Dear Mr. Miller:
I am so upset with California, they are making us turn somersaults in order to qualify for Medi-Cal. My wife is in a skilled nursing home, it’s costing $14,000 per month and we are slowly going broke. So we applied. They want all of our financial records (bank accounts from each bank, stock broker, everything) for the last 30 months. Because we have been changing banks every 6 months or so in order to get the best interest rate on our CD’s, there are a lot of bank accounts and statements we need to compile.
What do they need that for? My brother says, “Well, that’s just government for you—a giant bureaucracy!!!!!”
Husband Trying to Save Our Finances
Medi-Cal, Should You Do It Yourself: Medi-Cal is a fantastic program and it can probably come to your rescue. First, do you have an attorney or are you trying to do it all yourself? If the latter, then my best advice is, don’t. Get someone to help you. It sounds like you have some wealth, so see a competent attorney immediately.
Net Worth Limits: Did you know that in order to qualify you typically can have no more than $2000 for your wife (the disabled spouse) and $123,600 for you (the well or “community” spouse). So a total of about $125,000. There are various assets that are not counted, the largest one being your home. But if you have all of those bank accounts and the total value is over the limit, you are going to need to take action in order to be qualified. That is at least one reason why you need an attorney.
Methods to Reduce Net Worth: You may have to make gifts to your children or others, change your investments from bank accounts to something that is exempt, open IRA’s. Because you are in California, there is a slew of different approaches dependent on your situation. That is not necessarily true for those who reside in other states.
DRA 2006: A bit of history is in order. Medi-Cal is a joint federal and state program. The Fed’s provide a ton of money for this program. Following the “golden rule,” i.e. he who has the gold makes the rules, the Fed’s require the states to meet certain federal requirements in running the Medi-Cal program. In 2006, the Fed’s changed the rules under what is known as the Deficit Reduction Act (DRA). The purpose was to cut down the costs and to do so, eligibility requirements were stiffened.
California DRA: All states had to pass legislation to comply to continue receiving Federal money. As far as I know, all states did (including California) and all except one (California) are now operating under the rules of the DRA. California passed DRA legislation in 2008. That law specifically states that it will not go into effect until the final regulations under that law are implemented. Not too long after 2008, draft regulations were issued. But there has never been final regulations. I have no idea if we will ever get final regulations. So we continue to operate under the old rules. But that’s not really the end of the story. Actually, in California we don’t operate under the old rules, we operate under the old-old rules; the ones pre 1993 when the prior Federal rules were changed.
Since the DRA rules are far more stringent than the prior rules let along the pre 1993 rules, we can do things here in California that are simply unheard of elsewhere. I have been at national legal conferences and spoken to attorneys from other states who are simply amazed at what we can do here.
Look Back Period Differences: Before you condemn government, thank your lucky stars you are here in California. For example, in most, if not all, other states you would have to produce the financial records for the last 5 years, not just 30 months. And the reason for these financial records is really quite sound. The government does not want prospective Medi-Cal applicants to give away their assets on the eve of applying in order to qualify for the program. So under the DRA, there is a 5 year “look back” period. If gifts were made during that period, a “penalty period” is applied (computed by a formula) during which Medi-Cal will not pay any benefits. In California, that period is only 30 months.
Penalty Period Commencement Date: Another huge advantage for California residents has to do with gifting. In every other state, the penalty period starts when one applies for Medi-Cal. So if you gave away $9,000 you might suffer a penalty period of 1 month without benefits, starting the day you applied. But in California, the penalty period starts when the gift was made. So if you gave the gift 2 months ago, the penalty would have run out by the time you applied.
Stacked Gifting: When the penalty starts may not sound like such a huge benefit. However, because of the point in time when the penalty starts running, in California we can give a series of gifts, each one running a penalty period independently and each penalty period starting when the gift was made, i.e. they run concurrently, not consecutively. We call this stacked gifting. It essentially allows us to give away large amounts and suffer little or no penalty periods. For example, one could give away a series of gifts totaling $300,000 over a 3 month period (or, theoretically, an even shorter period) and have no penalty period. The frequency of the gifts, the amount of each gift, and the documentation for the gifts would all be issues decided by your attorney.