Resource Asset Rules
These are general federal guidelines. The specific rules in your state may differ somewhat.
In order to be eligible for Medi-Cal benefits a nursing home resident may have no more than $2,000 in “countable” assets.
The spouse of a nursing home resident—called the ‘community spouse’— is limited to one half of the couple’s joint assets up to $99,450 (in 2006) in “countable” assets (see Medi-Cal, Protections for the Healthy Spouse). The $99,450 figure changes each year to reflect inflation.
All assets are counted against these limits unless the assets fall within the short list of “noncountable” assets. These include:
- personal possessions, such as clothing, furniture, and jewelry;
- one motor vehicle;
- the applicant’s principal residence, provided it is in the same state in which the individual is applying for coverage.
- prepaid funeral plans and a small amount of life insurance; and
- assets that are considered “inaccessible” for one reason or another.
Treatment of Income
There is no income limitation in California for Medi-Cal. An individual or married couple can have any amount of monthly income and qualify for benefits. However, Medi-Cal may require a nursing home resident to devote most of his or her income to help pay for care. This is called a share of cost. Share of cost is calculated differently if the Medi-Cal recipient is married or single.
Married couples are entitled to keep at least $2,524.00 per month before any contribution must be made towards share of costs. This amount can be substantially higher depending upon whose income it is. If the income belongs to the well spouse it does not count towards share of costs and may be kept by the community spouse (well spouse).
If, on the other hand, the excess income belongs to the nursing home resident and their combind income exceeds the minimum amount those excess funds will need to be contibuted as a share of cost. Thus, even if the community spouse is still working and earning $5,000 a month, she will not have to contribute to the cost of caring for her spouse in a nursing home if he is covered by Medicaid.
Single individual are limited to a maximum of $35.00 per month. This $35.00 is called a personal needs allowance. A single individual will also receive a deduction for any uncovered medical costs (including medical insurance premiums). A deduction may also be allowed for a dependent child living at home.
Here in California you do not need to sell your home in order to qualify for Medicaid. The home is considered an exempt asset, if the Medi-Cal recipient has the intent to return home, and as such will not disqualify a person from Medi-Cal eligibility. The key to maintaining this exemption is the “intent to return home”. May people erroniously believe that this the actual ability to return home or that it must be substantially likley that the Medi-Cal recipient will return home. Neither of these is the standard. Instead the standard is whether, if the Medi-Cal recipient was cured of his or her disability would that person want to return home. If the answer to this question is yes, then the home is exempt and will not be counted against the Medi-Cal applicant. As you can see from this standard, the home is always exempt as the Medi-Cal recipient would always choose to move home rather than continuing to live in a nursing home if cured of his or her ailment.
Protections for the Healthy Spouse
The Medi-Cal law provides special protections for the spouse of a nursing home resident to make sure she has the minimum support needed to continue to live in the community.
The so-called “spousal protections” work this way: if the Medi-Cal applicant is married, the countable assets of both the community spouse and the institutionalized spouse are totaled as of the date of “institutionalization,” the day on which the ill spouse enters either a hospital or a long-term care facility in which he or she then stays for at least 30 days.
In general, the community spouse may keep one half of the couple’s total “countable” assets up to a maximum of $99,540 (in 2006). Called the “community spouse resource allowance,” this is the most that a state may allow a community spouse to retain without a hearing or a court order.
In all circumstances, the income of the community spouse will continue undisturbed; he or she will not have to use his or her income to support the nursing home spouse receiving Medi-Cal benefits. But what if most of the couple’s income is in the name of the institutionalized spouse, and the community spouse’s income is below $2,489.00 per month?
In such cases, the community spouse is entitled to raise the amount of non-exempt assets that they can keep. This rule can allow many married couple to increase the amount of exempt assets to well over $500,000.00.
What if the well spouse needs more thatn $2,489.00 per month to meet his or her basic needs? The short answer is that the well spouse may be able increase his or her minimum monthly income. The well spouse will need to petition to increase his or her income allowance and upon a showing of need will be allowed to increase this amount. My office has increased this minimum income level to over $5,000.00 per month.
Is Transferring Assets Against the Law?
You may have heard that transferring assets, or helping someone to transfer assets, to achieve Medi-Cal eligibility is a crime. Is this true? The short answer is that for a brief period it was, and it’s possible, although unlikely under current law, that it will be in the future.
As part of a 1996 Kennedy-Kassebaum health care bill, Congress made it a crime to transfer assets for purposes of achieving Medi-Cal eligibility. Congress repealed the law as part of the 1997 Balanced Budget bill, but replaced it with a statute that made it a crime to advise or counsel someone for a fee regarding transferring assets for purposes of obtaining Medi-Cal. This meant that although transferring assets was again legal, explaining the law to clients could have been a criminal act.
In 1998, Attorney General Janet Reno determined that the law was unconstitutional because it violated the First Amendment protection of free speech, and she told Congress that the Justice Department would not enforce the law. Around the same time, a U.S. District Court judge in New York said that the law could not be enforced for the same reason. Accordingly, the law remains on the books, but it will not be enforced. Since it is possible that these rulings may change, you should contact a qualified elder law attorney before filing a Medi-Cal application. This will enable the advisor to consult with you about the current status of the law and to avoid criminal liability for the advisor or anyone else involved in your case.
Exceptions to the Transfer Penalty
Transferring assets to certain recipients will not trigger a period of Medi-Cal ineligibility. These exempt recipients include:
- A spouse (or a transfer to anyone else as long as it is for the spouse’s benefit);
- A blind or disabled child;
- A trust for the benefit of a blind or disabled child;
- A trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances).
These transfer rules apply to the transfer of any and all property for the purpose of qualifing for Medi-Cal benefits. Unfortunately, Medi-Cal presumes that all transfers are for the purpose of qualifing for Medi-Cal. This rule creates a one month period of ineligibility for every $4,812.00 given away in a month.
Fortunately, Congress has also created a very important escape hatch from the transfer penalty: the penalty will be “cured” if the transferred asset is returned in its entirety, or it will be reduced if the transferred asset is partially returned. This cure can be a very important tool for crafting assistance in Medicaid planning.
Estate Recovery and Liens
Under Medi-Cal law, following the death of the Medi-Cal recipient California must attempt to recover from his or her estate whatever benefits it paid for the recipient’s care. However, no recovery can take place until the death of the recipient’s spouse, or as long as there is a child of the deceased who is under 21 or who is blind or disabled.
While California must attempt to recover funds from the Medi-Cal recipient’s probate estate, meaning property that is held in the beneficiary’s name only, they have the option of seeking recovery against property in which the recipient had an interest but which passes outside of probate. This includes jointly held assets, assets in a living trust, or life estates. California has opted to seek recovery from these sources. Therefore, any property being transferred after death, whether by title, trust or probate will be subject to recovery by Medi-Cal. Given the rules for Medi-Cal eligibility, the only probate property of substantial value that a Medi-Cal recipient is likely to own at death is his or her home.
Here in California, the transfer of the home does not cause the imposition of a disqualification period. However, the sale of the home could result in the loss of benefits, if the proceeds of the sale exceeded the amount of non-exempt assets that can be retained by the Medi-Cal reciepient and his or her spouse. Further, the proceeds, if given away, could create a period of ineligibility that under present law could be as long as 36 months.
The Top Eight Mistakes People Make with Medi-Cal Qualification
1. Thinking it’s too late to plan.
It’s almost never too late to take planning steps, even after a senior has moved to a nursing home.
2. Giving away assets too early.
First, it’s your money (or your house, or both). Make sure you take care of yourself first. Don’t put your security at risk by putting it in the hands of your children. Precipitous transfers can cause difficult tax and Medi-Cal problems as well.
3. Ignoring important safe harbors created by Congress.
Certain transfers are allowable without jeopardizing Medi-Cal eligibility. These include: transfers to disabled children, caretaker children, certain siblings and into trust for anyone who is disabled and under age 65; a transfer to a “pay-back” trust if under age 65; and a transfer to a pooled disability trust at any age.
4. Failing to take advantage of protections for the spouse of a nursing home resident.
These protections include the purchase of an immediate annuity, petitioning for an increased community spouse resource allowance, and in some instances petitioning for an increased income allowance or refusing to cooperate with the nursing home spouse’s Medi-Cal application.
5. Applying for Medi-Cal too early.
This can result in a longer period of ineligibility in some instances.
6. Applying for Medi-Cal too late.
This can mean the loss of many months of eligibility.
7. Not getting expert help.
This is a complicated field that most people deal with only once in their lives. Tens of thousands of dollars are at stake. It’s penny wise and pound foolish not to consult with people who make their living guiding clients through the process.
8. Confusion about the difference between lifetime liens on property and estate recovery.
There are a number of exceptions to lifetime liens on property, but for estate recovery there is only a deferral for a surviving spouse and a hardship waiver.