Medicare is a federal insurance program paid out of Social Security deductions. All persons over 65 who have made Social Security contributions are entitled to the benefits, as well as disabled workers who have been eligible for Social Security disability benefits for at least two years.

Participants in the Medicare program are liable for co-payments and deductibles as well as for monthly payments for Part B coverage. Medicare is not based on financial need. Anyone who meets the age, disability and/or coverage requirements is eligible.

Medi-Cal is a combined federal and California State program designed to help pay for medical care for public assistance recipients and other low-income persons. Although Medi-Cal recipients may receive Medicare, the Medi-Cal program is not related to the Medicare program. Medi-Cal is a need-based program and is funded jointly with state and federal Medicaid funds.

Medi-Cal EligibilitySSI and other categorically-related recipients are automatically eligible. Others, whose income would make them ineligible for public benefits, may also qualify as “medically needy” if their income and resources are within the Medi-Cal limits, (current resource limit is $2,000 for a single individual).Share of CostThe State sets a maintenance need standard. Since January 1, 1990 the maintenance need standard for a single elderly/disabled person in the community has been $600 monthly; the Long Term Care maintenance need level (i.e., personal needs allowance when someone is in a nursing home) remains at $35 monthly for each person.

Other Deductions from the Share of Cost:

In addition to the income deductions and the monthly maintenance needs allowance, any monthly medical premiums can also be deducted before the share of cost is determined. Other deductions can also be made, depending on the circumstances.

What Does Medi-Cal Cover?Medi-Cal pays for health care services which meet the definition of medically necessary. Services include: some prescriptions (although the Medicare Part D program now covers most prescriptions), physician visits, adult day health service, some dental care, ambulance services, some home health, X-ray and laboratory costs, orthopedic devices, eyeglasses, hearing aids, some medical equipment, etc.

Resource Limitations (Property/Assets)

To qualify for Medi-Cal the recipient must demonstrate that s/he has limited resources available. Since January 1, 1989, the property limit for one person has been set at $2,000.Medi-Cal classifies property as exempt and non-exempt. Exempt property is not counted in determining eligibility; non-exempt property is counted. If the applicant has more than $2,000 in non-exempt property, he/she will not be eligible, unless the property is spent down for adequate consideration before the end of the application month.

The HomeThe home of a Medi-Cal beneficiary continues to be exempt from consideration as a resource under a wide variety of circumstances. Under these provisions, a home will continue to be considered an exempt principal residenceIntent to ReturnThe principal residence is exempt based upon a person’s subjective intent to return, even though he/she may never have the ability to return to that residence. If the applicant is unable to complete the application, his/her representative may indicate that intent. The eligibility worker may not restrict, in any way, the individual or his/her representative in the process of indicating that intent. As long as the applicant or beneficiary declares an intention to return home on the Medi-Cal application, the house will be treated as a principal residence exempt from being counted as a resource by Medi-Cal.

Other Real Property/Business PropertyReal property other than the principal residence can be exempt if the net market value of the property (minus encumbrances) is $6,000 or less and if the beneficiary is utilizing the property, i.e., receiving yearly income of at least 6% of the net market value.

The amount allowed for upkeep of the home depends on the living circumstances of the LTC resident.

Spending Down/Gifting Assets

An individual whose personal property is above the Medi-Cal resource limit may spend down to $2,000. Resources must be reduced to the property limit for at least one day during the month in which a person is establishing eligibility. Giving away resources may render a person ineligible for a period of time running from the date of the transfer.

Spousal Impoverishment Laws

California law allows the community spouse to retain a certain amount of otherwise countable resources available to the couple at the time of application. This is called Community Spouse Resource Allowance (CSRA) and it increases every year according to the Consumer Price Index. The 2008 CSRA is $104,400.

Ethical Considerations

Property reduction requirements can usually be easily handled and documented, and it can be tempting for many attorneys to advise clients to reduce excess property on the purchase of exempt assets prior to a nursing home entry. It may be difficult however, to find a nursing home placement for a person who has spent all of his/her resources or who has few resources. In addition, a private pay patient may receive a higher level of service.

If you need to learn more about Medi-Cal Planning call Judd Matsunaga, an experienced estate planning attorney who can advise you on matters such as asset protection and Medi-Cal eligibility.  Judd can be reached at Elder Law Services of California at 1-800 403-6078