You may have heard friends or family members discussing the need to include Medi-Cal planning in your overall estate plan and wondered why you would need Medi-Cal planning, particularly if you have never before relied on Medicaid to cover your healthcare costs in the past. The very real possibility that you, or a spouse, will need long-term care (LTC) in the future, and the high cost of that care, are what cause many people to include Medi-Cal planning in their estate plan. Your California estate planning attorney can help you decide of Medi-Cal planning should be part of your comprehensive estate plan.
Will You Need Long-Term Care?
Although there is no way to know with certainty that you (or a spouse) will need LTC during your “Golden Years,” we do know that the likelihood of needing LTC care increases with each passing year. At the time you enter your retirement years at around age 65, you will stand a 50 percent chance of eventually spending time in a LTC facility prior to the end of your life. By age 85,those odds will have increased to a 75 percent chance. Keep in mind that if you are married, your spouse is equally as likely to need LTC at some point in the future.
How Will You Pay for Long-Term Care?
If you do end up in a nursing home or other LTC facility, the cost of that care could deplete your retirement nest egg in a relatively short period of time if you are forced to pay out of pocket. Nationwide, the average yearly cost of LTC is over $80,000. In the Los Angeles area, you can expect to pay a bit more with an average annual cost of around $110,000 as of 2017. Given that the average length of stay in a LTC facility runs 2.5 years, you could easily be facing a LTC bill of over $250,000. As a senior, you will probably rely heavily on Medicare to cover healthcare costs; however, neither Medicare nor most private health insurance policies will pay for LTC expenses. Fortunately, the Medicaid program does cover LTC costs for those who qualify.
Why Is Medi-Cal Planning Necessary?
Although California’s Medi-Cal program will cover LTC expenses, qualifying for the program can be challenging if you failed to plan ahead. This is why Medi-Cal planning is often included in a comprehensive estate plan. To be eligible for Medi-Cal both your income and your “countable resources” must not exceed the program limits. If your estate assets exceed the program limit you may be required to “spend-down” your assets until they fall below the Medi-Cal limit. Transferring assets out of your name when you recognize the need to qualify for Medi-Cal will not work because of the Medicaid five-year “look-back” rule. The rule allows Medi-Cal to review your finances for the five-year period prior to your application. Any asset transfers made for less than fair market value may be disallowed and the asset’s value added back into your estate. Medi-Cal planning anticipates your eventual need to qualify for Medicaid benefits and utilizes estate planning strategies and tools to ensure that you do qualify and that your assets are protected.