No one wants to end up in a nursing home but based on the way that our health care system works, you may end up there like it or not.
According to the U.S. Department of Health and Human Services, more than one-fourth of people age 65 or older will need more than $100,000 of long-term care. 15% will require care of $250,000 or more.
If someone needs care of 5 years or more in a facility for Alzheimer’s or dementia, the bill could top out at $500,000.
How would this cost be paid? The wealthy can pay by simply writing a check. The less fortunate can have the government cover the cost.
But what about the middle class?
For many, their life savings would be depleted in a short time. There would be no legacy for their kids or grandchildren. If there was a spouse at home, their standard of living would suffer.
The answer lies in understanding how the long-term care Medi-Cal system qualification rules actually work.
There is much misinformation being bandied about. Here are some of the more common myths and the real truth.
I HAVE TO BE BROKE
The truth is that approval is based on how much you have in countable assets “not” how much you have in income.
Even better, some assets are countable and some are not.
Here’s the surprise. For qualification, your home does not count as an asset regardless of value.
In addition, retirement accounts are also non-countable if a regular income such as a Required Minimum Distribution (RMD) is being taken from them.
Typically, these are the largest two assets that a middle-class individual owns, and the good news is that these assets don’t count for LTC Medi-Cal eligibility.
Countable assets include checking, savings, money market and CD accounts. Investment accounts such as brokerage, mutual funds and annuities are also countable. So is the cash value in a life insurance policy.
A single person can qualify if they have less than $2,000 in countable assets. Notice that I said “assets” not income.
A spouse of a married couple can qualify if the couple has less than $128,420 in combined countable assets. That’s a fair amount of money. This demonstrates that you don’t have to be broke in order to qualify. It’s knowing the rules that’s important.
It gets better. You are allowed to exempt an additional $20,000 of otherwise countable assets if you can provide proof that you received redress for internment during WWII.
Have more in countable assets than the limits? Don’t despair. There are legal strategies that allow you to protect your assets and still be able to qualify for Medi-Cal benefits immediately in many cases.
I HAVE TOO MUCH INCOME
As we just discussed, approval is based on how much you have in countable assets “not” income.
Not being able to qualify because of too much income seems to be a myth prevalent in the Japanese speaking community.
How does income figure into the LTC Medi-Cal formula?
Very simply, your monthly income is used to pay your share of the monthly nursing home costs. Medi-Cal pays the rest.
For a married couple the at-home spouse is allowed to have a “minimum” monthly income of $3,161 per month. Any shortage is made up from the Medi-Cal applicant’s income.
For example, the at-home spouse has a monthly income of $2,161. This is a monthly shortfall of $1,000.
The Medi-Cal spouse has a monthly income of $2,000. Of this, $1,000 must go to the at-home spouse. The remaining $1,000 less $35 for a “needs allowance” or $965 is paid to the nursing home as the Share of Cost (SOC).
If the private pay rate for the facility is $10,000, the Medi-Cal beneficiary pays just the SOC ($965). This is a great weight off of the shoulders of many families.
The myth is that if you own a home, you can’t qualify for Medi-Cal.
Another is that Medi-Cal is going to take your home.
Another is that you have to sell your home or give it away.
Whatever the myth, it all started because many families were forced to sell the family home after the parent on Medi-Cal died because they didn’t know that, although the home doesn’t count for qualification, it was still subject to recovery.
Because they didn’t know this, they left the parent’s name on the title. After the parent died that was on Medi-Cal, they were forced to sell the family home in order to pay back Medi-Cal.
As an unfortunate result of believing the myths, people that could have been on Medi-Cal never end up applying and wind up depleting their life savings, including selling their home.
The truth is that there were and still are strategies to prevent this from happening. You just have to know the rules.
What is recovery? Think of Medi-Cal as a loan program. While you’re alive, Medi-Cal will help to pay your nursing home bill. But after you die, they want their money back. This is called recovery.
What can be recovered against is your estate at time of death. In simple terms, this would be any asset that had your name on it when you died.
As of January 1, 2017, if the asset that has your name on it and is not probated, then it cannot be recovered against. For example, if your home is titled in the name of your living trust, Medi-Cal can’t recover against it. If your checking account is titled jointly with your child for instance, Medi-Cal can’t get it.
This doesn’t mean that recovery has been eliminated. It just means that it is easier now to avoid it.
These are some of the more common myths about the Long-Term Care Medi-Cal program. The bottom line is that California middle class families have an excellent option to help pay the nursing home bills, if you know the rules.
When should you start planning?
As soon as possible.
Not everyone ends up needing long-term care in a nursing home. But if you do, having your financial affairs organized ahead of time lifts a huge weight off of your spouse and family’s shoulders.
For a list of things to have handy, please see my previous articles in December of each year or email the office and we will email you the list.
Families can save thousands even tens of thousands of dollars each month on their nursing home bills. Knowing the rules for the long-term care Medi-Cal program will allow you to protect your home, life savings and retirement accounts for your spouse and family.