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The scenario is all too familiar – mom has been living alone, has dementia and is no longer able to live by herself or care for herself. Her physician has indicated that it is time to consider a facility to provide for her ongoing needs because providing in-home care is not feasible due to cost or the level of care needed. The doctor has recommended skilled nursing care for her.
So, now that a skilled nursing home appears necessary, how is mom going to pay for this care? The average private pay rate for skilled nursing homes in California is $7,092.00 a month. But the sad truth of the matter is that skilled nursing care in our area can easily exceed $8,000.00 a month. Mom has some assets, a home and maybe a limited amount of money in the bank. What are Mom’s options for paying for the medical care she requires?
When this issue arises, inevitably the family asks about Medicare, which is really of little or no assistance.
Medicare is a federal program that serves the health care needs of the elderly and some non-elderly individuals with disabilities without regard to their financial circumstances. The program covers individuals over the age of 65 that have paid into Social Security, or those under 65 who are eligible for Social Security by being disabled for the past two years. Under the Medicare program, if mom had been admitted to an acute care facility (hospital), her doctor might discharge her to a skilled nursing facility for rehabilitation for a brief period of time. Medicare will pay 100% of the skilled nursing home cost for the first 20 days and, thereafter, the patient becomes responsible for a co-payment for the time spent in the facility up to 100 days. This coverage is for rehabilitation only and not custodial care.
It is not uncommon for a patient to be admitted to a hospital following a medical episode such as a stroke, a fall or heart problem and then be discharged to a skilled nursing facility for rehabilitation for a limited period of time. The patient will receive a notice from the skilled nursing facility that the Medicare benefit will terminate after the first 20 days and that the patient will then be a “private pay” patient. If the patient cannot or chooses not to private pay they will have to leave the facility. If the patient suffers from dementia or Alzheimer’s and the doctor has indicated that a return home is not possible, the family is left scrambling for alternatives.
Essentially, the family has two options for payment – private pay to the facility at its going rates or applying for the Medi-Cal Long-Term Health Care Benefit.
Medicaid, which is different from Medicare, is the primary federal program that provides health care benefits to individuals with low income and limited assets, including children, parents, pregnant women, elderly people and those with disabilities. Medi-Cal is California’s version of the Medicaid program and is a federal and state cooperative program. While the Medicare and Medi-Cal programs are not related, some people may qualify for both. Medi-Cal is means tested and is generally available for public assistance recipients and other persons of very limited resources. While people from a varied number of categories can be eligible for Medi-Cal, for purposes pertinent to this discussion, Medi-Cal covers individuals that are “medically needy,” such as medically indigent adults who are in skilled nursing, so long as their income and resources are within the Medi-Cal limits. To be eligible for Medi-Cal, the individual may not have “countable” resources in excess of $2,000.00.
Unlike Medicare, Medi-Cal is available to pay for custodial care in a skilled nursing facility if the patient meets eligibility requirements. Medi-Cal does not, however, cover custodial care in an assisted living or board and care facility. Under current law, there are various legal strategies available to assist people in meeting those eligibility requirements that make them medically indigent. Traditional estate planning vehicles such as revocable living trusts are generally not of assistance in implementing these strategies. If it is possible that a client or family member may need to utilize the long-term care benefit, an elder law attorney familiar with the Medi-Cal requirements should be consulted.
To complicate matters further, the Medi-Cal eligibility requirements will change at some point in the not so distant future. In 2005, Congress passed on a partisan vote, the Deficit Reduction Act (DRA). The DRA mandated states to modify their Medicaid (Medi-Cal in California) regulations and statutes in ways that will make qualifying for the long-term care benefit exponentially more difficult. At this time, California has not yet implemented the DRA provisions, but it is expected that regulations implementing the provisions will occur sometime later this year. The likely effect of such implementation is that the process for qualifying for the long-term care benefit in California will become substantially more difficult and complex.
Getting a client or their loved one eligible for the Medi-Cal long-term care benefit is really only half the battle. After the death of one that received benefits, the Department of Health Care Services (DHCS), the state agency that administers the Medi-Cal program, may have the ability to recover the sums paid to the recipient by initiating an action to enforce an Estate Recover Lien against the decedent’s estate. The DHCS has a long history of being fairly aggressive about recovering benefits that have been provided to Medi-Cal long-term care benefit recipients.
Many families who are able to obtain eligibility for their loved one are shocked after the loved one passes away to find that the family home or other assets are subject to an Estate Recovery Lien by DHCS in the hundred- thousand dollar-plus range. They usually find out about the existence of the lien when they are served with a complaint for recovery by the California Attorney General’s Office on behalf of DHCS. The lien attaches to the real property even though it is not recorded, and if the property was in a living trust or in joint tenancy, the lien follows the property to the owner post death. The only way to avoid the lien is for the property not to be in the recipient’s name as of the date of death. This issue alone should point out the importance to estate planners to make sure that there are very good gifting provisions in trusts and durable powers of attorney that allow gifting for medical eligibility and Estate Recovery Lien avoidance.
But be wary! If the gift of the recipient’s property is construed to be an ineligible gift, it can create periods of ineligibility equal to the value of the ineligible gifts per day divided by the Average Private Pay Rate for nursing home care in California – currently $7,092.00.
While we can always argue about whether people should be allowed to escape the requirement to pay back the State for the Medi-Cal benefits they receive, few would argue with the notion that all of us should explore and be able to claim every legitimate tax deduction which is allowable to reduce the amount of our taxes. This is what elder law attorneys do – they assist clients and their loved ones in utilizing allowable and legitimate strategies to create eligibility for the Medi-Cal long-term care benefit and to legally avoid the Estate Recovery Lien for benefits which they have received.
Download the MCLE Self-Study test form here: Earn one hour of General MCLE credit by reading the article above and answering the questions of the Self-Study MCLE test. Send your answers, along with a check for $20 ($30 for non-members), to the address on the test form.
Ron Mullin, past president of CCCBA and a lawyer in this county for over 30 years, dedicates a significant amount of his practice to estate planning, wills, trusts and elder law. He is also a mediator and arbitrator for disputed cases serving on ADR panels for the First and Third District Courts of Appeal as well as Alameda and Contra Costa Counties.
 Medi-Cal Eligibility criteria available online at: http://www.canhr.org/factsheets/medi-cal_fs/html/fs_medcal_overview.htm#B
 See California Code of Regulations, Title 22 provisions available online at: http://www.canhr.org/medcal/PDFs/RecoveryCurrentRegs0607.pdf
 Medi-Cal Recovery FAQs available online at: http://www.canhr.org/factsheets/medi-cal_fs/html/fs_medcal_recovery_FAQ.htm
 Spending Down/Gifting Assets discussion available online at: http://www.canhr.org/factsheets/medi-cal_fs/html/fs_medcal_overview.htm#E