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What is New for Orange County Seniors who Need Nursing Care

Posted by James Burns | Jun 14, 2022 | 0 Comments

Assembly Bill 133 (Stats. 2021, ch. 143) enacted Welfare and Institutions Code section 14005.62, creating a two-phased approach to the elimination of the asset limits for non-MAGI Medi-Cal. The first phase, effective July 1, 2022, increases the countable asset limit from $2,000 ($3,000 for spouses or registered domestic partners) to $130,000 per person plus $65,000 per household member. On July 1, 2024, the asset test will be eliminated entirely. See All County Welfare Directors Letter 21-31 (Nov. 21, 2021). This will also change the Community Spouse Resource Allowance (CSRA) amount and Medi-Cal planning strategies.

However, the change to California's Medi-Cal asset limits will not affect the asset limits for Supplemental Security Income (SSI), or Medicaid programs in other states.

A Brief Summary of Medi-Cal

Medi-Cal is California's Medicaid health care program. Medicaid is a federal program that provides health care coverage to millions of people, including low-income adults, children, pregnant women, people with disabilities, and elder adults. Medicaid is administered by the states but must comply with federal requirements. (Medicaid is not to be confused with Medicare, the federal program providing health coverage for people 65 years old or older and those with qualifying disabilities.)

California's Medi-Cal program comes in two “flavors”: Modified Adjusted Gross Income Medi-Cal (MAGI Medi-Cal) and non-MAGI Medi-Cal (also known as “asset dependent,” “means tested,” or “traditional” Medi-Cal.)

MAGI Medi-Cal eligibility, as the name suggests, depends on a person's modified adjusted gross income being less than a certain percentage of the federal poverty level (138% in 2022), but does not consider a person's assets.

Traditional Medi-Cal eligibility depends on a person's or couple's “countable” assets and income. Under limits set in 1989, the Medi-Cal recipient cannot own more than $2,000 in countable assets, or $3,000 for a married couple or registered domestic partners. Medi-Cal rules contain no mechanism for periodic adjustment due to inflation. (According to SmartAsset's Inflation Calculator, $2,000 in 1989 is equivalent to $4,292 today.)

However, not all assets are “countable.” For example, an applicant's primary residence (home), one motor vehicle, personal effects and household items are not “countable” against the asset limit, as are a number of other items. (See Medi-Cal General Property Limitations for a summary.)

Understanding the Higher Asset Limit When One Spouse Is in Long-Term Care

Spouses and registered domestic partners may have up to $3,000 in countable assets and qualify for non-MAGI Medi-Cal. However, if one spouse is in long-term care (called the “institutionalized spouse”) and the other spouse is not (called the “community spouse”), the asset limits are different. In this situation, each spouse is currently allowed $2,000 in countable assets, as they are not considered part of the same “family budget unit.” Also, the community spouse is allowed to keep a certain amount of property over the $2,000 limit as the community spouse's Community Spouse Resource Allowance (CSRA.) The CSRA is set each year by the California Department of Health Care Services ($137,400 for 2022, All County Welfare Directors Letter 21-34 (Dec. 23, 2021).)

The total amount of countable assets the community spouse may keep to avoid disqualification of the institutionalized spouse is the countable asset limit plus the CSRA. When the countable asset limit increases on July 1, 2022, the amount of assets the community spouse may retain will also increase.

Asset Spend-Down and the Look-Back Period

To the uninitiated, Medi-Cal planning might seem as simple as having the client “spend down” their countable assets to under the limit. However, to avoid giving away assets to qualify for Medi-Cal paid long-term care, federal rules impose a period of ineligibility for transfers of assets for less than market value occurring within the 30 months prior to the date a person applies for Medi-Cal. (California has not yet enacted regulations to implement the 60-month look-back period required by the The Deficit Reduction Act of 2005 (DRA) (Pub.L. No. 109–171, 120 Stat. 4).)

A Medi-Cal applicant making a disqualifying transfer of countable assets becomes ineligible for a period equal to the value of the asset divided by the statewide Average Private Pay Rate (APPR), up to a maximum of 30 months. Any partial months are rounded down. (The APPR is set by the CDHS each year and is $10,933 per month for 2022. See All County Welfare Directors Letter No. 22-05 (March 14, 2022).)

For example, if you make a gift of $200,000 to your child to qualify for Medi-Cal to pay for long-term care, you become ineligible for Medi-Cal for 18 months. ($200,000 gift / $10,933 APPR = 18.293 rounded down to 18.) The ineligibility period in California currently runs from the date of the transfer. (Upon implementation of the DRA, the ineligibility period runs from the date of the Medi-Cal application.)

A simple Medi-Cal qualification strategy is for the applicant to gift countable assets but retain sufficient assets to self-pay for long-term care for the ineligibility period. Simple, careful planning is required to ensure that the applicant does not run out of money. Another strategy is to convert countable assets to non-countable assets -- for example, by paying of a mortgage on, or making improvements to, the applicant's home. Often these two strategies are combined.

For spouses and registered domestic partners, ineligibility might be avoided if the applicant spouse transfers all their assets to the community spouse, and then the community spouse gifts assets until the countable assets are below the CSRA amount.

Changes to Eligibility and CSRA Effective July 1, 2022

On July 1, 2022, the asset limit for non-MAGI Medi-Cal will increase to $130,000 per person plus $65,000 per household member (up to a maximum of ten members.) (See All County Welfare Directors Letter No. 21-31 (Nov. 19, 2021).) This also means that the amount of non-countable assets the community spouse or domestic partner may retain increases from $139,400 ($2,000 asset limit + $137,400 2022 CSRA) to $267,400 ($130,000 asset limit + $137,400 2022 CSRA). (Id.) And, as currently planned, elimination of the asset test for traditional Medi-Cal will occur two years later July 1, 2024.

About the Author

James Burns

Estate Planning, Asset Protection, Business and Real Estate Transactions, nutraceutical Law and franchising:

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