Demystifying Medi-Cal

I wandered into the swamp of Medi-Cal in a recent column, answering one question that triggered a lot of letters, phone calls and e-mail messages. So I’m devoting today’s column to the mysteries and complexities of this federal-state program designed to pay medical bills for the poor.

Most of the confusing questions deal with eligibility for long-term care in nursing homes under Medi-Cal’s “medically needy” program. Medi-Cal helps pay for the high cost of nursing home care, but only after a favorable eligibility ruling.

For millions of senior citizens and their families, the cost of a nursing home--$40,000 a year and more--can wipe out a lifetime of savings. Knowledge of the rules can help you legally preserve at least a portion of your money while still becoming eligible for help from the government.

There is no specific income level for eligibility. I mistakenly cited a specific number for the income a person may have and still qualify.

Instead, under the “medically needy” program, Medi-Cal works on a “share of cost basis,” with the beneficiary paying a portion of nursing home charges and the state picking up the rest of the tab.

In Southern California, a typical nursing home costs $3,600 a month when you are paying out of your own pocket. However, the nursing home will likely charge Medi-Cal $2,400 a month.

Suppose you are a single person and your monthly income is $1,200. You are no longer able to live alone, so enter a nursing home. You must use your own money to pay as much of the charge as you can afford. If you qualify, Medi-Cal lets you keep $35 a month as a personal-needs allowance, and also the cost of any Medi-gap supplemental insurance (policies many senior citizens buy to help with medical costs). Assume that the Medi-gap policy costs $150 a month. The rest of your income--$1,015 a month-- goes to the nursing home, and Medi-Cal will pay the balance of the $2,400 a month cost if you are ruled eligible.

However, Medi-Cal will start paying the nursing home bill only after you satisfy the main requirement for eligibility, which is an asset test. You can’t have more than $2,000 in countable financial assets. Your house, car and furniture are not counted.

An Individual Retirement Account does not count as long as you are making regular withdrawals. The same is true for a 401K account, or salary set-aside account from the company where you worked. If you have $100,000 in an IRA and are taking out $500 month, the $500 counts toward income, but the $100,000 balance does not count as an asset. So make sure you are drawing some principal and interest out of those IRA and 401K accounts on a regular basis to comply with California law.

Stocks and bonds outside your IRAs, and savings accounts, certificates of deposit and checking accounts are normally considered countable assets.

There are many legitimate ways to reduce your financial assets to help reach the eligibility goal of $2,000. You can spend money fixing the house, buying new furniture, purchasing a new car, taking a vacation trip or putting money aside in a special burial account.

On the application form, always say “yes” to the question “Do you intend to return home?” That protects your house from being counted as an asset. Even if a person is ill or incompetent, the relative filling out the application should say the person intends to return home.

When a couple is involved, there are special financial protections. For example, a husband goes into a nursing home and the wife remains in their home or apartment. She is entitled to have $2,019 a month in income, and $80,760 in assets.

Suppose Jane Smith has $500 a month in Social Security and John Smith has $1,000 a month from Social Security and $750 from a pension, for total family income of $2,250 a month.

John goes into the nursing home. Jane gets to keep her Social Security, his Social Security, and $519 of his pension, to provide her the monthly income allowance of $2,019.

Even though John’s name was on the Social Security and pension checks, Medi-Cal allows his spouse to have the money. (Long before someone becomes ill, both spouses should sign powers of attorney for each other, to make it easier to get access to bank accounts, and pension checks if one goes into a nursing home.)

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Some questions from readers:

Question: My father has a home in East Los Angeles, which he has paid off and is worth about $100,000. If he goes into a nursing home and sells the house for $100,000, can he give the money to his children? Or does it go to Medi-Cal to pay for his nursing home care?

Answer: Your father should only sell his house if that is what he wants to do. But if he decides to sell the property, the $100,000 becomes a countable asset, and would have to go to pay his nursing home bills. If he wants to give the $100,000 in cash to his children, and does so, it will make him ineligible for Medi-Cal for 29 months.

A better choice could be to transfer the home to the children. In California, you can always transfer an asset that doesn’t count for Medi-Cal eligibility. If he gives the home directly to the children, however, they could be subject to substantial capital gains taxes. Check with an elder law attorney about a transfer with a “retained life estate” or “occupancy agreement” that might minimize taxes.

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Q: My husband suffered a stroke 16 years ago and had to be put in a convalescent home on Medi-Cal. The house was deeded to me about 10 years ago. (My husband has died.) Now I am alone and still working because my Social Security isn’t enough to pay the mortgage and living expenses. Can I sell the house and buy a home in Southern California where my daughter lives? Or can I invest the money to provide rent and living expenses, or will Medi-Cal claim the proceeds?

A: The home belongs to you. You can sell it, without having to contribute to Medi-Cal for your late husband’s nursing home expenses.

However, if he had not deeded the home to you during his lifetime, Medi-Cal could potentially assert a claim against his estate for his half of the value of the property. Once again, this shows the importance of planning when a person goes into a nursing home.

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Q: My wife had a major stroke this past year, and I worry about being able to be her caregiver when I get older (currently I am 58). If she has to go into a long-term care facility, would it be possible for us to divorce, for me to take the majority of assets in my name and have her apply for Medi-Cal, or is spending almost all your assets the only easy to put her on Medi-Cal?

A: Divorce should be a last resort. Under Medi-Cal’s spousal protections (one spouse in the nursing home, one at home), you have significant financial protection without ending your marriage.

First, any money you earn from a job belongs to you exclusively. Financial assets of at least $80,760 are also protected. And potentially you could keep significantly more money.

Remember, you are guaranteed $2,019 a month in income as a spouse living in the community if your wife goes into a nursing home. If you can’t reach that income figure from your regular salary, or pension, you are entitled to keep enough financial assets to generate the income.

Suppose you retire, and your income is $1,000 a month. You are entitled to $1,019 more a month. If you have countable financial assets worth $180,000, they could generate income of $900 a month, assuming a reasonable interest rate of 6%. In these circumstances, you would be allowed to keep not only $80,000 in countable assets according to the regular rule, but also an additional $100,000, for a total of $180,000.

The Medi-Cal eligibility workers are required first to declare that you have too many assets. But you should then file for a “fair hearing” for increased spousal allocation, and you should be able to keep the full $180,000.

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Q: I have an adult son, 34 years old, who has been diagnosed with obsessive compulsive disorder. He has not worked for years. He has trouble doing daily things, like showers, shaving, etc., without supervision. But I work full time, so it is very difficult. His medication costs $150 every two weeks, and the doctor visits are $125. How can I get him on Medi-Cal?A few years back I tried to qualify for SSI, but he passed the very easy verbal test (and wasn’t approved).

A: You need to try again for Supplemental Security Income, the special federal-state welfare program for the aged, blind or disabled. Someone who is eligible for SSI would automatically qualify for Medi-Cal, which would help pay for your son’s medication and visits to the doctor. This time, consult with a Legal Aid or Legal Services attorney, who can provide guidance on the best way to apply for the program, and the best way to describe your son’s condition on the application. Sometimes you need to know the precise language that will meet the bureaucratic rules.

(Special thanks to Pat McGinnis, executive director of California Advocates for Nursing Home Reform, based in San Francisco, and Ed Long, executive director of Healthcare and Elder Law Programs, based in Torrance, for helping with this column.)

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For Answers and Advice

Here are some sources to help you manage the Medi-Cal maze:

* Bet Tzedek (“House of Justice” in Hebrew) Legal Services provides free advice to low-income residents of all racial, religious and ethnic backgrounds in Los Angeles County: (213) 939-0506 or (818) 769-0136. Web site: https://www.comquest.com/bet-tzedek/.

* California Advocates for Nursing Home Reform: (800) 474-1116. They provide direct advice and have a statewide list of elder law attorneys.

* South Bay residents can call H.E.L.P. (Healthcare and Elder Law Programs): (310) 533-1996. It provides seminars, private consultations, written resources and service referrals. Web site: https://www.palosverdes.com/helpcorp/index.htm.

* For residents of Sacramento, Yolo, El Dorado and Placer counties, the Health Rights Hotline is a free service for consumers in all types of health plans, public and private, ranging from Medi-Cal to Medicare and HMOs. Call (888) 354-4474 or TDD (916) 551-2180.