If you are considering applying for Medi-Cal, there are a few things you should know about the eligibility requirements. One important aspect is often referred to as the “five year look back” Medi-Cal rule. This penalty period applies when an applicant is seeking long-term care coverage. This part of the eligibility process can lead to a delay of benefits if you are not careful.
The timing of property transfers is critical
Medi-Cal is, what is known as, a “payer of last resort.” This means that all other sources of payment for an applicant’s medical care, must be exhausted before Medi-Cal will begin to pay for long-term care expenses. If you give away any of your property or assets shortly before applying, you may be ineligible for long-term care benefits for a five-year period after your application is accepted. In determining whether this penalty period applies to you, the Medi-Cal agency will scrutinize any transfers you made during the five years prior to your application, no matter how well-intentioned they may have been. However, if you need acute health care, such as hospital or physician services, you may still be eligible to receive those benefits.
Why are property transfers investigated?
The reality is that some individual, in anticipating the need for long-term health care, give away their assets to relatives or others, in an effort to reduce the value of their estate. This way, they are not required to give up all of their assets, just to qualify for long-term care benefits under Medi-Cal.
Medi-Cal does not look favorably on these types of transactions, because as they see it, those assets could have been used to pay for the individual’s own care. Therefore, the law not only discourages, but actually penalizes individuals for giving away their assets to avoid losing them to Medi-Cal. If you transfer assets within five years of your application for long-term care benefits, Medi-Cal will likely withhold or delay your benefits.
What types of property transfers are subject to the penalty?
A federal law known as the Deficit Reduction Act, passed in 2005, requires each state’s Medi-Cal agency to impose a period of ineligibility on anyone who gave away their assets within five years of their application for Medi-Cal. How Medi-Cal defines the term “asset transfer” is extremely broad. It includes gifts as well as charitable donations, the sale of any assets for less than fair market value, and forgiving a debt owed to you.
How does the five year look back Medi-Cal rule work?
The “look back” period beings when you apply for Medi-Cal, not on the date you transfer assets or make gifts. The length of time you remain ineligible or the “penalty period,” is contingent on the value of property you transferred. Your state Medi-Cal agency will divide the amount of the assets you transferred by the average monthly cost of nursing home care in your area. Let’s say, for example, you transferred a house to your son that was worth $100,000. If the average cost of nursing home care in your area is $10,000 a month, then your penalty period would be 10 months.
Exceptions to the five-year look back period
The good news is, there are a few assets that are considered exempt. In other words, certain types of assets are not considered in determining eligibility for long-term care Medi-Cal coverage. For example, gifts to spouses and disabled children are excluded. The best thing to do is to avoid making gifts and transfers of property, if you anticipate needing nursing home care in the future.
If you have questions regarding Medi-Cal planning, or any other estate planning needs, please contact the Schomer Law Group either online or by calling us at (310) 337-7696.
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