Medicare is a federal insurance program paid out of Social Security deductions. All persons 65 or older who have made Social Security contributions are entitled to the benefits, as well as persons under 65 with disabilities who have been eligible for Social Security disability benefits for at least two years, and persons of any age with end-stage renal disease.
Medicare has several parts including Hospital Insurance (Part A) and Medical Insurance (Part B). Those persons eligible for Social Security or Railroad Retirement benefits as workers, dependents or survivors, are eligible for Part A, Hospital Insurance, when they turn 65. If a person has not worked long enough to be covered for benefits, s/he may enroll in Part A and pay a monthly premium. If Medicare Hospital Insurance is purchased, that person must also enroll in Part B, Medical Insurance.
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.
Medicare does not pay for all medical expenses, and usually must be supplemented with private insurance ("medigap") or consumers can enroll in an HMO plan that contracts with Medicare. After 3 days of prior hospitalization, Medicare will pay up to 100% for the first 20 days of skilled nursing care. For the 21- 100 days, the patient will pay a co-payment. The premiums and copayments are increased every year. There will be no Medicare coverage for nursing home care beyond 100 days in any single benefit period.
It should be noted that Medicare only pays for “skilled nursing care,” does not pay for “custodial care” and the average stay in a nursing home under Medicare is usually less than 24 days. Thus, few can look to Medicare to pay for any substantial nursing home costs.
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.
SSI 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). This includes:
Share of Cost
The 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.
Individuals whose net monthly income is higher than the state payment rate may qualify for the program if they pay or agree to pay a portion of their income on monthly medical costs. This is called the share of cost. Individuals eligible with a share of cost must pay or take responsibility for a portion of their medical bills each month before they receive coverage. Medi-Cal then pays the remainder, provided the Medi-Cal program covers the services. This works much like an insurance deductible. The amount of the share of cost is equal to the difference between the "maintenance need standard" and the individual's net non-exempt monthly income.
Important: All Medi-Cal beneficiaries who have a Medi-Cal share-of-cost of more than $500 will no longer have their Medicare Part B premium covered by Medi-Cal, it will automatically be deducted from the beneficiary’s Social Security check. This does not apply to Medi-Cal eligible nursing home residents as their Part B premium will continue to be covered by Medi-Cal.
In addition to the "any income deduction" and the monthly maintenance needs allowance, any monthly medical premiums can also be deducted before the share of cost is determined such as your Medicare Part B premium. Other deductions can also be made, depending on the circumstances.
For example, under a legal settlement, Hunt v. Kizer, recipients may use old, unpaid medical bills for which the beneficiary is still legally responsible to reduce the monthly Medi-Cal share of cost. Some original documentation showing the billing statement is an outstanding balance should be provided to the County eligibility worker. The Share of Cost will be adjusted to reflect the cost of the outstanding balance, which could, for example, mean no share of cost until the old, unpaid bills are paid off. This is not automatic and should be discussed with the eligibility worker upon application for Medi-Cal.
Under the Johnson v. Rank settlement, recipients may use their share of cost to pay for medically necessary supplies, equipment or services not covered under the Medi-Cal program. A current physician's prescription is necessary and must be put in the recipient's record at the facility. This prescription must be a part of the physician's plan of care. After a copy of the prescription and the bill is presented to the facility, the facility will deduct the cost from that month's share of cost and bill the resident for the remaining share of cost.
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.
All covered services, or the remaining costs over the share of cost of nursing home care, will be covered if the individual meets income/resource requirements. Some services such as home health care, durable medical equipment, and some drugs require prior authorization.
Nursing home care is covered if there is prior authorization from the physician/health care provider. Residents are admitted on a doctor's order and their stay must be "medically necessary". Residents are allowed to keep $35 of their income as a personal needs allowance. Residents with no income may apply for the Supplemental Security Income/State Supplemental Program (SSI/ SSP), and, if eligible, they will receive a payment of $50 as a personal needs allowance.
If the individual qualifies for Medi-Cal, s/he does not need private "medigap" or HMO insurance to pay for costs, though if such insurance is carried, the premiums are deducted from income when computing the share of cost, and therefore costs the beneficiary nothing. If the HMO coverage includes drug benefits, maintaining the HMO coverage may become more important , as the beneficiary will continue to receive drug benefits from the HMO, which may be more comprehensive than the Medicare Part D coverage.
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 following property is generally exempt and, therefore, not counted in determining eligibility:
The Home: totally excluded, if it is the principal residence. Includes mobile home, houseboat, or an entire multi-unit dwelling as long as any portion serves as the principal residence of the applicant, and buildings surrounding, contiguous to, or appertaining to the residence. The property remains exempt if a person in a nursing home or the person's representative expresses an intent to return home on the Medi-Cal Application and Statement of Facts, or if an "exempt" individual resides in the home, such as a spouse, a minor, blind or disabled child (of any age) or a sibling or son or daughter who has lived in the home continuously for at least one year before the applicant entered a nursing home. Note that when the home is exempt, it can be transferred without penalty and without affecting the Medi-Cal eligibility.
Other Real Property: can be exempt if the net market value of the property ( assessed value or fair market value, whichever is less – minus any encumbrances such as mortgages, loans, etc.) is $6,000 or less and the beneficiary is "utilizing" the property, i.e., receiving yearly income of at least 6% of the net market value. Property used as a business can also be exempt if it meets the standards under the program, i.e., it is actually used as a business, reported to the IRS as such, etc. – see below for details on other real property and business property.
Intent to Return
The 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 (i.e., checks the "yes" box), the house will be treated as a principal residence exempt from being counted as a resource by Medi-Cal.
Unless the applicant is requesting an income deduction to maintain the home for the return within six months pursuant to Title 22, Section 50605, the county may not require any verification of the individual's ability to actually return home. If the applicant or his/her representative incorrectly states that there is no intent to return and later makes a correction, the county must accept that correction. (See ACWDL Nos. 95-48 and 00-11)
"Intending to return home" will also keep the home exempt if the community spouse dies first, but only for the life of the institutionalized spouse. Applicants/beneficiaries may want to transfer the home entirely to the community spouse in order to avoid an estate claim after the surviving spouse dies. In addition, if the community spouse dies first, the home will likely end up in the probate estate of the institutionalized spouse and be swallowed up in estate recovery claims.
Other Real Property/Business Property
Real 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 net market value is the assessed value (which is often lower) or the appraised value, minus encumbrances, whichever is less.
Other real property must meet utilization requirements in order to be exempt. This means that the property must generate at least 6% a year of the net market value. If the property does not generate income, then the full net market value of the property will be counted. (22 CCR § 50416(b),(j) )
If the applicant has made bona fide efforts to meet the utilization requirements but is unable to do so, the utilization period can be extended indefinitely and the applicant can be eligible. For example, if the applicant has made bona fide efforts to sell the property, but is unable to do so, the property won't be included in the countable resources. Note that the regulations include specific criteria for what constitutes "good cause" and "bona fide" efforts to sell. (§§50416, 50417)
The market value of property is very important, since it is used to determine the net market value. The market value of real property in California is one of the following, whichever is less: (22 CCR §50412)
Spending Down/Gifting Assets
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.
Penalties for transferring or gifting away non-exempt assets only apply if a Medi-Cal beneficiary or applicant enters a nursing home. If an applicant lives at home and gifts away property, there are no transfer penalties. The transfer rules are triggered when a person enters a nursing home and applies for Medi-Cal. The Medi-Cal application will ask if the applicant transferred any assets within the 30 months prior to the date of the application. The transfer rules apply only to non-exempt (countable) assets.
A transfer of non-exempt assets can result in a period of ineligibility which is the lesser of 30 months or the value of the transferred assets divided by the average private pay rate (APPR) at the time of application. The current APPR is $7,549.
Mr. D transfers $15,000 to his son in January 2013, and applies for Medi-Cal in February of 2013. Because Mr. D is in a nursing home, a transfer period will be triggered. The amount transferred ($15,000) is divided by the 2013 APPR ($7,549), and Mr. D will be subject to a period of ineligibility of 1.9 months. Since California does not count partial months, he will be ineligible for one month, running from the month of transfer (January 2013). Thus, Mr. D will not be eligible for January of 2013, but he will be eligible as of February 1, 2013.
If Mr. D transfers $8,000 to his son and $8,000 to his daughter in January 2013, each transfer is calculated separately. Each amount transferred ($8,000) is divided by the APPR of $7,549, and Mr. D will be ineligible for January 2013 only.
Note: Assets in any amount can be transferred at any time to a blind or disabled child of any age. The child's disability must meet the requirements under the Social Security Act, i.e., the child must meet the disability requirements for SSA or SSI disability benefits. Transfers of a home or any asset to a blind or disabled child will not affect the Medi-Cal beneficiary or applicant's eligibility. However, a transfer of liquid assets may impact the benefits of a child who is receiving SSI benefits, in which case an SSI specialist should be consulted.
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 current (2013) CSRA is $115,920.
Separate property will be counted in the total resources and subjected to the $115,920 limit. However, only non-exempt resources are counted in the spouses' combined, countable resources at the time of application for Medi-Cal. Thus, IRA's in the community spouse's name, household goods, personal effects, a car, the house, jewelry, etc. are all totally excluded, regardless of value, and the at home spouse can retain these, as well as the CSRA of $115,920.
Resources acquired after the spouse is institutionalized and before he/she goes on Medi-Cal are not protected and will be counted at the time of application. However, once the spouse is eligible for Medi-Cal, any resources acquired after eligibility by the community spouse are protected and will not affect the institutionalized spouse's eligibility. For example, if the community spouse inherited $100,000 after the nursing home spouse was on Medi-Cal, she could keep this without affecting the other spouse's eligibility. Resources held prior to the spouse's institutionalization may be transferred under certain conditions.
Spending Down: A spouse can spend down resources on anything, whether or not it is for his or her own benefit. Mortgage notes on property held in the names of both spouses could be paid in full by the institutionalized spouse without a period of ineligibility for transferring assets for less than fair market value.
Income: California law allows the community spouse to retain a minimum monthly maintenance needs allowance (MMMNA) of $2,898. This amount is adjusted annually by a cost of living increase. Under the "name on the instrument rule," the community spouse may retain any income received in his/ her name alone. It is important to note that the $2,898 amount is a floor.
Thus, if the community spouse's monthly income is less than the MMMNA of $2,898, he/she may receive an allocation from the institutionalized spouse's income; file for a fair hearing to increase the CSRA to generate additional income; and/or obtain a court order to obtain additional income-generating resources. With current miniscule interest rates, it is relatively easy for a community spouse to retain assets above the CSRA, if his/her income is low. If the community spouse's income in his or her name alone exceeds the MMMNA, the community spouse may keep it all. For example, if the spouse at home received $5,000 per month in income, he/she can retain all of that income, but will not receive a spousal allocation from the nursing home spouse, because the community spouse income is above the $2,898 MMMNA.
Federal and state laws allow for a family allocation to be offset from the income of an institutionalized spouse for the support of a dependent “family member” when there is a community spouse at home. Family members include only natural or adopted minors or dependent children, or dependent parents or siblings of the institutionalized or community spouse who are residing with the community spouse. In order for the children to receive the maximum family member allocation, there must be a community spouse. Grandparents who have legal guardianship over grandchildren have been hit hard by this onerous rule, and foster children are not considered “children” or even “family members” for the purposes of long term care Medi-Cal.
The family member base allocation amount, which is used to determine how much income the long term care beneficiary may allocate to family members, is increased annually. The current amount, $1,891, is effective June 1, 2012 through June 30, 2013. Of course, the allocation is only possible if the institutionalized spouse has sufficient income left over after the spousal allocation to the community spouse.
The family allocation is calculated separately for each family member. Any income is deducted from the maximum allocation, and the remainder is divided by 3 to arrive at the total maximum allocation. If the child or children receive no income, the maximum family allocation amount would be $630.33 for each child.
$1,891 (maximum family allocation)
-300 (Social Security income received by child)
$1,591 divided by 3 = $530.33 maximum family allocation for each child
(source: ACWDL 12-20; Form MC 176 W, section IX).
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.
Although "duration of stay" requirements, i.e., requiring private pay for a set period of time, are illegal, nursing homes can and do review potential patients' finances prior to admission. In most cases, they are unwilling to accept Medi-Cal eligible residents upon admission. The longer a person can pay privately, the more options there are available regarding nursing home placement.
In addition, a private pay patient may receive a higher level of service, e.g., a private room, although relatives of nursing home residents are now permitted to supplement the Medi-Cal rate to pay for non-covered services such as a private room, television or phone services. These factors should be considered when advising clients how to reduce excess resources. Once a patient has been admitted to a Medi-Cal certified facility, s/he cannot be transferred or evicted simply because of a change from private pay to Medi-Cal payment status. Thus, unless a person can pay privately for an indefinite period of time, s/he should be advised to seek out a Medi-Cal certified nursing home.
Medi-Cal applicants, beneficiaries and their spouses should always be aware of the Medi-Cal Recovery rules and plan ahead if they want to avoid recovery on their home or other assets. For detailed information on the Medi-Cal Recovery program, see the fact sheet, Frequently Asked Questions About Medi-Cal Recovery on this web site.
For more detailed information about Long Term Care Medi-Cal, order a copy of CANHR's "If You Think You Need A Nursing Home: A Consumer's Guide to Financial Considerations and Medi-Cal Eligibility."