There is a lot of confusion and misinformation about how to qualify for Medi-Cal to help pay for nursing home costs.
Many people that would qualify don’t even bother applying and end up broke. Adding to the confusion is that California draft regulations are different than any other state.
Many people that would qualify don’t even bother applying and end up broke. Adding to the confusion is that California draft regulations are different than any other state.
When applying for nursing home benefits, Medi-Cal has only two categories for a person’s finances. It is either an asset or income.
Assets are further broken down as either countable or non-countable.
Approval is based on how much the applicant and spouse, if married, have in countable assets. It is not based on how much income you receive each month.
Thresholds
For 2020, a single person may have no more than $2,000 in countable assets.
This is increased to $22,000 for Japanese Americans if they can prove receipt of $20,000 redress payment for internment during WWII.
A situation that frequently arises is the single applicant may have their adult child on their bank account as a joint owner.
In cases such as this, Medi-Cal considers 100% of the account as the applicant’s, not 50%.
A married couple may not have more than $130,640 in combined countable assets.
This is increased to $170,640 for a married couple if both husband and wife received redress payments.
For approval, all accounts owned by either spouse are counted. There is no “separate property.”
Countable Assets
Examples of countable assets include accounts such as checking, savings, time deposits or money market.
Brokerage, stocks, bonds, mutual funds, annuities and life insurance cash value are also countable assets.
Vacant land and other real property are also countable. The value is determined by the net taxable value on the property tax bill not market value. This is beneficial if the property has been owned for a long time.
Time shares are a countable asset. Here valuation is more difficult. Obtaining help from the time share company is usually not available. This could be problematic.
Non-Countable Assets
Non-countable assets must be disclosed but are not figured in the calculation for eligibility.
Your home doesn’t count for qualification if that is where you lived before entering the nursing home regardless of value.
You could have lived on a boat, in a mobile home, tract home or mansion in Beverly Hills, if that is where you lived then it doesn’t count.
With the price of real estate in California today, this exemption could be worth $500,000 to a couple of million dollars or more.
Also not countable is the retirement account of the applicant if a periodic income such as a Required Minimum Distribution (RMD) is being taken.
For example, if the applicant has a $400,000 IRA and is receiving a monthly RMD, then the $400,000 doesn’t count as an asset.
The at-home spouse’s retirement account is a non-countable asset regardless of whether or not a distribution is being taken.
For example, if the at-home spouse has a $50,000 IRA, it is a non-countable asset. A periodic income for Medi-Cal purposes does not have to be taken.
Example
To see how all of these rules may be applied, let’s look at a hypothetical example of a married couple, Sam and Nancy.
Sam is 80 years old as is Nancy. He’s in a nursing home and Nancy is the at-home spouse. Sam’s monthly nursing home bill is $10,000.
They own a home which they have lived in for the past 40 years. It is paid off and has a market value of $700,000. It is titled in joint tenancy with rights of survivorship.
Together they have $150,00 in checking and savings. Sam has an IRA with a balance of $500,000. He is receiving his RMD monthly.
Nancy has $100,000 in her Roth IRA.
Both received redress of $20,000 each for internment during WWII.
Does Sam qualify for Medi-Cal to help pay for his nursing home bill?
The answer is “Yes.”
Here’s why.
As a couple they can have up to $170,640 in countable assets. Their only countable asset is $150,000 in the bank so they are below the threshold.
Because Sam is receiving his RMD monthly, his $500,000 IRA doesn’t count as an asset.
Nancy’s $100,000 Roth is also a non-countable asset. As the at-home spouse, she doesn’t have to take a distribution from her Roth.
Their $700,000 home doesn’t count as an asset because that’s where Sam lived before entering the facility.
They have a total of $1.45 million in assets but because only $150,000 is countable, Sam qualifies for Medi-Cal benefits to help pay the nursing home.
They don’t have to spend down or give away any assets in order for him to qualify. This is a huge financial burden that Nancy doesn’t have to worry about.
Knowing the rules if a healthcare crisis happens can be life changing for your family.
Karl Kim, CFP®, CLTC is the President of Retirement Planning Advisors, Inc. and a LTC Medi-Cal specialist. He is the author of “Don’t Go Broke Paying the Nursing Home” available on Amazon and video program of the same name. His office is located in La Mirada. He can be reached at 714-994-0599 or at www.RetirementPlanningAdvisors.com. Karl has successfully submitted Medi-Cal applications over the past 23 years with a 99.9% success rate. This is meant to be an educational article. Do not make any decisions solely on the information in this article. Consult your tax advisor, financial advisor or attorney before taking any action. We are not responsible for any inaccuracies or misinformation.
Assets are further broken down as either countable or non-countable.
Approval is based on how much the applicant and spouse, if married, have in countable assets. It is not based on how much income you receive each month.
Thresholds
For 2020, a single person may have no more than $2,000 in countable assets.
This is increased to $22,000 for Japanese Americans if they can prove receipt of $20,000 redress payment for internment during WWII.
A situation that frequently arises is the single applicant may have their adult child on their bank account as a joint owner.
In cases such as this, Medi-Cal considers 100% of the account as the applicant’s, not 50%.
A married couple may not have more than $130,640 in combined countable assets.
This is increased to $170,640 for a married couple if both husband and wife received redress payments.
For approval, all accounts owned by either spouse are counted. There is no “separate property.”
Countable Assets
Examples of countable assets include accounts such as checking, savings, time deposits or money market.
Brokerage, stocks, bonds, mutual funds, annuities and life insurance cash value are also countable assets.
Vacant land and other real property are also countable. The value is determined by the net taxable value on the property tax bill not market value. This is beneficial if the property has been owned for a long time.
Time shares are a countable asset. Here valuation is more difficult. Obtaining help from the time share company is usually not available. This could be problematic.
Non-Countable Assets
Non-countable assets must be disclosed but are not figured in the calculation for eligibility.
Your home doesn’t count for qualification if that is where you lived before entering the nursing home regardless of value.
You could have lived on a boat, in a mobile home, tract home or mansion in Beverly Hills, if that is where you lived then it doesn’t count.
With the price of real estate in California today, this exemption could be worth $500,000 to a couple of million dollars or more.
Also not countable is the retirement account of the applicant if a periodic income such as a Required Minimum Distribution (RMD) is being taken.
For example, if the applicant has a $400,000 IRA and is receiving a monthly RMD, then the $400,000 doesn’t count as an asset.
The at-home spouse’s retirement account is a non-countable asset regardless of whether or not a distribution is being taken.
For example, if the at-home spouse has a $50,000 IRA, it is a non-countable asset. A periodic income for Medi-Cal purposes does not have to be taken.
Example
To see how all of these rules may be applied, let’s look at a hypothetical example of a married couple, Sam and Nancy.
Sam is 80 years old as is Nancy. He’s in a nursing home and Nancy is the at-home spouse. Sam’s monthly nursing home bill is $10,000.
They own a home which they have lived in for the past 40 years. It is paid off and has a market value of $700,000. It is titled in joint tenancy with rights of survivorship.
Together they have $150,00 in checking and savings. Sam has an IRA with a balance of $500,000. He is receiving his RMD monthly.
Nancy has $100,000 in her Roth IRA.
Both received redress of $20,000 each for internment during WWII.
Does Sam qualify for Medi-Cal to help pay for his nursing home bill?
The answer is “Yes.”
Here’s why.
As a couple they can have up to $170,640 in countable assets. Their only countable asset is $150,000 in the bank so they are below the threshold.
Because Sam is receiving his RMD monthly, his $500,000 IRA doesn’t count as an asset.
Nancy’s $100,000 Roth is also a non-countable asset. As the at-home spouse, she doesn’t have to take a distribution from her Roth.
Their $700,000 home doesn’t count as an asset because that’s where Sam lived before entering the facility.
They have a total of $1.45 million in assets but because only $150,000 is countable, Sam qualifies for Medi-Cal benefits to help pay the nursing home.
They don’t have to spend down or give away any assets in order for him to qualify. This is a huge financial burden that Nancy doesn’t have to worry about.
Knowing the rules if a healthcare crisis happens can be life changing for your family.
Karl Kim, CFP®, CLTC is the President of Retirement Planning Advisors, Inc. and a LTC Medi-Cal specialist. He is the author of “Don’t Go Broke Paying the Nursing Home” available on Amazon and video program of the same name. His office is located in La Mirada. He can be reached at 714-994-0599 or at www.RetirementPlanningAdvisors.com. Karl has successfully submitted Medi-Cal applications over the past 23 years with a 99.9% success rate. This is meant to be an educational article. Do not make any decisions solely on the information in this article. Consult your tax advisor, financial advisor or attorney before taking any action. We are not responsible for any inaccuracies or misinformation.
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