The following was updated on June 23, 2008.  New 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 June 23, 2008, the State of California has not yet passed 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. However, the retroactive effect of California laws and regulations when California implements the DRA is uncertain.

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)).

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.

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)).

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 additional information, including the full text of the Medicaid sections of the ACT by clicking on Medicaid Alert 2006-02-01 to go the the CANHR Website.

Uncertainty of the Implementation of the DRA in California

The Executive Director of California Advocates for Nursing Home Reform (CANHR), in San Francisco, states the following in an email on July 12, 2007:

"Over the past few months, representatives from CANHR and from Western Center on Law and Poverty have been meeting with representatives at the Department of Health Services, Medi-Cal Eligibility Branch to work on the implementing legislation for DRA in California.

"The language has now been approved by the DHSS Agency and the Governor's office and will hopefully be introduced as amendments to a policy bill this session. If this bill goes through and is signed by the Governor, the Department (now called the Department of Health Care Services) will issue non-emergency regulations, which will not become effective until they are filed with the Secretary of State. Thus, most of this will not be effective until at least 2009 or later, given the snail's pace of the regulatory system, and there will be no retroactive implementation.

" Although Senator Kuehl has a bill (SB 483) that would increase the equity limit to $750,000, the bill only increases the equity limit and does not include any of the other protections such as the definition of equity or the hardship provisions. While the Department is monitoring this bill, it is not known at this time whether this will be a vehicle for the rest of the implementation language.

" There are no guarantees that the statutory language will pass this session, but we will let you know when and if the Department announces an author, which should be next week. While none of us are anxious to implement the federal ill-conceived DRA restrictions on Medicaid, we feel that this current California DRA implementation language best protects the interests of current and future LTC beneficiaries in California. It offers protections for home equity issues, substantial hardship protections and the penalties for transfers will not be retroactive.

" It is our hope that the language will pass as is this session, which offers fewer opportunities for tinkering with it in the future.

" Some highlights:
1) defines annuity
2) increases the equity value to $750,000; defines "equity interest" as the lower of the assessed value or the appraised value, minus encumbrances and specifies the hardship criteria
3) specifies the conditions under which the state can be named as a remainder beneficiary on an annuity
4) specifies the conditions under which the state is prohibited from becoming a remainder beneficiary on an annuity and exempts certain annuities, including work-related pension annuities
5) tracks the federal language on the transfer of assets provisions, and incorporates
the partial months of ineligibility provision
6) Specifies the hardship criteria for transfer of assets"

For more up-to-date information about California's implementation of the DRA, please check CANHR's website by clicking on:

medcal_DRAImplementation031607

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.