Medi-Cal is California’s version of Medicaid, a federally supported but state-administered welfare program. Medi-Cal is thus a combined federal and California program, funded by general tax revenues. The federal government reimburses California for a percentage of the Medi-Cal payments the state makes on behalf of recipients. Medi-Cal is a needs based system whereas Medicare is an entitlement for those who have paid into the system during their lifetime.
The most important Medi-Cal benefit for most seniors is long term care in a skilled nursing facility. Medi-Cal may cover residential care facilities or in-home care on a limited basis.
To qualify for Medi-Cal benefits, an individual cannot have more than $2000 in countable assets, referred to as a nonexempt property reserve. The amount of “countable assets” increases with family size, so a couple may have $3000 in countable assets. Countable assets do not include assets classified as “exempt” or “unavailable.” The most important exempt asset is real property used as the individual’s residence. There are a myriad of administrative requirements surrounding transfers exclusively to qualify for Medi-Cal benefits. Generally, if an applicant transfers assets for less than fair market value in order to qualify for Medi-Cal, the property transfer rules work to calculate an ineligibility period during which the applicant is disqualified for Medi-Cal benefits.
Medi-Cal recipients who own assets at their death (particularly assets of substantial value, such as a residence) may have their estates subjected to claims for repayment of benefits received. The state refers to this process as “estate recovery.” Significantly, the state’s right to recover does not come into existence until after the death of the Medi-Cal recipient. To avoid the Medi-Cal recovery claim, recipients and their spouses often gift assets during their lifetimes. The state’s right to recover is limited to the amount actually paid for care, or the value of the property passing at the Medi-Cal recipient’s death, whichever is less. No recovery is allowed during the lifetime of the surviving spouse, the minority of surviving children, or when the recipient is survived by a child who is blind or permanently and totally disabled.
The rules for Medi-Cal eligibility, recovery, and benefits are complex. Whether you should divest yourself of assets to qualify for long-term care is something requiring careful consideration best done with an attorney conversant in all aspects of Medi-Cal planning.