Medi-Cal Planning





    








Medicaid is the Federal Welfare Program that sets the permissible limits in which each state may legislate their own Long-Term Care (LTC) limits. In the state of California, we have the California version of Medicaid, which is known as Medi-Cal.

Medi-Cal—NOT related in any way to Medicare—is a needs-based program, funded jointly by the federal government and the state of California, and based upon the financial need of the applicant, which means that an individual's income and the non-exempt assets become important.
Long-term care is a possibility that everyone should plan for carefully, so that one's assets and property  do not become hostage to their long-term care needs. It is important to know the difference between Medi-Cal and Medicare as Medicare never pays for only custodial care or long-term care. When an elder needs long-term care, they will be looking to Medi-Cal.

Click here for a succinct description of Medicare, and to learn more about what it covers medically and what portion of costs it will pay.

Click here to learn more about "The Facts Concerning Medi-Cal."

Click here to read an article written by Pat that appeared in the Los Angeles Times on the "Opportunities Available to Help Seniors Plan for Nursing Home Care."









Understanding Medicare

Contrary to many people’s understanding, Medicare is NOT a social welfare program but an insurance program, a federally insured hospital and medical program that everyone who has reached the age of 65 is entitled to receive if he or she has worked and paid into Social Security for the required number of quarters. It is NOT based upon the financial need of the applicant or the applicant’s financial status—even the wealthy are entitled to Medicare. How Medicare is paid for is through payroll deductions by people who are working or who have worked. It requires certain co-payments and deductibles and is divided into two areas of coverage.
Part A:

The hospital insurance program portion of Medicare, covers hospital care, skilled nursing facilities, home health care, and hospice care		 Part B:

Covers doctor’s charges, durable medical equipment, medical supplies, outpatient services, and other secondary medical care


In order to qualify for Medicare treatment:
The treatment must be prescribed by a doctor
The provider must be a Medicare certified provider
The care and supplies must be medically necessary for the treatment
 
When does Medicare cover nursing care?
If and only if there is a prior three-day hospital stay, then Medicare will pay for nursing care in a Skilled Nursing Facility if:
The patient required rehabilitation THERAPY five days per week or skilled nursing care seven days per week, AND
The care could only be rendered in a Skilled Nursing Facility, AND
The medical condition being treated is the same condition that was being treated in the hospital

If the patient satisfies all of these conditions, Medicare will pay a portion of the cost up to the first 100 days of the Skilled Nursing Facility during each “spell of illness.” There is no deductible for this care, and no co-payment for 20 days. The co-payment for days 21 – 100 is approximately $100 per day.


The Facts Concerning Medi-Cal
Every Medi-Cal applicant must apply for benefits and must meet the asset and income limitations set by the State of California. The rules for eligibility vary according to the stage of the application process. For example, when an application has been submitted, a couple’s total assets are examined—both the community property assets and their separate property assets. Once an individual has qualified for Medi-Cal, ONLY the assets of the spouse in the nursing home are examined. Therefore, if the healthy spouse inherits money after the ill spouse has qualified for Medi-Cal, he or she can keep all of it. If he or she inherits money prior to qualifying for Medi-Cal, it will be included in meeting the Medi-Cal asset limits as if it belonged to the ill spouse (Exempt Assets are listed at right).

In order to qualify for Medi-Cal, each applicant must be at least 65 years of age or disabled, meet asset and income requirements, and be a citizen or permanent California resident. An applicant can also meet these requirements if he or she is blind or disabled, and payment of medical bills would leave him or her with less than the available “need standard.”

This means that if a single person ever needs LTC, as a result of dementia, Alzheimer’s, stroke, crippling arthritis, etc., the State of California will pay for meals, nursing home bills, and medical care. But a single person can only retain $2,000 in assets, plus the exempt assets listed above—and then retain these assets ONLY for a limited period of time. Medi-Cal will NOT let you keep your home and other assets after you die free of liens.
  EXEMPT ASSETS - Under the Medi-Cal law, these assets are ONLY exempt at the time you enter the nursing home, and are NOT exempt for purposes of inheritance by your children. Under Medi-Cal law, liens can be imposed on both real property and personal property:
The home, houseboat, mobile home, multi-unit dwelling if he or she lives in one of the units at the time he or she enters the nursing home. The exemption is only for a limited period of time and property is not exempt in terms of inheritance.
Other real property if and only if it is used as a business or a means of self-support. Again it is NOT exempt forever.
Household goods and personal effects
Wedding and engagement rings of any value. Other jewelry up to a $100 limit
One automobile if used for the benefit of the applicant
Whole life insurance with a face value of $1,500
Term life insurance of any face value
IRAs/Retirement Plans in the name of the well spouse
Burial Plots
Prepaid Burial Plan - any amount and $1,500 in the bank where that amount is designated for burial funds. This $1,500 must be kept separate from other monies.
Cash surrender value of pension funds and annuities in the name of the ill spouse regardless of value if and only if payments of principal and interest are being made. If the annuity was recently purchased AND the payments were NOT amortized over the life expectancy of the annuitant, then the annuity will NOT be exempt
$2000 in assets, called a “property reserve” for a single person
Asset and Income Requirements for Couples

The exempt assets are the same as previously stated for a single person, however, the healthy spouse who is living at home is allowed to keep the following:
$84,120 (for the year 2000) in assets instead of the $2,000 that a single person is allowed to keep. This is called the CSRA.
The greater of $2,103 (for the year 2000) per month in income or all of the income in the “well spouse’s name.” This is called the Minimum Monthly Maintenance Need Allowance (MMMNA) and also referred to as the “name on the check” rule. It means that if the healthy spouse is working and receiving $5,000 in income, he or she can keep the $5,000, still qualify his or her spouse for Medi-Cal, and all of his or her nursing home and medical bills will be paid for by the State of California.
 
Example:
A wife is working earning $3,000 per month, her husband is ill, and he is receiving $500 per month in Social Security. The wife can keep all of her $3,000, but the husband’s share of costs will be $500 per month, which the nursing home will receive.

Transferring Assets Prior to Medi-Cal Qualification

Under the old law, any transfer of resources made by a Medi-Cal applicant or his spouse during the 30-month period preceding application for Medi-Cal, to the extent it was a gift, resulted in a period of ineligibility from Medi-Cal equaling 30 months. This was called the “lookback period.” Therefore, you could literally give away 1 million dollars under the old law and apply for Medi-Cal in the 31st month after you gave it away. This is no longer the case.

Under the new law, the “lookback period” is potentially unlimited. It is equal to the value of the assets gifted divided by the average 

 cost of a nursing home in the state of California per month, which is approximately between $3,200 and $3,500 per month, depending upon the year of calculation. Therefore, if you give away $100,000, this will result in a period of disqualification from Medi-Cal of approximately 34 months.

After you meet income and resource requirements, and if a doctor or health care provider certifies that your stay is “medically necessary,” your room, board, and medical bills will be paid for by the State of California.


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Liens and Estate Recovery Claims

OBRA 1993 requires estate recovery programs in all 50 states for medical assistance received and allows recovery against both the real and personal property of any person who received nursing home services. This new law will NOT apply to benefits paid before October 1, 1993 and will NOT apply to assets disposed of on or before 8-10-93 or to individuals who died on or before 8-10-93.

 Under the former law, a lien could only be placed on probate assets. Under OBRA 1993, a lien can be placed on both probate and non-probate assets such as joint tenancies and life estates. Nursing home advocacy agencies, such as California Advocates for Nursing Home Reform, are attempting to change this law.

Liens Against the Home

A lien can be imposed on the home of an institutionalized individual if it is determined that the nursing home resident cannot reasonably be expected to return home. Federal law allows these liens to be imposed and there is a rebuttable presumption that the institutionalized spouse cannot reasonably be expected to return home if any of the following conditions are met:

The beneficiary has been institutionalized for six months or longer with no discharge plan in place
The nursing home resident has received 30-days written notice and an opportunity to be heard on the lien issue
The nursing home resident has not stated that he or she “intends to return home” in a legally enforceable document
 
A lien cannot be imposed if:
A minor, blind, or disabled child is living in the home. Under the recent case of DeMille v. Belshe, a lien can be imposed when there is a spouse still living in the home, if there has been a hearing on the lien issue, and notice has been given.
The nursing home resident’s sibling, who has an equity interest in the home, has resided there at least one year before the individual’s admission to a nursing home.
Any individual, other than the spouse, is living in the home at leas two years before the resident was admitted to the nursing home and who provided care that enabled the resident to remain at home.

Available Planning Strategies

Non-Crisis Planning

Amend your Revocable Living Trust to include Medi-Cal Planning provisions. This will give the person you select the power to accomplish the Medi-Cal planning to preserve your assets should you ever need nursing home care. Without specific Medi-Cal planning provisions, no one would be able to protect your assets from the Medi-Cal spend-down  law.

If you are NOT in a crisis situation, then a Medi-Cal Protective Trust can work well to protect the home. This trust must be established at a time when the home has an “exempt” status. After funding the home into a protective trust, the home will be exempt from all future Medi-Cal liens and claims.

Additionally, the purchase of a long-term care insurance policy for at least a 36-month period of time, would allow you to establish a Medi-Cal Trust and “wait” the 36 months while your nursing home care is being paid for by LTC insurance.

  

Crisis Planning

If you are in a crisis situation, but the ill person is still mentally competent, then a Medi-Cal Protective Trust can still be established to protect the home. Again, this trust must be established at a time when the home has an “exempt” status. Again, after funding the home into such a trust, the home will be exempt from all future Medi-Cal liens and claims.

If you are in crisis and need to qualify for Medi-Cal immediately or in the near future, your planning must be done with an attorney who is familiar with this area of the law. What remedy is available depends upon your family situation, and the nature of your assets. One myth must be dispelled. Even in crisis planning, the home and most of your other assets can be protected from Medi-Cal liens, and preserved for your child or children to inherit. Whether Court action is necessary to preserve your assets and prevent any Medi-Cal liens depends upon the facts of the particular case. Nevertheless, the sooner you plan ahead, the less costly the Medi-Cal plan will be.

If the person in need is mentally incompetent, then all of the Medi-Cal planning will have to be accomplished through a court proceeding called a conservatorship.  Still, the home and many assets can be protected.

Because it is not possible to set forth all of the many different types of examples that we see in our office, let it suffice to say that there are many, many ways to plan for Medi-Cal protection, but each case is unique.

Several Medi-Cal Planning Strategies

Administrative Fair Hearings and/or Court Hearings to increase the resource allowance (CSRA) beyond the $84,120 allowed by Medi-Cal Although the list at left is NOT exhaustive, these strategies may be used alone or in combination with one another.

Medi-Cal planning is separate and apart from Revocable Living Trust Planning. A Revocable Living Trust escapes probate and capital gains taxes, but does NOT protect against Medi-Cal liens. (see Revocable Living Trust)
Court Hearings to increase the monthly income allowance beyond the $2,103 per month
Lifecare contracts where a child or other individual is committed to caring for the parent in the home
Sales with self-canceling installment notes
Motion for Substituted Judgment
Transferring non-exempt assets into exempt assets
Long-Term Care Insurance
Medi-Cal Protective Trust
Sale with leaseback provisions
Supplemental Needs Trust set forth in a Will
Medi-Cal Annuity

What You Should Know About Changes to the 7/1/00 Law

The law, which went into effect on 7–1–00, is called “Health Care Decisions” and expanded
the law in several areas that include the following:

The power of the agent to withdraw or withhold artificial nutrition or hydration, as well as all other forms of health care decisions, such as the right to halt cardio-pulmonary resuscitation and to provide a standing order for the doctor “to not resuscitate.”
The law also provides individuals the right to grant your agent if you so desire the authority to determine your residence, provide your meals, hire household employees, and arrange entertainment.
“Informed consent” has been deleted and replaced by the phrase ”capacity to consent.”  If a patient refuses to consent to the medical treatment, the court cannot force him or her to so consent to the treatment as long as he or she is deemed to be mentally competent.
All durable powers of attorney executed prior to 7–1–00 are still VALID.
Advance, directive decisions can be made by any person with mental capacity and these decisions can be made orally or in writing. However, if you are in a nursing home, one of the witnesses must be an ombudsman.
The Secretary of State is directed to establish a registry for all health care directives to be centrally filed and located with the ability to make all such information available to health care providers.


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OPPORTUNITIES AVAILABLE 
TO HELP SENIORS PLAN FOR NURSING HOME CARE

By Patricia Jo Wilkinson, Esq.
Claremont, California




Most senior citizens in our community are unaware of opportunities available to them in the event they ever need skilled nursing home care. Since care in a skilled nursing home facility costs approximately $3,500 per month, it is important to know what opportunities are available to help decrease this cost of care.

There are many planning opportunities available for married couples who, living on Social Security and interest income, do not realize the numerous planning opportunities available to them. The State of California, through the Medi-Cal program, will pay the cost of skilled care for one spouse while the other spouse lives at home.

However, the general rule is that Medi-Cal will only pay the cost of skilled nursing care if the healthy spouse who lives at home (hereafter referred to as the “at-home” spouse) meets asset and income requirements.

Medi-Cal divides assets into two categories: exempt and non-exempt. Exempt assets are not counted in reaching the maximum asset level. Exempt assets include the home (of any value), IRAs in the name of the “at home" spouse, real property “essential for self support,” property used in a trade or business, household items used to furnish a home, all personal effects, burial insurance, plots, trusts, vaults and crypts, all term life insurance or any life insurance policy with a face value of $1,500 or less, musical instruments, automobiles, reparation payments, and crime victim payments.

Non-exempt assets such as cash, stocks, bonds, mutual funds, money market accounts, etc., are counted in reaching the asset limit.

The general rule is that the maximum non-exempt assets the “at home” spouse can retain is $87,000 for the year 2001 plus all of the exempt assets stated above, such as the home and IRAs.

However, this general rule is only a general rule and it is not iron clad. This asset level is routinely increased from $87,000 up to $350,000 if the “at home” spouse can demonstrate that he or she needs this money to live on. One way the “at home" spouse might demonstrate need is illustrated in the following example.

Suppose a husband’s monthly income is $1,260 per month from Social Security and $400 per month from retirement benefits. The wife’s monthly income consists of $600 per month in Social Security. Suppose this couple has $300,000 in non-exempt assets (CDs, cash, money market, etc.) and the wife would like to qualify her husband for Medi-Cal benefits so that she is not forced to pay $3,500 per month in nursing home costs. The wife is afraid that if she is obligated to pay the nursing home $3,500 per month for her husband’s care, and also pay her own household bills, it will not be long before she has no money at all.

   The federal government anticipated this problem when it passed the Medicare Catastrophic Coverage Act (MCCA) in 1988.

Under MCCA, the wife can file a court petition seeking to increase her asset level from $87,000 to $300,000 on the basis that her monthly Social Security Income (excluding her husband’s monthly income) is only $600 and she prefers to retain her assets of $300,000, which, when invested at 5.5% (or the current CD rate) would help bring up her monthly income to the $2,175 maximum level. In this situation, the wife prefers to keep all of the couple’s assets of $300,000, all of her own social security, and a portion of her husband’s social security up to a maximum monthly income of $2,175 and pay only that portion of her husband’s Social Security and retirement income which exceeds the $2,175 per month limit to the nursing home. These petitions are routinely granted by the courts.

Similarly, for individuals who have a large retirement income but assets at or below the $87,000 maximum, a court petition can be filed seeking to increase the income level from $2,175 per month to $4,000 per month. Again, there must be a demonstration that the excess income over and above the $2,175 maximum limit is needed to build up their asset level toward the $87,000 limit or that the “at home” spouse otherwise needs this income for home repairs, medical bills, etc.

As the population ages, it is important to remember that all 401(k)s and IRAs  in the “at home” spouse’s name are totally exempt from counting toward the $87,000 limit just as the family home is exempt from counting toward the $87,000 limit The ill spouse's 401(k) and IRA is “unavailable” and not counted initially, but exempting this asset totally is possible but somewhat complex.

Although planning for nursing home care for single individuals was not discussed in this article, it certainly exists for those seniors who are in need of skilled nursing care. However, planning for a single person has a whole different set of asset and income limits from those of a married couple, and contains a different set of problems and solutions. Two categories of assets, exempt and non-exempt exist and planning for single persons who need skilled nursing care is just as important as the planning for spouses.

In conclusion, our senior population needs to be aware that planning for future nursing home care is extremely important if seniors wish to preserve their assets and income in accordance with the limits allowed by law. A certified Elderlaw Attorney is the type of attorney who can explain and implement the planning discussed in this article.

Patricia Jo Wilkinson is an attorney with Wilkinson
and Wilkinson, practicing law in Claremont.




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