When you know you are going to qualify for Medicare when you reach the age of 65, the Medi-Cal program may be off your radar.
Medicare and Medi-Cal are both health insurance programs, right? Why would you need Medi-Cal if you are going to qualify for Medicare?
It is true that Medicare and Medi-Cal are both government run health insurance programs. If you qualify for Medicare, you won’t need Medi-Cal at first. Plus, you probably wouldn’t be eligible, because Medi-Cal is only available to people who have very limited financial resources.
The Medi-Cal program enters the picture for people who will qualify for Medicare because Medicare does not pay for long-term custodial care. This is the type of care that you would receive if you need assistance with your activities of daily living.
This is a big deal, because long-term care is very expensive, and most seniors are eventually going to need help with their day-to-day needs. We practice in the state of California. In our state, the average cost of nursing home care is over $8000 a month.
A government survey has indicated that the average length of stay is over two years, and about 10 percent of nursing home residents require at least five years of care.
Medi-Cal will pay for long-term care, and it is the disability planning solution for a significant percentage of seniors. In fact, most seniors in nursing homes are enrolled in the program.
Medi-Cal Asset Limits
Medi-Cal has an upper asset limit of $2000 for an individual applicant in most states, but there are assets that don’t count. Your home is not considered to be a countable asset, and there is no equity limit in the state of California at the present time.
You can retain ownership of unlimited term life insurance, and a whole life insurance policy with a value of $1500 or less. You can also have a maximum of $1500 put aside for burial or cremation expenses.
One vehicle that is used for transportation is not counted, and your household goods and personal effects are not countable assets. Heirloom jewelry, wedding rings, and engagement rings would not be counted.
Disability Planning and the Community Spouse
In many cases, one spouse will require long-term care while the other spouse is still capable of living at home. In Medi-Cal parlance, the healthy spouse is called the community spouse.
The community spouse can retain ownership of the family home, and there would be no equity limit.
There is also a Community Spouse Resource Allowance. This allows the community spouse to keep half of shared countable assets up to a certain limit. In California, the limit during the current calendar year is $119,220.
In addition to the maximum limit, there is also a minimum Community Spouse Resource Allowance. In California, it is the same as the maximum.
To explain the minimum by way of example, if the couple had $110,000 in countable assets, half of that would be $55,000. Because of the minimum allowance of $119,220, the community spouse could retain the entire $110,000 under these circumstances.
Under Medi-Cal rules, most of the income that is brought in by the institutionalized spouse must go toward the cost of the care that is being received. However, this rule can be waived if the community spouse is relying on all or some of that income to maintain a minimum standard of living.
This is called a Monthly Maintenance Needs Allowance. The minimum and maximum monthly allowance in 2016 is $2981 in California.
Disability Planning Strategies
Because of these asset limits, you have to take measured steps in advance if you want to shape your financial profile to fit the Medi-Cal eligibility parameters. One way to go about it would be to give gifts to your loved ones before you apply for Medi-Cal to pay for long-term care.
This is a strategy that is often implemented, but you would do well to discuss the appropriate techniques with a licensed elder law attorney. Advance planning is key, because there is a 30 month look back in California. Your eligibility is delayed while you serve out a penalty period if you give away assets within 30 months of the submission of your application for Medi-Cal coverage.
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