Articles of Interest

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Difference of Medicare, Medi-Cal and Medicaid

1. Public benefits fall into two categories: entitlements and means-tested benefits. An "entitlement" is not based upon one's income or assets. A "means tested" benefit is dependent upon one's income and resources. SSI and Medi-Cal are examples of means tested public benefits; whereas SSDI, Social Security and Medicare are entitlement programs.
2. MEDICARE is a federal program administered by the Social Security Administration which provides health insurance to persons over age 65 and to some disabled persons. Medicare has two parts: Hospital Insurance (Part A) and Medical Insurance (Part B) MEDICARE only pays for skilled nursing home care immediately after a minimum three-day hospitalization and for less than 100 days.
3. MEDICAID is a combined state and federal program which provides medical care for people with low income and low resources. In California, the federal MEDICAID program is called MEDI-CAL. It is the only government program which pays for care in a skilled nursing home. However, Medi-Cal generally does not cover the cost of custodial board and care facilities. A board and care facility (unlike a skilled nursing home) only provides assistance with the necessities of daily living, such as dressing, bathing, walking, and eating.
4. Individuals who reside in California and who receive SSI or AFDC are automatically eligible for "categorical" Medi-Cal. An individual who is 65 or older, blind or disabled will be eligible for "medical needs only" Medi-Cal in a skilled nursing facility if the individual meets the resource and income limitations.

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Who Qualifies For Medi-Cal

1. Year 2008 - Minimum Limitations on Assets:
   Single $ 2,000
   Married $104,400
   
   
   Hint: You may still qualify for Medi-Cal even if your assets exceed the above limitations. Call us to discuss planning opportunities.
2. Medi-Cal Eligibility: To determine eligibility, Medi-Cal classifies assets as exempt and non-exempt. Exempt assets do not affect Medi-Cal eligibility, regardless of their value. If an individual has too many non-exempt assets to qualify for Medi-Cal, the individual may still be able to qualify by implementing different strategies.
   
   
   Hint: Do not give away your residence to qualify for Medi-Cal! In California, the residence is not "counted" as an asset in determining eligibility.

   Exempt vs. Non-Exempt Assets: (see attached chart)

   Share of Cost: A Medi-Cal beneficiary must still pay a "share of cost" for a nursing home. A beneficiary's "share of cost" is determined based upon the person's income. The at-home spouse is entitled to keep a minimum monthly maintenance needs allowance (MMMNA) of $2,610 so he/she will not become impoverished and the Medi-Cal beneficiary can keep $35 per month in income. Once the beneficiary's "share of cost" is determined, Medi-Cal will pay the remaining cost of the skilled nursing facility.

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Penalties For Transfer of Assets (30/36/60 months)

1. No penalties for gifts of "exempt" assets
2. No penalties for transfers to spouses
3. No penalties for transfers to blind or disabled children
4. The tax law permitting gifts of $12,000 is not related to Medi-Cal!
5. A penalty is imposed for the transfer of non-exempt assets (Every $5,496 transferred = 1 month of Medi-Cal ineligibility)
6. Look-Back Period: There is a "look back" period of 30, 36 or 60 months from the date of the Medi-Cal application to determine whether any gifts were made which would cause a penalty period.

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Medi-Cal Planning Strategies - Income

1. Name-on-the-Check Rule
2. Be sure the Minimum Monthly Maintenance Needs Allowance (MMMNA) is fully funded (year 2005 = $2,378 per month)
3. Administrative Fair Hearing or Court Order to increase the amount of monthly income (MMMNA) the at-home spouse may keep

Medi-Cal Planning Strategies - Resources

1. Spend Down: The simplest way to reach the permitted amount of assets of $2,000 or $104,400 is to spend down excess funds. Excess funds can be spent to acquire exempt assets, such as a car or a residence. Funds can also be spent on health care, home furnishings, home repairs, clothes, or mortgages. The spend down must be for the beneficiary's or spouse's benefit.
2. Convert Non-Exempt Assets to Exempt Assets: An applicant can decrease non-exempt property by converting it to exempt property. Examples: selling securities to purchase a house; using excess cash to pay off a car loan or mortgage; trying to sell a vacant lot; and moving out of an apartment into a home owned by the applicant.
3. Annuities: The purchase of one particular type of immediate annuity (periodic payments of principal & interest) can convert the countable asset of cash into an unavailable, non-countable asset. (Due to the specific technical requirements of Medi-Cal annuities, do not attempt to shelter assets in annuities without receiving professional advice from an experienced Elder Law Attorney.)
4. Divorce: Allows a married couple to divide their assets equally. Thus, the at-home spouse can keep half of the property outside the reach of Medi-Cal. (This makes sense (if at all!) only for persons with substantial assets or for an at-home spouse with substantial separate property in a new marriage.)
5. Fair Hearing or Court Petition: Without a court order, the at-home spouse can have $104,400, which is called the Community Spouse Resource Allowance ("CSRA") and monthly income of $2,610 ("MMMNA"). Courts can be petitioned to increase this amount of assets or income. One permitted planning technique is for the at-home spouse to prove at an administrative fair hearing or Court hearing that the CSRA needs to be increased in order to meet the permitted MMMNA. For example, if the at-home spouse has a low income, it is possible to shift the disabled spouse's income to the at-home spouse or to permit the at-home spouse to keep additional assets to produce the allowed monthly income of $2,610.

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Medi-Cal Planning Tips

1. At-Home Spouse Acquires Assets after Medi-Cal is Approved: Assets acquired by the at-home spouse after the other spouse is on Medi-Cal do not affect the institutionalized spouse's Medi-Cal eligibility. (Examples: lottery, inheritance, gifts). Once Medi-Cal eligibility is established, the resources in the name of the at-home spouse are not considered "available" to the institutionalized spouse.
2. Do Not Gift Assets: As a general rule, do not gift assets as a strategy for Medi-Cal qualification because transfer penalties may apply. However, gifting strategies may be helpful in some circumstances, but get legal advice first to avoid the penalties.
3. Timing is Important: Because a house is "exempt" and cash is "not exempt", the timing of selling a residence is very important, so obtain legal advice before selling!
4. New Estate Plan Needed: When one spouse receives Medi-Cal, the estate plan of the at-home spouse should be redrafted to leave the estate to the couple's children or other loved ones, rather than to the institutionalized spouse. Otherwise, receipt of an inheritance could disqualify the institutionalized spouse from future Medi-Cal benefits.

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Reimbursement to Medi-Cal

1. Claims for Reimbursement by Medi-Cal: After the death of both spouses, the Department of Health Services can seek reimbursement of Medi-Cal benefits from an individual's "estate" by making a claim against the estate. The "estate" includes all assets in a decedent's name at the time of death, including trusts, stocks, bonds, cash, joint tenancy assets and the house. Although the family home is not counted for Medi-Cal eligibility purposes, it is counted as an asset from which Medi-Cal may seek reimbursement after the beneficiary's death.
2. No Liens by Medi-Cal: Liens against property are no longer permitted for reimbursement of long-term care Medi-Cal benefits.
3. Personal Injury Settlement: However, before receipt of a personal injury settlement, Medi-Cal must be reimbursed.

Special Needs Trusts:Requirements

1. Definition: A special needs trust ("SNT") is designed to preserve trust assets for the "special needs" of a disabled beneficiary without jeopardizing the public assistance benefits.
2. Purpose: Public benefits are available for persons who are blind, disabled, older or in need of skilled nursing care. These benefits are designed to provide food, clothing, shelter and essential medical benefits to the recipient. The purpose of a SNT is to protect a beneficiary's eligibility to receive government benefits (such as SSI and Medi-Cal), and still allow the beneficiary to benefit from the assets in a SNT.
3. Discretionary Distributions, Not Mandatory: The trustee must have discretion to pay for the special needs of the beneficiary; the payments cannot be mandatory. The trust funds cannot be used for food, clothing or shelter. Careful planning and legal advice is important to guide the trustee and to prevent inadvertent disqualification from public benefits.
4. Examples of "Special Needs": Special needs which can be paid for by the SNT include: entertainment, recreation, movies, vacations, specially designed equipment for the beneficiary, medical costs not covered by Medi-Cal and dental costs not covered by Medi-Cal.
5. Beneficiary Restricted Access: The trust assets must be unavailable to the beneficiary; this means that the beneficiary cannot demand payment by the trustee.
6. Income Tax: A SNT is irrevocable and will have it's own individual tax identification number, the trustee will submit annual fiduciary tax returns and taxes will be paid out of the SNT.

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Who Needs a Special Needs Trust?

SNT may be created in a living trust, in a Will, in a testamentary trust or as part of a personal injury settlement. A SNT is useful in the following different situations:

1. SSI/Medi-Cal (Supplemental Security Income): SSI is based on disability and financial need. SNT's can be used to provide additional funds for a beneficiary receiving SSI. Basically, the same assets which are exempt and non-exempt for long-term care Medi-Cal benefits apply to SSI benefits.
2. SSDI/Medicare (Social Security Disability Income): Social Security Disability Income is an entitlement program based upon contribution to Social Security by the disabled individual or by that individual's retired or deceased parent. The value of an individual's estate is irrelevant to SSDI qualification; thus, the use of special needs trusts are also irrelevant to SSDI qualification.
3. Long-Term Care Medi-Cal: Medi-Cal benefits provided for long-term care in skilled nursing facilities are based on financial need. SNT's can be used to provide additional assets or services for a beneficiary receiving Medi-Cal.
4. Gifts: A SNT can be used as a vehicle to allow annual gift giving by a parent or grandparent for the benefit of a disabled beneficiary.
5. Estate Planning: If you have a family member or other loved one with a "special need", such as a disability, inability to care for themselves or a drug addiction, a SNT may be the proper vehicle to meet your estate planing goals. Your Will or Living Trust can include a SNT which will hold and manage assets for the disabled beneficiary following your death.
6. Personal Injury Settlement: A person who is disabled in an accident may qualify for SSI and Medi-Cal due to the accident. However, the award of a personal injury settlement could jeopardize the individual's qualification for the much needed public benefits. A SNT can be used to prevent disqualification from public benefits and still allow the person to benefit from the settlement award.

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