Medicare, Medicaid, Medi-Cal. If you’re approaching the age of 65, these terms may have started to appear on your radar. But what exactly do they mean? What’s the difference?
Medicare is a federally funded program that provides basic health care coverage for Americans over the age of 65 and certain disabled individuals. It is an entitlement program, meaning just about all Americans who are 65+ are eligible – even the wealthy, like Bill Gates. Medicare typically pays for things like short-term hospital stays.
Medicaid is a jointly funded federal and state program that provides healthcare coverage for individuals with limited income and resources. It is a needs-based program, meaning one has to qualify in order to receive benefits.
Medi-Cal is California’s version of Medicaid. Most people are concerned with the type of Medi-Cal that deals with long-term care, i.e., skilled nursing facilities.
As a result of the “Medi“ confusion, there is an unfortunate amount of misunderstanding and misinformation floating around regarding the eligibility and qualification for Medi-Cal benefits. In my last article (“Estate Planning FAQs” Sept. 23-Oct.6, 2016, issue), I discussed the most frequently asked Estate Planning questions that I receive when I hold Elder Law seminars. To continue in the same fashion, I would like to share the three most common questions I am asked when it comes to Medi-Cal planning.
FAQ #1: I was told I make too much money to qualify for Medi-Cal. Is that true?
Qualification for long-term care Medi-Cal is determined by one’s assets, not income. An applicant is allowed a certain amount of “countable” assets. Assets are not countable if they are exempt. Your home, a car and IRAs are a few important examples of exempt assets.
Nonexempt assets are things like vacation homes, rental properties, savings, investment accounts, etc. These are the types of resources that are “countable.”
While it is true that you won’t receive benefits if you have too many “countable” assets, it does not mean you are forever ineligible. There are legal ways to “spend-down” and/or liquidate your assets in order to qualify. If done properly, this can be an excellent strategy for receiving Medi-Cal benefits.
FAQ #2: I heard there was a three- to five-year “look back” period. What is that?
The easiest way to understand a “look back” period is through an example. Let’s say Mr. Tanaka has never been in a nursing home and now needs nursing home care and wanted to use the Medi-Cal program to pay for it. If he applied, he would get denied, and it’s easy to see why: He has too many assets. Realizing this, Mr. Tanaka gifts his properties, money and other “countable” assets to his three children in 2016. Voila! Mr. Tanaka is impoverished and now believes he is Medi-Cal eligible. But he is wrong.
Currently, Medi-Cal can “look back” to see if you’ve made significant transfers like this within the past 30 months (2.5 years). A new law, the Deficit Reduction Act, will change this time frame to 60 months (5 years). If you have made this type of transfer, then you will be penalized with a period of ineligibility. In Bill Gates’ case, even if he has no assets, he will be ineligible from receiving Medi-Cal until 2018 (under current laws) or 2021 (under the DRA).
Most people automatically dismiss the possibility of receiving Medi-Cal when they hear about the “look back” period, but this should not discourage anyone. If you appropriately navigate through Medi-Cal’s labyrinth of rules, then there are legal ways of sheltering your assets without triggering the penalty period. Strict conformity with the rules is the key.
FAQ #3: If I use Medi-Cal, can the State take my home?
If you received Medi-Cal benefits after the age of 55, then your home can be subject to an Estate Recovery claim after your death if it is a part of your probated estate. So, even though your home is an exempt asset while you’re alive, it can still be recovered by the State after your passing. The State is essentially reimbursing itself for the amount it expended on your medical care.
The good news is that an estate recovery is completely preventable. There are several different ways to protect your home and ensure that your assets are passed on to your loved ones. Strategies differ depending upon the individual, but a plan can be customized to fit your personal circumstances and goals.
Staci Yamashita-Iida, Esq. is an Estate Planning attorney at Elder Law Services of California. She can be contacted at (310) 348-2995. The opinions expressed in this article are the author’s own and do not necessarily reflect the view of the Pacific Citizen or JACL. The information presented does not constitute legal advice and should not be treated as such.