By JUDD MATSUNAGA
In Part 3, we discussed how important it is to place Grandma in a nursing home conveniently located to the person(s) who will be visiting most often. In this article, we will share some little known information on how to get the government to pay for the skyrocketing costs of long-term care.
“Little known?” That’s right. 71% of Medicare recipients have the mistaken belief that Medicare will pay for long-term care. 87% of people under 65 have the mistaken belief that their private health insurance will cover the cost of long-term care. Consequently, most families end up privately paying for long-term care until their life’s savings are wiped out.
People come into my office from all over the country (sometimes other countries) with the same problem. It goes something like, “My grandma (father, sister, etc.) is in a nursing home in California. The insurance has run out and the private pay rate is $250 per day. We can’t afford that. The nursing home said that you can help us.”
In order for Medi-Cal to pay for nursing home care, you must qualify. In other words, Medi-Cal is a “need-based” program (as opposed to an “entitlement,” such as Medicare). That means, as a single applicant, you are only allowed to have $2,000. If you are a married applicant, the “at-home” spouse may have $115,920 in countable assets.
In addition, Medi-Cal considers certain assets to be “exempt” from the above countable asset requirements. That means you are allowed to keep your home (subject to recovery), one car, IRAs and other work-related pension plans, burial plots, up to $1,500 in life insurance and some other personal effects.
If you already meet the countable asset test, no problem. The problem occurs when you are over the asset limits. For example, as a single applicant, let’s say you have $102,000 in countable, non-exempt assets (e.g., bank accounts, stocks and bonds, etc.). That would make you $100,000 over the asset limits.
Now, the nursing home tells you that you do not qualify for Medi-Cal and that you’ll have to privately pay until you run out of money. At this time, many shrewd families will try to beat the system by transferring assets to their children. They are shocked to find out that they just triggered up to a three-year waiting period for Medi-Cal benefits.
Since Medi-Cal uses a “30-month look-back period,” it is advisable not to transfer any money away if Grandma may need long-term care in the not too distant future. That includes simply adding an adult child’s name to Grandma’s accounts (if the tax ID number on the account is changed to the adult child).
But wait, there are ways to protect your savings. The law states that “a Medi-Cal applicant may reduce his or her non-exempt property to within the specified limits in any way he or she chooses…” Except that a transfer of non-exempt property for less than fair market value may result in a period of ineligibility.
“Does that mean that if I have $100,000 too much in savings, I can still qualify for Medi-Cal?” That’s right!!! You may legally preserve your savings and qualify for Medi-Cal provided it is done properly. That’s where a Medi-Cal planning attorney comes in. Done carefully, you may preserve your savings and protect your home (see Part 5).
“But Judd, I know of a financial planner that says he can help with Medi-Cal.” So do I. All I’m going to say is: “Let the buyer beware!” In a recent elder abuse seminar, Prescott Cole, senior staff attorney for California Advocates for Nursing Home Reform (CANHR), addressed financial abuse scams against elders.
Mr. Cole said that the “wolf in sheep’s clothing,” e.g., licensed elder planning advisor, holds FREE seminars to give information on Medi-Cal and the “changing laws.” Once the seminar begins, they instill fear in the elders: “Did you know that 50% of the people in this room will be in a nursing home?”
After they instill the fear of outliving one’s savings, they continue to create anger: “The government won’t tell you about these special benefits because it is not in their interest.” Next, they introduce financial products that will help the elders qualify for government programs such as Medi-Cal.
“Lawyers,” they say, “will charge you thousands of dollars for what I am telling you for free!” They go on, “I am working with an attorney and he tells me that this is the law.” How ridiculous is that? The Medi-Cal rules and regulations are a combination of both federal and state laws. Only a lawyer can give you legal advice.
According to Mr. Cole, they trick elders into purchasing financial products, such as annuities, stating, “The annuity is the safest place to have your money” or “You must purchase an annuity now because of the 36-month look-back period” or “No one has ever lost any money on an annuity.”
Not so fast!!! Annuities are a terrible place to have your money if you want to qualify for Medi-Cal. Regardless of what you were told at the free seminar — that “Medi-Cal does not make claims against annuities” — any annuity purchased on or after Sept. 1, 2004 will be subject to recovery upon the death of the decedent.
Furthermore, in order to be “Medi-Cal friendly,” annuities purchased on or after March 1, 1996 “must take steps to receive periodic payments of interest and principal, scheduled to exhaust the balance of the annuity at or before the end of the annuitant’s life expectancy.” In other words, the income received must go to the nursing home as “share-of-cost.”
“Let me get this straight — if Grandma has $100,000 too much in assets and buys a Medi-Cal-friendly annuity, that annuity must spin off payments that go straight to the nursing home as share-of-cost. Then upon her death, the State of California gets the remainder? Where’s the benefit to the family?” Exactly.
That’s why the sale of annuities for Medi-Cal planning is considered an elder financial abuse scam. The only person that benefits from the purchase of a “Medi-Cal-friendly” annuity is the financial advisor that sold you the annuity. There are much better ways to preserve assets for your family and still qualify for Medi-Cal.
Finally, Mr. Cole provided the following tips if you are approached about an annuity:
• Don’t buy anything at the initial presentation. Tell the salesperson you want time to think about the investment.
• Consider other options for planning that might be available, particularly if you are looking at Medi-Cal planning.
• Always talk to a neutral third party knowledgeable about Medi-Cal estate planning.
• Find out how much commission the sales agent will make.
• Remember, you have 30 days to cancel the contract.
Judd Matsunaga, Esq., is the founding partner of the Law Offices of Matsunaga & Associates, specializing in Estate/Medi-Cal Planning, Probate, Personal Injury and Real Estate Law. With offices in Torrance, Hollywood, Sherman Oaks, Pasadena Fountain Valley, he can be reached at (800) 411-0546. Opinions expressed in this column are not necessarily those of The Rafu Shimpo.