MediCal 101 – The Three Phases of MediCal for Long Term Care (updated for 2017)

When a person needs to be in a Skilled Nursing Facility (SNF) and they cannot afford to private pay and if they did not obtain Long Term Care Insurance, then in the State of California they would look to Medi-Cal as a possible payment solution.

Medi-Cal is California’s Medicaid program. This is a public health insurance program which provides needed health care services for low-income individuals including families with children, seniors, persons with disabilities, foster care, pregnant women, and low income people with specific diseases such as tuberculosis, breast cancer or HIV/AIDS, among others. Medi-Cal is financed equally by the State and Federal governments. So while Medi-Cal does provide for other medical needs for indigent people – this note is going to focus solely on utilizing Medi-Cal as the primary source to cover SNF or Nursing Home care (it does not cover the limited IHSS part of the Medi-Cal program either). While Medi-Cal is California’s implementation of the Federal Medicaid program – how we implement that program and what people can and cannot do in California has nothing to do with how this program works in other states, nor what planning techniques people in other states would employ.

When a person is no longer able to care for themselves at home, they may be ordered by their Doctor to be admitted into a Skilled Nursing Facility. There are many other types of places that “seniors” may live and get care- such as Board and Care Homes; Residential Care Facilities; Assisted Living Facilities; etc. However one important note is that the Medi-Cal benefit for “long term care” ONLY covers SNF level of care. Generally speaking the only way to gain admission into a SNF level of care facility is with a Doctor’s order.  There is a limited off-shoot of Medi-Cal for Long Term Care known as IHSS – or In-Home Supportive Services – this article is not addressing that program.

So, assuming you have a loved one who will qualify medically for a SNF and assuming that they cannot private pay nor do they have private long term care insurance – they would most likely look to Medi-Cal to cover those costs. In the Bay Area it is not uncommon for a private pay rate for a bed in a SNF to run $8,000 to $11,000 or more per month.

The process of Medi-Cal can be broken down into three distinct phases. The rules are slightly different for Single People and Married Couples.  This article is specifically about individuals.

The First Phase of Medi-Cal is the Qualification Phase.

There are two separate prongs to this phase. This first is – do you qualify Medically? If you are 65 years of age or older, blind or disabled AND your doctor thinks you need to be in a SNF – then you meet this prong. The second prong of the first phase is – do you qualify asset wise? In essence Medi-Cal is supposed to cover “poor” or “indigent” people and Medi-Cal has a list of exempt assets that a person can own and be considered “eligible”. At this time in the State of California there are no income limits for this FIRST PHASE of qualification.

In a nutshell the primary assets that a person can CURRENTLY own and be considered eligible for Medi-Cal SNF coverage are – One home of any value (if/when the law changes this will be capped at a maximum $750,000.00 assessed value); one car of any value; term life insurance; retirement accounts of any value – so long as minimum distributions are actually being taken; pre-paid burial accounts; and personal possessions. If the potential applicant is a single person then a MAXIMUM of $2,000.00 liquid assets and (if the applicant is married then their well spouse can keep a MAXIMUM $120,900.00 (in 2017) known as the Community Spousal Resource Amount (CSRA)).

So – if the person qualifies medically and asset wise – and they are admitted to a SNF, then Medi-Cal will cover or pay for that bed. That will lead to the Second Phase – otherwise known as The Share of Cost.

Once the person has been admitted and is on Medi-Cal one of the first benefits of the Medi-Cal coverage is that it caps the monthly expense of that bed to something known as the Annual Private Pay Rate (APPR). This amount is currently $8,515.00 (2017). That means that regardless of what the institution could charge a private paying person – Medi-Cal is only going to pay a maximum of $8,515.00, and NO ONE is responsible or liable for the difference – ever. SO if the party had been paying $10,500.00 per month privately – after Medi-Cal eligibility that same bed will only be $8,515.00 and no one is ever going to have to pay or cover or be responsible for the difference of $2,015.00 per month.

However, while Medi-Cal will pay up to a maximum of $8,515.00 per month – in reality they will be paying something less than that and that is because during this phase – the Share of Cost Phase – any and all income that the person in the SNF receives – from any sources – MUST be tendered to the Nursing Home. The party can keep $35.00 per month – but that is all. So for example, if the person in the SNF receives social security and possibly a pension or even rental income and if all of those checks are made payable to that person and the total monthly amount of monthly income is $4,035.00, then the party in the SNF gets to keep the $35.00 and the $4,000.00 remaining is given to the SNF and so the DIFFERENCE or $4,515.00 will then be covered by the Medi-Cal benefit.

That brings us to the THIRD PHASE of Medi-Cal coverage – otherwise known as ESTATE RECOVERY.

Let’s say that our person was in the SNF and had Medi-Cal coverage for 10 months and during those ten months Med-Cal paid the SNF $4,515.00 or a total of $45,150.00. After the person who was receiving the Medi-Cal benefits passes away the State of California through the Department of Health Services (DHS) can make a claim against that now deceased person’s estate for the lesser amount of either – what they paid – in this case $45,150.00 or the value of the person’s estate – that is going to go through PROBATE. Whichever is less.

So if in this case when the person passed away they still owned their home, in their own name and it was subject to Probate and assuming it was worth $400,000.00 on date of death – then the DHS will be able to collect their full claim of $45,150.00 because it is LESS than the value of the decedent’s probate estate of $400,000.00.

On the other hand, if the party died and they had no assets in their name that were subject to PROBATE, then the DHS claim of $45,150.00 is greater than the probate estate which in this fact pattern in 0 and they will recover NOTHING from this estate and again NO ONE is liable for the difference.

IN January 2017 there were very consumer friendly changes enacted regarding this Third Phase of Medi-Cal – or Estate Recovery.  AND for all individuals who die on January 1, 2017 or later – ONLY assets that are subject to a PROBATE are recoverable.

What this means in plain English is that IF a person who needs to use Medi-Cal for long term care owns a home – ALL they need to do now to ensure not Medi-Cal recovery is to put their home in a Revocable Living Trust!!!  This is now one more reason why people in California who own Real Estate should strongly consider utilizing a Trust based Estate Plan over simply relying on a Will to document their wishes.

This is a very cursory overview of the Three Distinct Phases of Medi-Cal benefits for SNF care. It does not get into the different planning techniques nor does it go into detail on the variables of a single person vs. a married couple.

Each person has an individual set of facts and circumstances and any Medi-Cal planning should ideally be done in conjunction with assistance from professionals who are truly well versed in the most current laws regarding Medi-Cal.

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