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Pre-planning with Trust – Medicaid and Medi-Cal and how to pay for nursing costs

In California, Medi-Cal sometimes pays long-term nursing home and home care costs if you can’t afford the cost of a nursing home.

Long-term care like nursing homes, assisted living facilities, and home care are expensive, and private health insurance policies generally do not cover those services. Medicare coverage for long-term care is very limited, and few people have purchased private long-term care insurance policies. For California residents needing long-term care services, Medi-Cal is the most common source of funding. Medi-Cal pays for the nursing home expenses of approximately 65% of the residents in California nursing homes.

Medi-Cal is California’s state Medicaid program. It is funded by both federal and state funds, and it provides health insurance to about 25% of California’s population. There are many different ways to become eligible for Medi-Cal, and there are specific eligibility rules for long-term care services like nursing homes, assisted living facilities, and home health care services. The California Department of Health Care Services (DHCS) administers long-term care programs in California.

Medi-Cal for Nursing Home Residents

Skilled nursing facilities are residential facilities that offer round-the-clock skilled nursing care in addition to other supportive services. These nursing homes are expensive, averaging approximately $7,000 per month in California in 2012. Most people cannot afford to pay their own nursing home expenses.

Medi-Cal will pay for a nursing home only when it is “medically necessary.” California defines medically necessary as “when it is reasonable and necessary to protect life, to prevent significant illness or significant disability, or to alleviate severe pain.” For Medi-Cal to pay for a nursing home stay, your treating physician must prescribe a nursing home for you because you either need the continual, round-the-clock availability of skilled nursing care or what’s called “intermediate care.” Skilled nursing care includes things like giving injections, inserting or replacing catheters, changing wound dressings, feeding through a gastric tube, and treating bed sores. Intermediate care means a protective and supportive environment with “observation on an ongoing intermittent basis to abate health deterioration.” To determine whether you need at least an intermediate “level of care” (LOC), Medi-Cal will do an LOC assessment that looks at your limitations in your activities of daily living (ADLs), cognitive function, and physical function and your need for help with medication and treatments.

If you need a health care aide or nurse only for one or two things a day, then Medi-Cal may find that a nursing home stay is not medically necessary, because you could get these services on an outpatient basis or by a home health provider. In essence, your doctor must find that your health is at risk if you do not have access to skilled nursing or intermediate care.

Qualifying for Medi-Cal

If you already qualify for Medi-Cal, then your Medicaid coverage includes nursing home care if you need it. Groups of people who automatically qualify for Medi-Cal include SSI recipients, participants in the CalWORKs (California’s Temporary Assistance to Needy Families) program, individuals enrolled in California’s refugee programs, and children in its foster care system.

Medi-Cal Income and Asset Limits

If you do not already qualify for Medi-Cal, you might be eligible if you have little income. Thanks to the Affordable Care Act (ACA), the income limit for Medi-Cal now works out to 138% of the Federal Poverty Level (FPL). That is about $16,100 for an individual and $32,900 for a family of four.

While the ACA has eliminated an asset test for many Medicaid applicants, if you are elderly or disabled, you will still need to have few assets to qualify for Medi-Cal: $2,000 for an individual and $3,000 for a couple. Some assets are not counted, such as a home if your spouse is living there or if you intend to return there, one vehicle, personal belongings, and small burial or life insurance policies.

You are permitted to “spend down” your assets to qualify for Medi-Cal by paying for certain kinds of debts or expenses. If you are trying to spend down your assets, get advice from a lawyer or legal aid office first. Be very careful about transferring any of your assets. Medi-Cal will look back 60 months from the date that you apply for Medicaid-paid long-term care and examine any asset transfers to see if they were legitimate. If you give property away for less than it is worth, then Medi-Cal will impose a waiting period before you can start getting your benefits.

Share of Cost Medi-Cal

If you are “over-income” for Medi-Cal but have high health care expenses like nursing home fees, then you might qualify for a program called Share of Cost (SOC) Medi-Cal. SOC Medi-Cal allows recipients to pay a certain portion of their income every month towards their medical expenses, and Medi-Cal pays all of the expenses incurred afterwards. The portion that the Medi-Cal recipient pays is called his or her share of cost.

SOC Medi-Cal is an important resource for individuals who might have higher incomes but who find that they cannot afford the cost of long-term care. However, Medi-Cal only lets long-term care residents keep a very small personal needs allowance ($35-$50/month) when they receive SOC Medi-Cal. Any non-exempt income above that personal needs allowance has to be paid to the long-term care facility before Medi-Cal will cover additional costs each month. In essence, Medi-Cal pays the difference between the monthly cost of the nursing home and the monthly income of the Medicaid recipient (minus $35).

Medi-Cal for Assisted Living Facility Residents

Assisted living facilities (ALFs) offer a wide range of supportive services like housekeeping, medication management, meal preparation, and assistance with dressing and bathing, but they do not offer skilled nursing care. In general, Medicaid pays for room and board only when they are offered in an institution that provides skilled care (like a nursing home), and it does not generally pay for room and board expenses in assisted living facilities. However, in California, to assist with the costs of assisted living facilities, the state has created a Medi-Cal program called the Assisted Living Waiver (ALW).

ALW is a Home and Community Based Services (HCBS) waiver program that offers care coordination services and can pay for expenses associated with some assisted living facilities and also with some home health services. Most recipients of ALW services still have to pay most of their income to the assisted living facility for room and board charges.

To be eligible for ALW, you must be eligible for Medi-Cal and require an intermediate level of care. You meet that level of care if, without the ALW services, you would need to live in a nursing home. However, because ALW is a Medicaid waiver program, it does not need to be equally available to everyone in the state who is eligible for it. At this time, California has opted to make the services available to some seniors and people with disabilities living in Sacramento, San Joaquin, Los Angeles, Sonoma, Fresno, San Bernardino, Contra Costa, Alameda, San Diego, Riverside, Kern, Orange, Santa Clara and San Mateo counties.

If you qualify for ALW, you must use one of the assisted living facilities that have been approved by the state to participate in the program. The state licenses and regulates assisted living facilities that wish to receive Medi-Cal payments. Those approved facilities are called Residential Care Facilities for the Elderly (RCFE). There are three different RCFE licenses, depending on the level of care that the facility offers. In a Level 1 RCFE, residents are largely independent and receive minimal assistance with their personal care. In a Level 2 RCFE, residents receive frequent assistance with personal activities of daily living. In a Level 3 RCFE, residents receive extensive assistance with personal activities of daily living, and they may occasionally require the services of a skilled nurse or other medical professional. RCFEs can have as few as six beds or as many as 100 beds.

SSI/SSP Payments for Assisted Living or Custodial Care

California’s SSI/SSP program also pays for some non-medical custodial long-term care. (Many people who are eligible for Medi-Cal are also eligible for SSI.) SSI is paid for by the federal government, but California pays an extra supplement to its residents called the “state supplementary payment” (SSP). The SSP amount is higher for those living in a “non-medical out of home care” situation (board and care, RCFE, or ALF). Someone who receives SSI/SSP in California and lives in a assisted living facility or RCFE receives $1,133 monthly, and the long-term care facility may charge no more than $961, leaving a small personal needs allowance for the recipient.

Medi-Cal for Home Health Care

California covers home health services as part of its state Medicaid plan. Medi-Cal covers home health services that are medically necessary, like skilled nursing care and medical equipment. For individuals who need ongoing, non-skilled care like assistance with bathing, cooking, and chores, California has the In-Home Supportive Services (IHSS) Program.

The IHSS program pays for home care services that aren’t necessarily medical in nature. The types of services covered by IHSS include housecleaning, meal preparation, laundry, grocery shopping, bathing, bowel and bladder care, accompaniment to medical appointments, and protective supervision for the mentally impaired. To be eligible for IHSS, you must be 65 or older, disabled, or blind, and you must be living in a home, not an institution. In addition, you must meet the financial eligibility criteria for Medi-Cal, and you must be unable to live at home safely without IHSS services.

When you apply for IHSS, your county will send a social worker to interview you about your needs and review your medical records. The county will use the results of the needs assessment to decide how many hours of in-home services it will pay for each month. In 2013, non-severely impaired applicants could receive up to 195 hours each month, and severely impaired applicants could receive up to 283 hours.

You apply for IHSS through the Department of Social Services, using this Application for Social Services form.

 Medicaid/Medi-Cal Pre-planning With Trusts

If you are worried about the high costs of long-term care and how it will affect your estate, this is the chapter for you. Seniors over the age of 65 have a 50% chance of needing a nursing home someday. The pressing question for most people is: “How can we afford to pay the nursing home without losing everything we own?” The second question is: “What can we do to plan ahead?”
The Problem: In the United States, care in a skilled nursing facility can run from $2,500 to $25,000 per month or more, depending on your location. The average
stay in a nursing home is approximately three years. In certain cases, such as dementia, a stay of three to twenty years is not uncommon.
In California, the average cost of care in a nursing home is approximately $5,500 per month, or $66,000 annually. Three years of care is $198,000. The greatest threat to your loved one’s hard-earned money is the high cost of nursing home care.
Planning ahead for such costs is prudent and wise.

There are only four choices for paying for skilled nursing home care:

1. Private Pay. You can privately pay the nursing home by writing them a check once a month.
2. Long-Term Care Insurance. It is great if you have long-term care insurance, but even if you do, it does not always cover all your costs and it often has time limits. Moreover, you have to buy it before you need it.
3. Medicare. Medicare, in conjunction with your supplement, may pay for up to 100 days of coverage, as long as you continue to improve. If your condition plateaus, or if your health starts deteriorating, Medicare can stop paying for your stay at the nursing home within a week.

4. The Medicaid/Medi-Cal Program.

Medicaid is a needs-based Federal entitlement program, implemented by the states, which provides funding for medical care for those who qualify.

The California version of Medicaid is called Medi-Cal.

The Medicaid Program will pay for your stay in a nursing home and will cover most drug costs for those who qualify.

The Solution: If preservation of assets for your family is your goal, the Medicaid program is the only cost-effective way to pay for nursing home care.

There are two important aspects of the Medicaid Program you must know in order to plan properly:

1. Qualifying for Medicaid/Medi-Cal

In order to qualify for Medicaid, you must meet a strict asset and income test. The numbers vary from state to state. However, in every state, there are assets that are exempt (not counted) when Medicaid determines whether you qualify. Also, Medicaid will look at the applicant’s financial records for the past three to five years to find any “uncompensated transfers” (gifts). If they find gifts, they can calculate a penalty period during which they will not pay for the nursing home. The rules of Medicaid are complex. You need to hire an advocate, such as a qualified Elder Law attorney, who knows the rules and how to formulate a working strategy.

2. The Medicaid Lien

If your loved one qualifies for Medicaid, is receiving benefits during a stay in a nursing home, and owns assets that were “exempt” for qualification purposes, such assets may be subject to a Medicaid recovery lien upon his or her death. However, with knowledge of Medicaid rules, your Elder Law Attorney should know how to legally defeat the Medicaid lien and protect the assets from recovery.

There are three stages to Medicaid planning

Stage One: Your estate Plan

A professionally crafted estate plan is essential for Medicaid planning and should include the following documents:

a. Revocable Living Trust

There are myriads of benefits to owning your property in a living trust, but such trusts are especially useful for purposes of Medicaid planning. A properly drafted living trust solves the problem of not being able to manage your assets if you become incapacitated. You can name a person who will act as trustee and manage the assets in the trust if you are unable to do so yourself. In order to be properly drafted, your trust must contain special language granting your trustee the powers necessary to implement Medicaid planning.

b. Financial Power of Attorney

Equally important is the financial Power of Attorney, which also requires special language so your agent can implement Medicaid planning along with the trustee of your living trust (typically the same person).

c. Irrevocable Trust

In the right circumstances, and in consultation with an Elder Law attorney, families with larger estates and trustworthy adult children may be able to utilize Irrevocable Trusts to achieve Medicaid eligibility.
d. Other Important Documents Every Estate Plan Should Have.

Every estate plan should also have a Pour Over Will, Advance Health Care Directive or Healthcare Power of Attorney (depending on the state), HIPAA Authorization, and a Living Will

If you have the above documents in place, they are properly drafted, and you keep them current by reviewing them with your attorney every few years, you are ready for Stage Two, if necessary. Suppose you have prepared the above documents and are now faced with a crisis situation where you need to apply for Medicaid.

Stage Two: Spend down and Application

You will need to consult with an attorney in your state regarding the spend down process and how to fill out the Medicaid application. “Spend down” does not mean spending all your money until you hit the qualification limits. What it does mean is that you implement a plan to reposition assets within the rules of Medicaid in a legal, ethical, and moral manner. The Medicaid rules allow you to spend down your money by paying for any necessary medical needs you may have (i.e., new glasses, hearing aids, etc.). You can also spend money to fix your home. Because the home is exempt, you are turning a non-exempt resource (cash) into an exempt resource, the home.

The opportunities for spending down in accordance with Medicaid rules are vast and vary from state to state. One very important purpose behind the rules is to ensure a “well-spouse” is not completely impoverished by spending down the “ill-spouse’s” assets.

For example, in California in 2008, the “well-spouse” is allowed to keep $104,400 in assets, and $2,610 in income. John Doe and Mary Doe are a married couple who has $250,000 in assets, and a $250,000 home. John Doe has developed Alzheimer’s disease and requires around-the-clock care in a skilled nursing facility. John has $1,200 per month in income and Mary has $700 per month in income.

In order to qualify John for Medicaid, his assets must be spent down to $2,000. Mary gets to keep $104,400 in cash assets, plus the house, because it is an exempt asset. Now comes the fun part.

John and Mary are “over-property” by $146,000. That amount must be “spent down” or “repositioned” in order for John to qualify for Medicaid. A good attorney will notice that John and Mary’s income only totals $1,900 per month. John can only keep $35 per month in income and Mary is entitled to $2,610 in income. Mary’s current income is only $1,865 per month.

Mary’s attorney can go to court and ask the court to increase the amount of assets Mary is allowed to keep from $104,400 to an amount that, if invested conservatively, will produce an income stream that will bring Mary up to the limit of $2,610 per month.

The question then becomes: How much money will it take to produce an income stream for Mary that will produce $745 more in income?

Often, the court will award the entire estate to Mary without her having to spend down a dime (except for attorney fees, of course) so she can support herself. This is just one example of a planning opportunity existing within the rules of Medicaid.

Your attorney can fill out your Medicaid application for you and present it to the Medicaid office with evidence attached detailing asset repositioning you have done, along with a copy of the Medicaid rules authorizing such repositioning. A good attorney will determine whether further revocable trust planning is necessary. For example, it is necessary to ensure that the person who is going on Medicaid does not receive an inheritance unless it is in the form of a Special Needs Trust, designed to supplement but not replace Medicaid benefits.

Stage Three: defeat of the Medicaid Lien

Your attorney will best be able to advise you about how to avoid the Medicaid lien. The issue is very state-specific. If you have done the above planning, defeating the lien should not be a difficult task.

Find an estate planner/lawyer to relieve your fear and uncertainties regarding disability, the high costs of long-term care, and death.

Email to refer you to an estate planner/lawyer for seniors.

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