There has long been a misconception that nursing homes and Medi-Cal planning are on opposing sides of the proverbial fence. That misconception is starting to change as many nursing homes begin to realize that Medi-Cal planning actually helps ensure that patients qualify for Medi-Cal. In turn this ensures that the patient’s financial obligation to the nursing home is covered. Without Medi-Cal planning, a nursing home can find itself stuck with an exorbitant bill that the patient cannot pay and that non-spouse family members are not obligated to pay. All too often that leaves the nursing home with an uncollectable bill, which is why many nursing homes are reconsidering their support for the concept of Medi-Cal planning. In order to better understand how nursing homes perceive Medi-Cal planning, consider a couple of common real-life scenarios:
Scenario One: A nursing home admits a patient who has applied for Medi-Cal. The nursing home is under the belief that the resident has spent down all of her assets to under the $2,000 limit in the state of residence, making the resident appear to be eligible for Medi-Cal benefits. Unbeknownst to the nursing home, the resident still owns a piece of property in another state that she has had listed for sale for over a year. The resident has listed the property as “best offer,” clearly indicating her willingness to accept any offer made on the land. Unfortunately, there have been no takers. In practical terms, the property is worthless if no one is willing to pay anything for it; however, because the property appraised for $10,000, Medi-Cal considers it a “countable resource.” Consequently, the resident’s application for Medi-Cal benefits was denied and the nursing home was stuck with the bill.
Had the resident consulted with a Medi-Cal planning attorney ahead of time, a number of Medi-Cal planning strategies might have been utilized that would have resulted in a better outcome for both the resident and the nursing home. Even transferring the property to the nursing home when she entered the home might have produced a better result because she would have then been approved for benefits right away.
Scenario Two: A woman enters a nursing home and immediately applies for Medi-Cal based on the fact that she believes she has reduced her “countable resources” to under the program limit of $2000 in her state of residence. Knowing this, the nursing home accepts her under the assumption that her application for Medi-Cal will be approved and the bill she is incurring will be covered. Both the patient and the nursing home are shocked when her application for benefits is denied. The cause of the denial was apparently a life insurance policy with a face value of just $3000 and a cash value of $2,500. Everyone involved believed the life insurance policy would be considered an exempt asset. However, in her state, if a life insurance policy has a face value that exceeds $1,500 then the entire cash value of the policy becomes a countable resource. Therefore, she would not qualify for Medi-Cal until the cash value of the policy was “spent down.” In the interim, the resident has incurred a hefty bill for her stay at the nursing home. To make matters worse, the nursing home was informed that even if she spent down the value of the policy tomorrow and re-applied, Medi-Cal would not cover the bill the applicant had accrued to date, leaving the nursing home with no way to collect on the bill.
This scenario highlights the need to consult with a Medi-Cal planning attorney before applying for benefits. Had the applicant done that she likely would have been advised to cash out the policy prior to applying and apply the funds to her nursing home bill. Had she done that, she would have been eligible for Medi-Cal right away and her entire nursing home bill would have been paid. Instead, the nursing home wound up stuck with a bill for several months of care that it will likely never collect.
As the cost of long-term care continues to climb and the number of older Americans continues to increase, it becomes more and more important for nursing homes and patients to work together to ensure that the cost of a patient’s care is covered. One way to do that is to work closely with a Medi-Cal planning attorney as early in the process as possible. Doing so will ensure that the facility providing care is paid, allowing everyone to focus more on the quality of care instead of the cost of care.