Medi-Cal Trusts
Our practice makes available trust language that may ease eligibility for long-term care benefits under Medi-Cal (California's version of the federal Medicaid program). People sometimes think of Medi-Cal as a poverty program, but some homeowners who have modest savings may still need Medi-Cal because Medicare covers only very limited periods of long-term skilled nursing home care. Optionally, we can design documents to coordinate with Medi-Cal eligibility rules. Some of this work – the part addressing state collection claims against deceased patients’ estates – can now be done more simply under the provisions of SB 833, which took effect in 2017.
A hopeful legislative change affecting estate planning is that in 2021 California enacted a plan to phase out Medi-Cal asset limits as part of AB 133. California’s Department of Health Care Services (DHCS) has already announced that as of July 1, 2022, asset limits for non-MAGI Medi-Cal benefits will increase from $2,000 to $130,000 for a single person. The full phase-out is not scheduled to apply until mid-2024. This is huge progress toward reducing the spend-downs that many retirees have faced to qualify for long-term care coverage. However, these changes are not a full reform of the program. They affect only asset limits, not income limits, and they do not change either income or asset limits for federal Supplemental Security Income (SSI). See ACWDL 21-31 and 21-34 at https://www.dhcs.ca.gov/services/medi-cal/eligibility/letters. It's a good idea to re-check the DHCS site later for updates.
Medi-Cal for Long-Term (Skilled Nursing) Care
Nursing home care in this country is expensive. In California, the annually updated official Average Private Pay Rate (APPR) for nursing home care has been set at $10,933 for 2022. Unusually, it remains at the same amount as in 2020. For these and many other Medi-Cal announcements, refer to the state’s posted ACWDL announcements. Without long-term care insurance, it is difficult for many people to pay such costs. Medi-Cal is the only publicly funded program that covers long-term skilled nursing care for some chronic conditions.
Medicare Skilled Nursing Coverage is Limited
Many people mistakenly believe Medicare will cover skilled nursing care. In fact, the coverage that Medicare offers is very limited. For example, patients generally have to spend three days in an acute care hospital before they qualify to receive Medicare payments for skilled nursing care, and then the care must be related to the same acute illness or episode as the hospital stay. If this requirement is met, Medicare is likely to pay up to 100% for the first 20 days, and to charge a copayment for the 21st through 100th days of skilled nursing care, but generally it will not pay after that. Medicare payments do not cover nursing care at all for diseases such as Alzheimer’s or Parkinson’s disease, because those require custodial care – as opposed to acute care, which is medical care for a sudden accident or event such as a hip fracture.
Who May Receive Medi-Cal benefits for Long Term Care?
Medi-Cal financial eligibility is simplest for very low-income people. Anyone who receives federal means-tested Supplemental Security Income (SSI) qualifies automatically for Medi-Cal. (However, the situation may be different for recipients of Social Security retirement benefits or federal SSDI employment-based disability benefits). Medi-Cal benefits are also automatic with eligibility for CalWORKs, which is California's version of the family welfare benefit, known at the federal level as Temporary Assistance for Needy Families (TANF).
Medi-Cal “expansion” benefits also became more widely available under the Affordable Care Act, also known as the ACA or Obamacare. Eligibility in this category is derived only from the modified adjusted gross income reported on the applicant’s federal tax return, so this Medi-Cal program is sometimes called “MAGI Medi-Cal.” These benefits are limited to recipients ages 19 through 64 who have incomes less than 138% of the federal poverty level. In 2022, the official 138% threshold is $2,006 per month for a two-person household. But people who meet these MAGI Medi-Cal criteria are not subject to any limit on the assets they may keep to receive Medi-Cal coverage.
There have been efforts at the national level to repeal the ACA and to restrict Medicaid more sharply – but as of this writing it remains to be seen whether such efforts will succeed — or, if there are cuts at the federal level, how California legislators might choose to cushion the effect of any such cuts by boosting state benefits programs.
For older adults who don’t qualify under one of the programs described above, Medi-Cal eligibility requirements for long-term care generally include strict caps on both liquid assets and monthly incomes. Unmarried individuals are usually limited to $2,000 in cash savings or other non-exempt assets. There is more flexibility for married people where only one spouse needs long-term care coverage. The "sick spouse" who needs Medi-Cal help to pay for treatment currently may have only about $2,000 in liquid assets, while the well spouse may have up to $137,400 (as of 2022) in liquid assets. The new AB 133 rule is a tremendous help with this rule: as of July 1, 2022, asset limits for non-MAGI Medi-Cal benefits will increase from $2,000 to $130,000 for a single person.
As we’ll explain next, a house or other ownership interest in a home is usually an exempt asset for Medi-Cal purposes during the lifetime of the patient and of the patient's spouse or registered domestic partner. Therefore a married homeowner, living at home, can sometimes maintain a middle-class standard of living while a spouse is receiving Medi-Cal assistance for skilled nursing care in a facility. It also may be possible under Medi-Cal for a patient to receive a “nursing home” level of skilled nursing care at home. People interested in this option may want to check if their county is part of the PACE program.
Exempt Assets for Medi-Cal Eligibility
Many types of assets are not counted in calculations of Medi-Cal eligibility. The most important exempt asset is the applicant’s own home — their “principal residence” — so long as their ownership and residency situations meet specific criteria (California Welfare and Institutions Code Sections 14006(b)and 14006.15). This is a very broad exemption. The home may still be exempt even if the applicant is absent from it for a while, so long as the applicant still intends to return home. An attorney should be consulted on questions about this exemption or Medi-Cal eligibility.
There is a slow regulatory process in the works that, if it is completed before any change in the law itself, will impose a federally required limit on the amount of home value exempted from Medi-Cal asset limits. The federal Deficit Reduction Act of 2005 (DRA) required states to set caps on the amount of equity that long-term care benefit applicants or recipients may own in their primary residences. State legislation (W&I Code Sec. 14006.15(b)) has now set California’s cap at the maximum permitted level of $750,000. However, the cap will not take effect until state regulations interpreting it have been finalized. As of this writing, in mid-2021, the regulations had not become final. This could change at any time, however. If or when the DRA limit is imposed, there may be further uncertainty on how to decide if the homeowner’s equity interest in the property reaches the $750,000 cap. Sec. 14006.15(a)(1) defines the value of an "equity interest" as the assessed value of a property minus encumbrances, which could help some people who acquired property a long time ago.
For further information about Medi-Cal eligibility and long-term care options, the San Francisco-based nonprofit California Advocates for Nursing Home Reform (phone: 415-474-5171) is an excellent resource.
Estate Planning That Eases Application for Medi-Cal
Any person who requires Medi-Cal assistance to obtain skilled nursing services must first become impoverished. However, for a married couple, the well spouse may still be able to retain substantial assets. The sick spouse may transfer assets to the well spouse as long as the sick spouse can make an informed decision and sign his or her name. However, there is a problem if the sick spouse no longer has capacity to make financial decisions. Court intervention may be necessary to transfer documents from the sick spouse to the well spouse.
Part of our work is in drafting documents that prepare for these scenarios – for example, by allowing assets to be transferred between spouses if one spouse becomes incapacitated. These kinds of estate planning provisions may reduce the likelihood of a need for court intervention in the event of one spouse's incapacity.
Medi-Cal and SB 833 for Homeowners
During a patient's life, a house is an exempt asset and therefore not a barrier to Medi-Cal eligibility. However, after a Medi-Cal recipient is deceased, and the surviving spouse or registered domestic partner is also deceased, the home is subject to Medi-Cal "recovery," meaning the state can pursue a claim against the deceased Medi-Cal patient's estate. Most Medi-Cal collections have always been for costs incurred from age 55 onward; one of the effects of the new SB 833 is to narrow down the kinds of care that are subject to recovery.
Until the recent passage of SB 833, exemptions from Medi-Cal recovery were narrow and were based on personal circumstances. Principally, the state will not pursue recovery if the patient is survived by a minor (under 21) or by a blind or disabled child of any age. A child of the deceased person who lived in the home as a caregiver may also be able to stave off recovery. A "hardship waiver" may be filed within 60 days from the notice of the claim for recovery.
California law, unlike the law of some other states, does not prevent a homeowner who receives Medi-Cal benefits from giving away an exempt asset, including a home. Therefore, one option, more often used in the past, was to transfer most of the patient's equity in the exempt house to the people who the patient would want to inherit the house, while the patient retains a "life estate" right to continue using the property as long as he or she is alive. This is a complex process and can be a disempowering one, so it is a relief that SB 833 reduces the reasons to gift away home equity during the homeowner’s lifetime.
SB 833 adds one more reason why a revocable trust may be to a homeowner's advantage. In addition to help with avoiding probate, a trust can also help avoid Medi-Cal recovery claims against the house after the homeowner's death.