Medi-Cal is the name for California’s Medicaid program. Medicaid is a healthcare program that provides coverage for low income individuals and families as well as the aged and disabled.
People often confuse the two or use the names interchangeably despite the fact that they are two very different programs. Both Medi-Cal and Medicare are federally funded healthcare programs; however, the similarities stop there. Medicare is an “entitlement” program, meaning that as long as you worked and paid into the program you are “entitled” to benefits when you turn 65 years old. You will automatically be enrolled in Medicare. Basic Medicare is free; however, there are four parts to Medicare and if you choose to participate in the additional parts you will pay a premium each month. Medi-Cal is a “needs” based program, meaning you must demonstrate a financial “need” for benefits to be eligible. If you qualify, participation in Medi-Cal is free.
As you age, the likelihood that you will need long-term care (LTC) increases with each passing year. The cost of that care may cause you to turn to Medi-Cal for help. As of 2016, the average cost of a month of LTC in California was over $9,000 and the average length of stay about 2.5 years. Neither Medicare nor most basic health insurance plans will pay for LTC expenses. Unless you can afford to pay out of pocket, that leaves Medi-Cal as your only option because Medi-Cal does pay for LTC.
Along with some basic requirements, such as U.S. citizenship (or legal status) and proof of California residency, you will need to meet Medi-Cal’s income and asset requirements to be eligible for Medi-Cal for the aged benefits. The income limit varies, depending on where you live, your household size, and the specific program within Medi-Cal for which you are applying. The asset limit is where most seniors run into problems if they failed to plan ahead. As a general rule, an applicant cannot have non-exempt, or “countable resources,” valued at more than $2000.
When determining your eligibility, only non-exempt assets are considered. Examples of exempt assets include:
- Your primary residence
- Household goods and furnishings
- One vehicle
- Term life insurance
- Burial plot
Once upon a time this was possible; however, Medi-Cal closed that loophole by implementing a five-year “look-back” rule. The rule allows Medi-Cal to review an applicant’s finances for the five-year period leading up to application. Any asset transfers made for less than fair market value will be suspect and may be discounted, meaning the value of the asset will be imputed back into the applicant’s assets for purposes of determining eligibility.
If your non-exempt assets exceed the program limit, Medi-Cal will impose a waiting period during which time you will be expected to “spend-down” your non-exempt assets. In simple terms, Medi-Cal wants you to sell your assets and use the proceeds to cover your LTC costs during the waiting period. The length of the waiting period is determined by taking the value of your assets that exceeds the limit and dividing by the average monthly cost of LTC in your area. For example, if you have $150,000 in non-exempt assets, the amount over the limit is $148,000. Assuming an average monthly cost for LTC of $9,500, you would divide $148,000/$9,500 = 15.6, resulting in a 16 month waiting period before Medi-Cal would consider you eligible for benefits.
Fortunately, the Medi-Cal spousal impoverishment rules prevent this from happening. If you need to enter a LTC facility, an allowance is made for your “community spouse” when calculating your eligibility to ensure that he/she is not left without any income and/or resources. Your spouse may be able to keep both resources and part of your monthly income, depending on your spouse’s income.
Medi-Cal planning utilizes legal tools and strategies within your larger estate plan to protect your assets and ensure that you qualify for Medi-Cal when the times comes that you need help paying for LTC. A common Medi-Cal strategy involves the use of an irrevocable Medicaid trust to shelter your assets. Your estate planning attorney can review your asset portfolio and help you decide the best tools and strategies for your situation.