Earlier this year, the California Advocates for Nursing Home Reform along with four other senior advocacy groups called upon Congress to abolish the Medicaid/Medi-Cal estate recovery mandate.
In order to understand the relevance of this petition, you have to digest some information about senior citizens, nursing home care, and Medicare.
Long-Term Care Costs
When you make FICA or self-employment tax contributions to the IRS, you are earning retirement credits. You get one credit for every $1470 in earnings up to a maximum of four credits per year.
When you have 40 credits, you will qualify for Social Security and Medicare when you reach the eligibility age. For Medicare, the eligibility age is 65, so the program is specifically designed to meet the health care needs of senior citizens.
Nearly three-fourth of elders will receive some form of living assistance at some point, and over 30 percent will require nursing home care. When you put all this together, you would have to assume that Medicare is set up to cover nursing home care for those that need it.
In reality, this is not the case. Medicare does not pay for long-term care, but Medi-Cal will cover these expenses if you can gain eligibility. It is a need-based program, so there is $2000 asset limit.
You can obtain eligibility by divesting yourself of assets, and this is done by many people. However, advanced timing is necessary because there is a 30 month look back period. After you transfer assets out of your name, you will be ineligible for Medi-Cal for 30 months.
Home Ownership and Medi-Cal Estate Recovery
Your home is not a countable asset for Medi-Cal purposes, so you could qualify as a homeowner. If you do, the home would be part of your estate after you pass away. There is a Medi-Cal estate recovery mandate, so the program can put a lien on the property after your death to recoup their losses.
Economic Impact on Low-Income Families
Regardless of your income level, your home is probably your most valuable asset, but this is especially true for people of modest means. Imagine if your home was the only item of value that was left to leave to your loved ones.
You would be in a position to pass along a piece of property that would be life-changing for your surviving family members. The California Advocates for Nursing Home Reform and the other groups pointed this out in their plea to Congress.
Their argument is bolstered by a very surprising statistic. This mandate is devastating many families, but Medicaid estate recovery efforts in the United States recover just .55 percent of their fee-for-service spending. They contend that it’s doing no real good, but it is doing a lot of harm.
It is possible to gain eligibility for Medi-Cal as a homeowner if you have the foresight to implement a plan with the assistance of an elder law attorney. You could convey your home into an irrevocable trust at least 30 months before you require long-term care.
A life estate is another option that can be right for some people. If you have a life estate, you could remain in the home as usual for the rest of your life. The remainderman that you name in the document would have an ownership interest while you are still living in the home.
The remainderman would inherit the entirety of the property after your passing, and Medicaid would not be able to reach it because it would not be part of your estate.
There are solutions, but a lot of people do not have the foresight to plan ahead in this manner, and their loved ones pay the price.
We Are Here to Help!
Our doors are open if you would like to work with a Los Angeles, CA estate planning and elder law attorney to put a plan in place. You can call us at 310-337-7696 set up a consultation, and you can use our contact form if you would prefer to send us a message.