Many seniors that qualify for Medicare seek Medi-Cal eligibility late in their lives because Medicare does not pay for long-term care. The majority of elders will need help their activities of daily living eventually, so this is something everyone should take seriously.
In many instances, a person will apply for Medi-Cal while their spouse is still capable of independent living. Under these circumstances, the healthy spouse (community spouse in Medi-Cal parlance) is entitled to certain allowances.
They are updated annually to account for inflation, and the 2021 figures have been released. We will share them, but before we get there, we will provide an overview.
Countable Assets
Since Medi-Cal is a need-based program, there is a $2000 limit on assets, but there are some assets that do not count. Your home is one of them, and in California, there is no equity limit at all. There are home equity limits tied to Medicaid eligibility in other states, so this is a favorable arrangement.
One motor vehicle is not counted, and your personal belongings and items that you have around the house are exempt. You can maintain possession of wedding rings, engagement rings, and heirloom jewelry, and prepaid burial plots are not counted.
Up to $1500 of whole life insurance is permitted along with unlimited term life insurance. An applicant can set aside as much as $1500 to help cover their final expenses.
Medi-Cal Spouse Allowances
Now that you have a general understanding of the parameters, we can get to the point of this post.
When a single person is using Medi-Cal to pay for long-term care, they receive a $35 a month personal needs allowance. The rest of their income is contributed toward the cost of the care that is being received.
As we all know, married couples typically rely on two incomes, and this can be especially important for retired people that are living on fixed incomes. With this in mind, the program makes an allowance for healthy spouses that can live independently.
They can qualify for a Monthly Maintenance Needs Allowance, but there is a limit. The maximum allowance in 2020 has been $3216, and it is going up to $3259.50 next year.
The healthy spouse is also entitled to a Community Spouse Resource Allowance. This is half of the shared assets that are considered to be countable up to a certain limit. The current limit is $128,640, and next year it will be $130,380.
30 Month Look-Back Period
When it comes to the assets that are countable, you could fund an irrevocable Medi-Cal trust to develop a financial profile that will lead to eligibility. The principal would not count if you apply, but you could continue to receive income that is generated by assets in the trust.
Timing is the key to the successful execution of this strategy, because there is a 30 month look-back period in California. You are penalized and your eligibility is delayed if you divest yourself of assets within 30 months of the submission of your application for coverage.
This 30 month interim is another break that we get here in California. The look-back period in other states is a full five years.
If you violate this rule, the duration of the period of ineligibility would depend on the amount that you conveyed into the trust.
Let’s say that the state determines that the average cost for a month in a nursing home is $10,000, and you fund the trust with $100,000. That amount would have paid for 10 months of nursing home care, so your eligibility would be delayed by 10 months.
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