|
|Total Income||$ 1,950||Total Income||$ 1,633|
|Personal Needs||$ 35||MMMNA||$ 2,981|
|Insurance||$ 100||Shortfall||$ 1,348|
|Maximum Share-of-cost||$ 1,815|
|Allocation||-$ 1,348||(Income-MMMNA)||$ 1,348|
|Final SOC||$ 467||Final Income||$ 2,981|
Medi-Cal Estate Recovery Planning
Medi-Cal keeps track of the total amount of benefits it pays out over the lifetime of a Medi-Cal beneficiary and attempts to recover that amount from the beneficiary’s remaining estate. But Medi-Cal may only recover from the assets that the Medi-Cal beneficiary has an ownership interest in at the time of their passing and only after the Medi-Cal beneficiary’s spouse also passes away. Thus, the Medi-Cal beneficiary’s spouse will have unrestricted use of the assets for the remainder of his or her lifetime.
At the death of a single-person or the last of a married couple recipient of Medi-Cal benefits however, the State will seek to recover amounts paid out. Medi-Cal estate recovery planning involves preserving those assets for other loved ones who need them.
If you've read this far, you're probably a little overwhelmed about the complexity involved with California Elder Law and Medi-Cal Planning. But please always remember that we at Kaiden Elder Law Group, PC can help. That is to say that there's a lot which can be done both in anticipation of the need for long-term care as well as when a love one is suddenly confronted with such issues.
To best preserve assets and qualify for Medi-Cal, advance planning with the use of asset protection trusts is often recommended. With asset protection trusts, a person can ensure that they age with dignity, not go broke, and/or have to rely on stretched family members for assistance, simply to get the care needed as they age. Some of the advantages of asset protection trusts used in conjunction with Medi-Cal Planning are:
- Protecting a person's property so that it can be used for their basic support
- Preserving family assets for a healthy spouse who remains at home
- Money can be spent on enhanced care or basic items of comfort
- Assets are protected from Medi-Cal liens and estate recovery
In order to achieve a comprehensive plan for a person and his or her loved ones, our office carefully reviews your financial income as well as assets in order to to develop a proper Medi-Cal plan that will not only qualify an individual for Medi-Cal benefits (thereby preserving assets), but provide asset protection from potential Medi-Cal estate recovery (including protection of one's home without losing out on important tax benefits).
In addition to advanced planning, we help families engage in emergency planning to immediately qualify a person for Medi-Cal benefits. Most of the time, this is not a simple task and requires adeptly rearranging an estate, filling out and filing numerous Medi-Cal forms, and interfacing with case workers, until the desired result is achieved. When special circumstances exist, such as overcoming a denial of benefits or increasing statutory benefits, court proceedings and administrative “Fair Hearings” are sometimes required. Court petitions and administrative Fair Hearings are valuable tools we use to significantly increase or preserve benefits available for our clients.
Thus, if how to pay for long term care is an issue for you or your loved ones, please call us to set up a complimentary consultation to discuss how we can help you.
A Word of Caution: Medi-Cal regulations are constantly updated and changing. Medi-Cal planning should only be done under the supervision of an experienced elder law attorney familiar with Medi-Cal. Certain transfers of property can have significant tax ramifications that should be discussed with your attorney as well. Furthermore, improper transfers can disqualify a Medi-Cal beneficiary from benefits and result in a significant period of ineligibility for Medi-Cal benefits.