The most sweeping changes since 1993 are being made to the Medi-Cal recovery program. California’s aggressive recovery procedures have been punitive to the uninformed and unprepared especially with the expansion of the Medi-Cal health insurance program through Covered California.
Governor Brown signed the budget bill on June 27, 2016. Contained within are provisions of SB 33 (Hernandez) that bring California law into line with federal Medicaid laws in regards to recovery procedures.
Currently, if a person age 55 or older is receiving any type of Medi-Cal benefits, general or long-term care, the department will seek repayment of the benefits paid out after the Medi-Cal beneficiary passes away.
However, federal law only requires recovery of benefits paid out to a person age 55 or older for nursing home care, home and community-based services, hospital and prescription drug services while receiving nursing home or home care services and persons who are “permanently institutionalized.” Health insurance programs like Covered California are subject to recovery under federal law.
Up to now, California has gone beyond the scope of the federal law by placing claims on estates of surviving spouses and for all Medi-Cal benefits received by those age 55 or older.
Families have been forced to sell the family home in order to pay the claim. If they wanted to keep and stay in the home, they were forced to sign a “voluntary lien” which accrues at a 7% annual percentage rate.
The new recovery provisions will be effective January 1, 2017. The major changes are:
- Medi-Cal will only be allowed to recover from the probate estate. For example, if the home and bank account are titled in the name of the living trust or held in joint tenancy, they will be not be recovered against.
- Medi-Cal recovery will be limited to only what is required by federal law. As was discussed previously, there will be recovery only for those that are age 55 or older and have received nursing home, home and community based services, or any age if the person was “permanently institutionalized.”
- Medi-Cal will not recover from the surviving spouse’s estate.
Additional changes include limitations on interest for liens, a hardship exemption for homes where the fair market value is 50% or less of the average home value in the county, and the ability to receive an itemized billing of Medi-Cal services once a year for a $5 fee.
Even though there is still recovery for long-term care, it will now be much easier to protect the family home by having it in a living trust, joint tenancy, or life estate.
This does not mean, however, that a living trust will protect all of your assets when qualifying for Medi-Cal. These rules have not changed.
A single person cannot have more than $2,000 in countable assets. A married couple with one spouse applying cannot have more than $121,220 in countable assets.
How these assets and accounts are titled does not matter for qualification. What is important is whether or not the asset is countable or not.
Remember, we are talking about two different procedures: qualification and recovery. Living trusts still will not protect assets for qualification.
The new recovery procedures do not go into effect until January 1, 2017. Until then, if a Medi-Cal beneficiary dies, the home is still subject to recovery if titled in the name of the living trust, individual or joint tenancy.
The retirement accounts also are still subject to recovery if the estate is the beneficiary or the living trust.
The balance in the checking account is also still subject to recovery even if a joint tenant is on the account.
There is good news coming in 2017!
Karl Kim, CFP®, CLTC is the President of Retirement Planning Advisors, Inc. and a Medi-Cal specialist. He is the author of “Don’t Go Broke Paying the Nursing Home” available on Amazon. His office is located in La Mirada. He can be reached at 714-994-0599 or at www.RetirementCrisisPlanning.com. Karl has submitted over 1,000 Medi-Cal applications over the past 20 years with a 99.9% success rate. This is meant to be an educational article. Do not make any decisions solely on the information in this article. Consult your tax advisor, financial advisor or attorney before taking any action. We are not responsible for any inaccuracies or misinformation.