1. MEDI-CAL OVERVIEW
2. MEDI-CAL NOTICE REGARDING STANDARDS OF ELIGIBILITY
3. MEDI-CAL MYTHS…AND THE TRUTH  ABOUT MEDI-CAL
4. MEDI-CAL INCOME AND ASSET TEST
5. MEDI-CAL EXEMPT ASSETS
6. MEDI-CAL ASSET PROTECTION OPTIONS FOR MARRIED COUPLE
7. MEDI-CAL ASSET PROTECTION OPTIONS FOR SINGLE PERSON

Medi-Cal Overview

WHAT IS MEDI-CAL?

Medi-Cal is California’s Medicaid program, which is funded by both federal and state funds. Medi-Cal has two divisions. One which provides regular medical care for the poor and the other division was created to assist senior citizens with nursing home costs. Social Security, Medicare and Medi-Cal are federal entitlement programs. Social Security and Medicare are non-means tested entitlement programs which senior citizens qualify for by attaining age 65 or older.

To receive Medi-Cal benefits the applicant and spouse’s assets or resources must be within the Medi-Cal guidelines. If assets exceed the Medi-Cal resource limit the excess resources must be “Spent-Down” on nursing home costs, or, otherwise legally protected until they are depleted down to the qualifying limits. Assets are divided into three categories, exempt assets (assets that do not count), countable assets (assets that are subject to spend down) and unavailable assets (assets that can not be converted to cash and spent on nursing home costs).

MEDI-CAL RULES AND REGULATIONS

Medical Necessity

Medical necessity is the prerequisite for participation in the Medi-Cal (Medicaid Title XIX) long term care program. Medical necessity is the determination that a recipient requires the services of a licensed nurse. The applicant must demonstrate a medical disorder or disease or both that:

• Are ordered by and remain under the supervision of a physician;

• Are dependant upon the individual’s documented medical, physical, and/or functional disorders, conditions, or impairments;

• Require the skills of a registered or licensed vocational nurse;

• Are provided either directly by or under the supervision of licensed nurses in an institutional setting; and

• Are required on a regular basis.

OBRA’93

Omnibus Budget Reconciliation Act of 1993 was passed by the United States Congress and among other things addressed Medicaid Recovery (Medi-Cal for California), Medicaid Trust rules and the rules controlling annuities that convert assets from available or countable to unavailable or exempt. California has not adopted all of the OBRA ’93 rules as of 2009 and still rely on various “draft regulations” and departmental letters to determine how California deals with estate recovery, trust rules and what are exempt versus non-exempt assets (these draft regulations are subject to change every year).

Assets Transfers

Prior to applying for Medi-Cal assets may be converted from countable to unavailable or exempt to assist in Medi-Cal qualification. If transfers for less than fair value are made to another person (30 month look-back) or an irrevocable trust (60 month look-back) within thirty or sixty months prior to applying for Medi-Cal, a disqualification period will be established.

California is one of the few states that permits the gifting or transfer of exempt assets after qualifying for Medi-Cal benefits.

NOTE: Although Medi-Cal does “look-back” into past asset transfers, the applicant will not lose eligibility if the transfers (gifting of assets) were done properly…even during this look-back period (be sure to discuss your rights with an Elder Law Attorney of your choice).

Share of Cost Determination

After the CSRA (Community or at home spouse asset allocation) and the MMMNA (Minimum Monthly Maintenance Needs Allowance, or, amount of income spouse in facility is allowed to keep) has been established, Medi-Cal then calculates the applicants “Share of Cost”. The community spouse is allowed to keep the first $2,739 per month as the MMMNA for the year 2009 (this amount is adjusted annually and can be increased by filing a 3100 petition in Court). Once the applicant has qualified for Medi-Cal benefits, the community spouse is no longer required to pay nursing home expenses in excess of the applicant “Share of Cost”.

For a single person, the Share of Cost is calculated by taking all of the applicant’s income (not assets) required to be paid to the Nursing Home for board and care. The applicant is allowed to keep $35.00 for personal need and sufficient fund to pay for their insurance premium (they are also allowed to keep and pay for the prior medical HMO or private medical plan if so desired).

Spousal Support Order & Fair Hearing

A Spousal Support order for more income and/or assets can be produced by a Superior Court. For Medi-Cal planning purposes, it is used to increase the MMMNA above the federal guidelines.

A request to increase the assets only can be produced by requesting a Fair Hearing with an administrative law judge, to avoid the cost and delay of filing a petition in superior court.

Name On the Check Rule

Medi-Cal designates income by whose name is on the check. If the check is payable to the Medi-Cal recipient then the income will become part of his or her “Share of Cost”. If the check is payable to the Community Spouse then the income is retained by the spouse and is not used to pay the LTC expenses of the ill spouse. In other words, if the at home spouse has $3,500 (for example only) of income in there name only (i.e., Social Security, Retirement or other Pensions), then they are allowed to keep it all and the Share of Cost will only come from the income of the applicant.

Estate Recovery

The federal government under OBRA’93 mandated that upon the death of the Medicaid (Medi-Cal in California) recipient that the States recover the cost of Medi-Cal benefits paid on behalf of the Medi-Cal recipient.

Currently the definition of an estate is either assets that are being probated (i.e., the applicant either has a Will or no estate planning documents at all) or assets within a Revocable Living Trust.

With proper planning the Medi-Cal recipient’s estate should only have the $2,000.00 of allowed exempt assets, because all other assets were properly and timely transferred to their beneficiaries during the Medi-Cal look-back or qualification period.

Revocable Trust

A revocable trust is sometimes referred to as a “Living Trust” or “Inter Vivos” trust. Such a trust is created during the life of the donor rather than through a will. With a revocable trust, the donor maintains complete control over the trust and may amend, revoke, or terminate the trust at any time. Generally this type of trust is created principally to avoid probate and to create a testamentary trust referred to as a “Credit Shelter Trust” to reduce estate settlement costs and reduce estate taxes. Assets placed in a revocable trust are considered available and possibly non-exempt by Medi-Cal.

Notice Regarding Standards of Elegibility

If you or your spouse is in, or is entering a nursing facility, read this important message!

You or your spouse do not have to use all your resources, such as savings, before Medi-Cal might help pay for all or some of the costs of a nursing facility.

You should be aware of the following to take advantage of these provisions of the law:

UNMARRIED RESIDENT:

An unmarried resident is financially eligible for Medi-cal benefits if he or she has less than $2,000 in available resources. A home is an exempt resource and is not considered against the resource limit, as long as the resident states on the Medi-cal application that he or she intends to return home. Clothes, household furnishings, irrevocable burial plans, burial plots, and an automobile are examples of other exempt resources.

If an unmarried resident is financially eligible for Medi-Cal reimbursement, he or she is allowed to keep from his or her monthly income a personal allowance of $35 plus the amount of health insurance premiums paid monthly. The remainder of the monthly income is paid to the nursing facility as a monthly deductible called the “Medi-Cal share of cost.”

MARRIED RESIDENT:

If one spouse lives in a nursing facility, and the other spouse does not live in a nursing facility, the Medi-cal program will pay some or all of the nursing facility costs as long as the couples together does not have more than $109,560 in available assets. the couple’s home will not be counted against this $109,560, as long as one spouse or a dependent relative, or both, lives in the home, or the spouse in the nursing facility states on the Medi-cal application that he or she intends to return to the couple’s home to live.

If a spouse is eligible for Medi-cal payment of nursing facility costs, the spouse living at home is allowed to keep a monthly income of at least his or her individual monthly income or $2,739, whichever is greater. Of the couple’s remaining monthly income, the spouse in the nursing facility is allowed to keep a personal allowance of $35 plus the amount of health insurance premiums paid monthly. The remaining money, if any, generally must be paid to the nursing facility as the Medi-Cal share of Cost. The Medi-Cal program will pay remaining nursing facility costs.

Under certain circumstances, an at home spouse can obtain an order from an administrative law judge that will allow the at home spouse to retain additional resources or income. Such as order can allow the couple to retain more than $109,560 in available resources, if the income that could be generated by the retained resources would not cause the total monthly income available to the at home spouse to exceed $2,739. Such an order also can allow the at home spouse to retain more than $2,739 in monthly income, if the extra income is necessary due to exceptional circumstances resulting in significant financial duress.

An at home spouse also may obtain a court order to increase the amount of income and resources that he or she is allowed to retain, or to transfer property from the spouse in the nursing facility to the at home spouse. You should contact a knowledgeable attorney for further information regarding court orders.

The paragraphs above do not apply if both spouses live in a nursing facility and neither previously has been granted Medi-Cal Eligibility. In this situation, the spouses may be able to hasten, Medi-Cal eligibility by entering into an agreement that divides their community property. The advice of a knowledgeable attorney should be obtained prior to the signing of this type of agreement.

Note: For married couples, the resource limit ($109,560 in 2009) and income limit ($2,739 in 2009) generally increase a slight amount on January 1 of every year.

TRANSFER OF HOME FOR BOTH A MARRIED AND AN UNMARRIED RESIDENT

A transfer of a property interest in a resident’s home will not cause ineligibility for Medi-Cal reimbursement if either of the following conditions is met:

(a) At the time of transfer, the recipient of the property interest states in writing that the resident would have been allowed to return to the home at the line of the transfer, if the resident’s medical condition allowed him or her to leave the nursing facility. this provision shall only apply if the home has been considered an exempt resource because of that resident’s intent to return home.

(b) the home is transferred to one of the following individuals:

1. The resident’s spouse.

2. The resident’s minor or disabled child.

3. A sibling of the resident who has an equity interest in the home, and who resided in the resident’s home for at least one year immediately before the resident began living in institutions.

4. A son or daughter of the resident who resided in the resident’s home at least two years before the resident began living in institutions, and who provided care to the resident that permitted the resident to remain at home longer.

This is only a brief description of some of the Medi-Cal eligibility rules; for more detailed information, you should call either contact our office, or you may contact your local county welfare office...

AS STATED ABOVE, THIS IS AN ONLY AN EXCERPT OF INFORMATION AS PROVIDED BY MEDI-CAL. YOU SHOULD CONTACT AN KNOWLEDGEABLE ATTORNEY IF YOU OR SOMEONE YOU KNOW NEEDS LONG-TERM CARE NOW, OR IN THE VERY NEAR FUTURE.

Note: Items that are in bold and highlighted above in the DHS excerpt as outlined above, are for your convenience and information only and are not highlighted on the information as provided by the DHS.

Medi-Cal Myths... And the Truth About Medi-Cal

A Grain of Truth...but...Mostly Myth

Medi-Cal Income Test

AS OF JANUARY 1, 2009

• Do not include investment or interest income for these calculation purposes, only Social Security,  Retirement and other Pension type of income.

LIST OF OTHER INCOME THAT YOU OWN AND IS NOT LISTED ABOVE (Be sure to advise your attorney or financial advisor of these assets too, to determine how they should be categorized…and protected):

Medi-Cal Asset Test

AS OF JANUARY 1, 2009

• Insert actual or estimated amount of assets for each account and round to nearest dollar for calculation purposes only.
  

• Use “blank” description of asset column for other accounts or multiple accounts not listed above.
  

• Combine accounts if necessary (i.e. all checking accounts, all savings accounts etc.) so that all assets are included in table above.
  

• TAX DEFERRED ASSETS such as IRA’s, 401K’s, Annuities etc., may be counted as an asset and not an exempt asset UNLESS you are taking the minimum required distribution as required under the current IRS rules. Discuss this issue with an Elder Law Attorney or a knowledgeable senior financial advisor.
  

• OTHER REAL PROPERTY: If you own more property than your home, you will need to consult with an attorney to determine if it is “exempt” as a rental property OR if it can be legally protected in a different manner.

LIST OF OTHER ASSETS THAT YOU OWN AND IS NOT LISTED ABOVE (Be sure to advise your attorney or financial advisor of these assets too, to determine how they should be categorized…and protected):

Medi-Cal Exempt Assets

The following property is generally exempt and therefore, not counted in determining Long Term Care Medi-Cal eligibility:

• SINGLE PERSON or PERSON APPLYING FOR MEDI-CAL can have up to $2,000 in their name in a cash reserve, e.g. in savings, checking, etc., as the Medi-Cal applicant.

• AT HOME OR COMMUNITY SPOUSE; the spouse at home can keep the first $109,560 in assets (Community Spouse Resource Allowance). The spouse at home can manage the $2,000 allowed for the applicant spouse; therefore, a couple can have $109,560 in total liquid assets and still be eligible for Medi-Cal benefits for the applicant.

• The home: totally excluded, if it is the principal residence. The applicant must state an “intent to return to the home.” Includes mobile home, houseboat, or an entire multi-unit dwelling as long as any portion serves as the principal residence of the applicant.

• Other real property: may be excluded if it is used in whole or in part as a business or means of self-support (you should see an attorney if you have other real property).

• Household goods and personal effects: totally exempt.

• Jewelry: for a single person, wedding, engagement rings and heirlooms, and items of jewelry with a net market value of $100 or less are totally exempt; for spouses; there is no limit on exempt jewelry for determining the institutionalized spouse’s eligibility.

• One car is generally exempt if used for the benefit of the applicant/beneficiary or if needed for medical reasons.

• Whole life insurance policies with a total face value (also called “combined death benefit”) of $1,500 or less.

• Term life insurance: totally excluded.

• Burial plots: totally excluded, includes headstone, crypts, etc.

• Prepaid irrevocable burial plan of any amount and $1,500 in designated burial funds. These designated funds must be kept separate from all other accounts.

• Cash surrender value or balance of pension funds, IRAs and certain types of annuities.

Medi-Cal Asset Protection Options for Married Couple

If you are a MARRIED COUPLE, the steps necessary to protect your assets and your asset protection options are as follows (this is in addition to keeping your Exempt Assets…see list provided):

1. Create new or update your current Estate Planning documents (i.e., Trust, Power of Attorney for Finances, Power of Attorney for Real Property or other related documents) as necessary that allow your trustee/agent to protect your assets a) If you ever require long-term care assistance in the future, or b) If you require long-term care assistance immediately.

2. If you are applying for Medi-Cal long-term care benefits at this time (or will be in the near future…the next 2-3 months or so), prepare the necessary documents to properly transfer and protect your home and other personal assets as needed.

3. If you have more than $2,000 in the name of the spouse applying for Medi-Cal benefits, in any form (i.e., bank accounts, financial investment accounts, annuities, mutual funds, stocks, life insurance etc., see asset schedule you submitted for details), you will need to transfer any amounts above $2,000 into the name of the well spouse (community spouse).

4. If the current estate has more than $109,560 (to include the $2,000 allowed for the Medi-Cal applicant) in assets (not including the home or list of exempt assets), then you will need to protect the amount that exceeds $109,560 by one of the options listed below.

5. If the income of the well spouse (community spouse) is below the minimum allowed for the at home spouse of $2,739, you may be eligible to request a administrative Fair Hearing or submit a petition to the proper Court of Law, and request that a judge allow you to increase the Community Spouse Resource Allowance of $109,560 as allowed for a couple in the year 2009, to include most if not all of your assets that exceed this amount of $109,560.

6. Under some circumstances, if the minimum allowed monthly income of $2,739 for the at home spouse is not sufficient to meet the at home spouses’ monthly living needs, you may be able to file a petition with the Court, requesting that they allow you to increase the minimum monthly income to allow you to support yourself as needed (if available).

7. Create a Medi-Cal asset protection Annuity, which will allow you to protect much of the principal of your estate and still qualify for Medi-Cal benefits.

8. Spend-down your assets on Exempt Assets (see Exempt Assets list attached).

9. You can make Gifts of money/assets to your beneficiaries as desired, however, this must be done properly so as not to interfere with your Medi-Cal benefits or create a penalty period (requiring you to wait a period of time before you may be considered eligible for Medi-Cal benefits) as a result of the gift.
   

10. You can enter into a LIFETIME PERSONAL Care Agreement or contract, which allows you to give a certain amount of money to your current and future care providers and they will sign the agreement (contract) to continue to provide such care to you; or to see that such care is provided for you if you enter into a facility, for the remainder of your lifetime. This type of agreement (or contract) if properly designed, will not result in a “penalty” for any transfer of assets should you apply for Medi-Cal benefits in the future.
    

Note: The steps and options listed DO NOT include all possible asset protection strategies/options and IS NOT to be considered legal advice, and therefore I recommend you either contact our office or another knowledgeable Elder Law Attorney in your area before attempting to protect the assets of your estate as discussed above.

In addition, because the laws applying to Medi-Cal and Asset Protection do change from time to time, again I recommend you either contact our office or another knowledgeable Elder Law Attorney in your area before attempting to protect the assets of your estate as discussed above.

You may contact our office directly to assist you with this matter by calling (916) 536-1773 in Fair Oaks, CA, or, if you desire to retain legal and/or financial asset protection services within your local area, please contact our office so that we may assist you in locating a knowledgeable Elder Law Attorney in your area.

Medi-Cal Asset Protection Options For Single Person

If you are a SINGLE person (or a not married couple), the steps necessary to protect your assets and your asset protection options are as follows (this is in addition to keeping your Exempt Assets…see list provided):

1. Create new or update your current Estate Planning documents (i.e., Trust, Power of Attorney for Finances, Power of Attorney for Real Property or other related documents) as necessary that allow your trustee/agent to protect your assets a) If you ever require long-term care assistance in the future, or b) If you require long-term care assistance immediately.
   

2. If you are applying for Medi-Cal long-term care benefits at this time (or will be in the near future…the next 2-3 months or so), prepare the necessary documents to properly transfer and protect your home and other personal assets as needed.
   

3. If you have more than $2,000 in your name in any form (i.e., bank accounts, financial investment accounts, annuities, mutual funds, stocks, life insurance etc., see asset schedule you submitted for details), you will need to protect the amount that exceeds $2,000 in your name by one of the options listed below (items 4-7).
   

4. Create a Medi-Cal asset protection Annuity, which will allow you to protect much of the principal of your estate and still qualify for Medi-Cal benefits.
   

5. Spend-down your assets on Exempt Assets (see Exempt Assets list attached).
   

6. You can make Gifts of money/assets to your beneficiaries as desired, however, this must be done properly so as not to interfere with your Medi-Cal benefits or create a penalty period (requiring you to wait a period of time before you may be considered eligible for Medi-Cal benefits) as a result of the gift.
   
   

7. You can enter into a LIFETIME PERSONAL Care Agreement or contract, which allows you to give a certain amount of money to your current and future care providers and they will sign the agreement (contract) to continue to provide such care to you; or to see that such care is provided for you if you enter into a facility, for the remainder of your lifetime. This type of agreement (or contract) if properly designed, will not result in a “penalty” for any transfer of assets should you apply for Medi-Cal benefits in the future.

   
   Note: The steps and options listed DO NOT include all possible asset protection strategies/options and IS NOT to be considered legal advice, and therefore I recommend you either contact our office or another knowledgeable Elder Law Attorney in your area before attempting to protect the assets of your estate as discussed above.

   In addition, because the laws applying to Medi-Cal and Asset Protection do change from time to time, again I recommend you either contact our office or another knowledgeable Elder Law Attorney in your area before attempting to protect the assets of your estate as discussed above.

   You may contact our office directly to assist you with this matter by calling (916) 536-1773 in Fair Oaks, CA, or, if you desire to retain legal and/or financial asset protection services within your local area, please contact our office so that we may assist you in locating a knowledgeable Elder Law Attorney in your area.