1. Medi-Cal for Estate Planners
Presentation by Janice Sternfeld
Law Office of Janice Sternfeld
1221 Farmers Lane, Suite 200, Santa Rosa
(707)

2. “Fast and Dirty Medi-Cal Primer”
MAGI Medi-Cal
Traditional Medi-Cal
Medi-Cal for Long-Term Care

3. MAGI-Medi-Cal
This is the “Medicaid Expansion of the Affordable Care Act”
Individuals under 65 who earn up to 135% of the Federal Poverty Level (FPL)
NO Asset Limit
Single individuals can earn up to $16,754 per year.
Two members of household can earn up to $22,715 per year.
Income limits increase with additional family members.

4. Traditional Medi-Cal Individuals who don’t qualify for MAGI Medi-Cal:
Because they are over 65
Because they receive Medicare (even if under 65)
Because their earnings exceed MAGI levels (but they will have a share of cost!)
NOTE: Asset AND Income limits

5. Eligibility for Traditional Medi-Cal
Asset Limits:
$2000 for a single individual
$3000 for a married couple
Exempt assets are not counted:
Home of any value
One Vehicle
Annuitized retirement accounts
See Medi-Cal handout in packet
Income Limits based on the “Aged and Disabled Federal Poverty Limits” (ADFPL)
Single—up to $1242 per month
Married—up to $1682 per month.
When income exceeds ADFPL, individual can still receive Medi- Cal as long as asset limits are met, but there’s a “Share of Cost”

6. Share of Cost is Draconian
Individual must spend all but the following amounts per month on health care otherwise covered by Medi-Cal before Medi-Cal will pay the first dollar.
Single Individual--$600
Married Couple--$934
Can you live in Sonoma County on $600 per month???

7. Strategies to Eliminate Share of Cost
Health Insurance is a deduction.
Purchase more expensive supplemental insurance
Most people have to wait for open enrollment
Purchase expensive vision and dental plans
NOTE: Medi-Cal will take over supplemental insurance payments without penalizing the recipient by increasing the income calculation.
If the individual’s income is close to the ADFPL, it’s always worthwhile to apply because certain other deductions may apply.

8. Medi-Cal for Long Term Care
Includes Medi-Cal for Nursing Home and Waiver Programs
Waiver programs are programs which provide care in lieu of institutionalization
Uses the same asset and income eligibility criteria as “Traditional Medi-Cal” but married couples can take advantage of “Spousal (Anti) Impoverishment Provisions.
Share of Cost Calculations are different:
Individual in a nursing home gets to keep only $35, remaining income is share of cost. Different shares of cost calculations for waiver programs.
Married couples use spousal (anti) impoverishment provisions to avoid impoverishing the “community spouse”

9. Spousal (Anti) Impoverishment Provisions
Institutionalized spouse may keep $2000 in non-exempt assets.
Home of any Value
Vehicle of any value
Annuitized retirement accounts
Wedding jewelry
$1,500 burial policy
(see Medi-Cal handout in packet)
Community Spouse may keep up to $126,420 in non-exempt assets and share the exempt assets with the institutionalized spouse. (Community Spouse Resource Allowance--CSRA)
CS may keep all income in his or her name.
CS may be able to keep some or all of IS income to reach the $3,161 per month Minimum Monthly Maintenance Needs Allowance (MMMNA)

10. Probate Code 3100 Petition
Community Spouse may petition the Court to increase the Community Spouse Resource Allowance
Community Spouse may petition the Court to increase spousal allowance (which essentially increases the Minimum Monthly Maintenance Needs Allowance).
Courts are favorable to these petitions for the support of the community spouse.

11. Waiver Programs
Medi-Cal has certain “Waiver Programs” which are intended to provide services to keep people OUT of nursing homes.
These programs provide services to maintain disabled individuals in the community when the only other alternative is nursing home care.
They can provide In Home Support Services, Case Management, Day Programs, and even some skilled nursing service in the home.

12. But . . .
Individuals had to meet traditional Medi-Cal asset and income tests to be eligible for waiver services.
HOWEVER . . .

13. Hidden in the Affordable Care Act . . .
A provision was included broadening the definition of “Institutionalized Spouse” to spouses who need certain Waiver Programs to remain safely in their homes.
This allows married couples to apply Spousal (Anti) Impoverishment rules to a spouse receiving certain services in the home—most notably In Home Support Services.
California ignored this provision until sued in 2017 (Kelley v. Kent)
Atypically, California quickly settled this litigation and issued an All County Welfare Director’s letter mandating extension of Spousal (Anti) Impoverishment provisions for certain Waiver Programs.

14. Spousal (Anti) Impoverishment Provisions can be applied to Certain Waiver Programs
Home and Community Based Waiver Programs—Sonoma County:
Community First Choice Option—provides In Home Support Services
Assisted Living Waiver—covers assisted living but EXTREMELY LIMITED
Multi-Purpose Senior Services Program—case management
Home and Community Based Alternatives Waiver—skilled care nursing and IHSS for very medically complex individuals who would otherwise need nursing home care
There are a few other Waiver programs that apply Spousal (Anti) Impoverishment provisions but they are not available in Sonoma County.

15. Hurry Up and Wait Can be a good thing
All of these waiver programs (except Community First Choice Option for IHSS) have LONG waiting lists, BUT . . .
If you get on a waiting list, you qualify in the interim for Medi-Cal and for In Home Support Services, while you are on the waiting list.
Medi-Cal pays Medicare premiums, lowers or eliminates deductibles and co-payments, and the combined formulary of Durable Medical Equipment and Drugs may be broader than your Medicare supplement.

16. Downsides to Waiver Programs
Once an individual is already on Medi-Cal, finding a nursing home bed, especially in Sonoma County, can prove difficult or impossible.
The difference for Nursing Home Revenue for a Medi-Cal bed vs. a Medicare Rehab bed is estimated to be $3.5 MILLION dollars per annuum. Who wants to have Medi-Cal residents filling up beds???
Not all medical providers (in fact, very few) accept Medi-Cal.
Potential recovery against the Medi-Cal recipient’s estate if the community spouse dies first.

17. Recent Developments in Medi-Cal
Spousal Impoverishment applied to certain waiver programs
Changes to Estate Recovery
Self-Settled Special Needs Trusts

18. Changes to Estate Recovery (2016)
Old Rule
Medi-Cal recovery against estate of surviving spouse
Recovery for every individual who received Medi-Cal after age 55
Recovery from estates, trusts, jointly owned property (except life estates), small estates
7% interest on voluntary recovery liens
New Rule
Recovery is forever barred if there is a surviving spouse
Recovery only for individuals over 55 who receive institutional care (this includes waiver programs)
Recovery ONLY from Probate Estates. No probate, no recovery. Hardship waivers for “homes of modest value”
Voluntary recovery lien interest limited to “annual average rate earned on investments on Surplus money” or 7%, whichever is less.

19. Self-Settled Special Needs Trusts
What do you do with a “windfall” (inheritance, legal settlement, lottery winnings, etc.)? Ages 18 to 65 only.
Old rule: A first party special needs trust could be set up by the beneficiary’s parent, guardian, or the court. NOT the individual.
New Rule: A disabled individual with capacity may establish his or her own first party special needs trust. This was signed into law as part of the 21st Century Cures Act by President Obama in December of 2016.

20. First Party Special Needs Trusts
Established with the assets of the disabled individual.
Irrevocable
Sole Benefit Rule Applies
Payback Trusts—Medi-Cal or other state’s Medicaid agencies must be paid back for any claims before any remaining proceeds are distributed on the termination of the trust.

21. Windfalls for individuals over 65
The only option is a Pooled Trust.

22. When is Medi-Cal Planning Appropriate?
The estate does not have to be “small”. Consider the cost of care-- $9000 to $12,000 per month for nursing home care.
Clients may exhaust their assets paying for in-home care, assisted living or RCFE before entering a nursing home. What seems like a medium to large estate may become depleted when care needs
Consider your clients’ goals for asset preservation.
Consider the needs of a widowed spouse.

23. Options for Medi-Cal Planning
Trusts and Durable Powers of Attorney for Finance can have flexible powers that can be activated when an individual may need Medi-Cal:
Gifting Powers (CAUTION: Gifting for Medi-Cal may cause ineligibility for certain VA benefits!)
Transmutation of assets to community spouse as his or her separate property.
Establishment of Irrevocable Trust (not often needed with new recovery laws).
Turning non-exempt assets into exempt assets

24. 3100 Petitions
Community spouses can petition the Court to increase spousal allowance or expand the Community Spouse Resource Allowance
Can request transfer of community property to the community spouse as separate property.

25. Long Term Care Insurance
Pros:
May cover all or some of the cost of care, allowing the beneficiary to remain in the community or reduce the cost of nursing home care.
Cons:
Expensive
Premiums can become too expensive for people on a fixed income—all premiums lost.
Typically covers only 3 -5 years, some people outweigh the benefit
Can be too little without an inflation rider
Waiting periods and difficulty in meeting benefit criteria

26. Veteran’s benefits Service Related Injury: California Veteran’s Homes
Provides some limited in home coverage, not tied to income or assets.
California Veteran’s Homes
I have no clue!
VA Pension—sometimes called “Aid and Attendance”
For veterans and their spouses when veteran served at least one day during wartime and was honorably discharged
Limited reimbursement of care expenses.
Asset and Income limits currently mirror Medi-Cal spousal impoverishment rules, even for a single veteran.

27. Exercise Caution using strategies
You can, but should you? Consider:
Capital Gains for inter vivos transfers
Difficulty finding Nursing home placement if strategies are employed before placement
Risk of loss of control of assets

28. But . . .
Does a very wealthy client really want to spend their last days in a Medi-Cal nursing home when there are other options?

29. Continuum of Care* Home care--can be the MOST expensive option!
Adult day care
Residential Care Facility for the Elderly
Assisted Living or Memory Care
Nursing Home