Are you prepared to cover the expenses of long-term health care (LTC) if you need nursing home, assisted living or regular at home care down the road? If you are like many seniors, you will turn to Medi-Cal for help with your LTC costs. While Medi-Cal will cover LTC expenses, getting approved can be challenging. The old adage is that “if you fail to plan, you may as well plan to fail.” Your failure to plan could put your hard-earned assets at risk. Even worse, if you try to conceal those assets, you could face serious legal consequences even prison for Medi-Cal fraud. The good news is that Medi-Cal planning – through proper planning – can help.
Medi-Cal May Be Your Only Hope for Help
The older population in the United States is growing at an unprecedented rate. In fact, by the year 2050, experts tell us that the older population (age 65 and older) in the U.S. will outnumber their younger counterparts (age 21 and younger) for the first time in history. As the average life expectancy steadily increases, it also means there will be a dramatic increase in the need for long-term care (LTC) in the U.S. – and the cost of that care will be high. By 2036, experts tell us that the average cost of LTC across the United States will be over $150,000 a year per person receiving such care.
With an average length of stay of 2.5 years, that puts the average future LTC bill at almost $400,000. While most seniors can count on Medicare to cover the majority of their healthcare-related expenses, Medicare will not cover LTC costs except under very limited circumstances, and even then only for a short period of time. Most basic health insurance plans also exclude LTC expenses unless you purchased a LTC rider at an additional cost. For over half of all seniors in LTC, that leaves Medi-Cal, a needs tested program, as the only hope for help.
Qualifying for Medi-Cal
While Medi-Cald oes cover LTC costs, you must first qualify for benefits. Because Medi-Cal is intended to help low income applicants, the program imposes a “countable resources” limit that applicants cannot exceed and may impose an income limit. The income limit is tied to the Federal Poverty Level (FPL) in the geographic area where an applicant lives and changes each year. For seniors on a fixed income, even if the state has an income limit that is not generally where the problem lies. The problem applicants often face is the very low “countable resources” limit. In many states, the limit is as low as $2,000 for an individual applicant. Unfortunately, this can lead applicants to try to conceal resources.
The Wrong Way to Approach Medi-Cal Planning
Medi-Cal uses a five-year look-back period that effectively penalizes any asset transfers made by an applicant for less than fair market value during the five-year period prior to applying for benefits. Knowing this, some applicants try to hide assets when applying for Medi-Cal. Take, for example, the case of Stephen Gossman. Gossman applied for Medi-Cal (California’s Medi-Cal program) for his grandmother.
On the application he stated that his grandmother had no money when, in fact she had $220,000 from poker winnings and another $115,000 from the sale of her Los Angeles residence in cash hidden in her home. Medi-Cal paid $116,000 in expenses for her San Diego County nursing home. Gossman made the mistake of taking his grandmother’s unreported money and using it for a down payment on his home and then depositing the remainder in small amounts to avoid bank transaction reporting requirements. Medi-Cal eventually found out about the money. As a result, Gossman was charged with 17 counts of money laundering and health care fraud for which he was sentenced to almost four years in prison, fined $315,000, and ordered to reimburse Medi-Cal the $116,000 it paid for his grandmother’s nursing home expenses. Even if you aren’t concealing assets there are other ineffective ways to plan.
The Right Way to Approach Medi-Cal Planning
Probably the saddest part of Gossman’s story is that his attempt to hide his grandmother’s money was not necessary. Gossman’s grandmother could have been approved for Medi-Cal without losing her money by using legitimate Medi-Cal planning strategies. Although the rules vary by state, all states exempt certain assets from an applicant’s “countable resources.” A primary residence, for example is almost always exempt as is income producing property. The Gossmans could have used the cash to purchase a home, or other exempt assets, thereby converting non-exempt assets into exempt assets.
The key to protecting the assets you have spent a lifetime accumulating, and still qualifying for Medi-Cal if you need it, is proper Medi-Cal planning. The rules for Medi-Cal eligibility vary by state; however, in every state, the earlier you incorporate Medi-Cal planning into your comprehensive estate plan, the better off you will be when the time comes to apply for benefits. Consult with a Medi-Cal planning attorney in your area to find out how you can protect your hard-earned assets in the event you need to pay for long-term care down the road.