The following was updated on January 4, 2010.  Federal legislation will have a significant affect on Medi-Cal (i.e., Medicaid) planning as described in this website, when the legislation is made effective in California. 

Status of New Legislation

The United States Congress passed the Deficit Reduction Act of 2005 (S. 1932) (hereinafter the "ACT" or the "DRA") that was signed into law by President Bush on February 8, 2006.

As of September 29, 2008, the State of California passed statutes (see SB483) but not yet the necessary regulations to put any substantial part of the DRA into effect in California. Therefore, California is still following the laws and regulations that were in effect before the DRA was signed into law by President Bush and SB483 was signed by Governor Schwarzenegger. Since the California Department of Health Care Services has not yet published any proposed regulations for the implementation of the DRA, it is not likely that such regulations and most of the DRA will be effective in California before late 2010.

The provisions of SB 483 will not be effective until the regulations are filed with the Secretary of State of California, which should take a while. Such provisions will not be retroactive.

The following is a summary of the salient provisions of the DRA.   Please note that any transactions made before the date of enactment would be treated under existing Medicaid law (except for Section 6014 of the ACT regarding home equity).

1. Lengthening Look-Back Period (Sec. 6011 (A))

Section 6011 (a) would make the look-back period 60 months for all transfers (outright transfers as well as transfers to and from certain Trusts).

2. Change In Beginning Date For Period Of Ineligibility (Sec. 6011(B))

Section 6011(b)(2) adds a new clause in the case of a transfer of assets made on or after the date of enactment of the ACT, providing that the beginning date for the period of ineligibility is the first day of a month during or after which assets have been transferred for less than fair market value, or the date on which the individual is eligible for medical assistance under the State plan and would otherwise be receiving institutional level care based on an approved application for such care but for the application of the penalty period, whichever is later , and which does not occur during any other period of ineligibility.

Section 6011(b)(1) retains current law in the case of a transfer of assets made before the date of enactment of the ACT, such that the beginning date for the period of ineligibility is the first day of the first month during or after which assets have been transferred for less than fair market value and which does not occur in any other periods of ineligibility.

3. Disclosure and Treatment of Annuities (Sec. 6012)

Disclosure and Notice (Section 6012(a)). Section 1917 of the Social Security Act (42 U.S.C. § 1396p) is amended by re-designating subsection (e) as subsection (f) and adding a new subsection (e). For purposes of being eligible for long term care services under Medicaid, the applicant or his or her spouse must disclose any interest in an annuity (or similar financial instrument that may be specified by the Secretary).

Such application or recertification form shall include a statement that the State becomes a remainder beneficiary under such annuity or similar financial instrument. Also, the State shall notify the issuer of the annuity of the right of the State to be a preferred remainder beneficiary in the annuity.

The change in the Annuity rules shall apply to transactions (including the purchase of an annuity) occurring on or after the date of the enactment of the ACT (Sec. 6012(d)).

Please refer to SB483 for the new laws regarding annuities.

4. Disqualification for Long-Term Care Assistance for Individuals with Substantial Home Equity (Sec. 6014)

Section 6014 provides for a denial of benefits for an individual who has equity in a home that exceeds $500,000. It allows states to increase the $500,000 limit to an amount not greater than $750,000, which California SB483 does do.  Starting December 31, 2011, such limit will be increased by changes in the consumer price index.

The change in the Medicaid eligibility rules as to Substantial Home Equity shall apply to individuals whose eligibility is based upon a Medicaid application filed on or after January 1, 2006 (Sec. 6014(b)).

Under SB483, "equity interest" means the lesser of the following:

(1) The assessed value of the principal residence determined under the most recent tax assessment, less any encumbrances of record.

(2) The appraised value of the principal residence determined by a qualified real estate appraiser who has been retained by the applicant or beneficiary, less any encumbrances of record.

Under SB483 this equity limit does not apply to an individual if any of the following circumstances exist:

(1) The spouse of the individual or the individual's child, who is under 21 years of age, or who is blind or who is disabled, as defined by federal law, is lawfully residing in the individual' s home.

(2) The individual was determined eligible for medical assistance for home and facility care based on an application filed before January 1, 2006.

(3) The Department of Health Care Services determines that ineligibility for medical assistance for home and facility care would result in demonstrated hardship on the individual. Demonstrated hardship shall include, but need not be limited to, any of the following circumstances:

  (A) The individual was receiving home and facility care prior to January 1, 2006.

  (B) The individual has been determined to be eligible for medical assistance for home and facility care based on an application filed on or after January 1, 2006, and before the date that regulations adopted pursuant to this section are certified with the Secretary of State.

  (C) The individual purchased and received benefits under a long-term care insurance policy certified by the Department of Health Care Services's California Partnership for Long-Term Care Program.

  (D) The individual's equity interest in the principal residence exceeds the equity interest limit, but would not exceed the equity interest limit if it had been increased by using the quarterly House Price Index (HPI) for California, published by the Office of Federal Housing Enterprise Oversight (OFHEO).

  (E) The applicant or beneficiary has been denied a home equity loan by at least three lending institutions, or is ineligible for any one Federal Housing Administration (FHA) approved loan or reverse mortgage.

  (F) The applicant or beneficiary, with good cause, is unable to provide verification of the equity value.

  (G) The applicant or beneficiary meets the undue hardship criteria set by law.

5. Impose Partial Months of Ineligibility (Sec. 6016 (A))

Section 6016(a) provides that States are no longer allowed to round down the penalty period to the lowest whole number. Rather, the penalty will, in essence, be a per diem penalty. For example, if a transfer is made creating a transfer penalty period of 4.25 months, the applicant will be ineligible for 4 months and 8 days.

6. Multiple Transfers Into One Penalty Period (Sec. 6016(B))

Section 6016(b) adds a new paragraph (H) to 42 U.S.C. § 1396p(c)(1). It applies to "multiple fractional transfers of assets in more than 1 month for less than fair market value" by the community spouse or institutionalized spouse after the enactment date. The term "multiple fractional transfers" is ambiguous but presumably it applies to transfers made in successive months. For purposes of determining the period of ineligibility, Paragraph (H) gives states discretion to treat as one transfer, the total cumulative uncompensated value of all assets transferred by the individual or spouse during all months on or after the look-back date in 42 U.S.C. § 1396p(c)(1)(B). The period of ineligibility begins on the earliest date which would apply under 42 U.S.C. § 1396p(c)(1)(D).

You can get the full text of the Medicaid sections of the ACT by clicking on Deficit Reduction Act Text to go the the CANHR Website.

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What Is Medi-Cal Planning?

Medi-Cal Planning is basically asset preservation. Many middle-income families have lost their homes and life savings to the high cost of nursing home care. But with Medi-Cal planning, those families could have preserved their major assets and had their nursing home bills paid for by Medi-Cal.

Medi-Cal is California’s Medicaid health care payment program. It is funded by the state and federal governments. The program is designed to pay for the medical care of those California residents who have very limited income or resources. However, with some planning, middle-income persons can qualify as well. Medi-Cal planning is complicated. There are many rules governing which assets a person can keep, which ones can be transferred and to whom, and how much can be transferred at one time. If done incorrectly, it could lead to a period of ineligibility or disqualification. That is why you should consult an elder law attorney if you or a family member will be applying for, or is considering applying for, Medi-Cal.

An elder law attorney can help you through the application process and design a plan for you that will preserve the maximum amount of your assets and income. Some accountants and financial planners try to provide the same services for their clients. However, they may not know the intricacies of this area of law and are not authorized to give legal advice. Also, the spouse of a Medi-Cal beneficiary is limited as to the amount of income and assets that he/she is allowed to keep. These limits are referred to as the Community Spouse’s Resource Allowance (CSRA) and Minimum Monthly Maintenance Needs Allowance (MMMNA). The only way a person can increase these limits is by obtaining an order from the Superior Court or from administrative law judge. Unlike other financial advisors, an attorney can represent you in the hearing held in the Superior court or before an administrative law judge.

Learn more about the realities and financial implications of long-term care:

• The Realities Of Long-Term Care
• Paying For Long Term Care

Contact the Kisner Law Firm today and start planning for tomorrow.