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How to Pay for the Nursing Home
My number one rule is don't go to the nursing home unless absolutely necessary. Nobody wants to go to live at a nursing home. Stay home as long as possible. Sometimes it is just unavoidable. If you must go to the nursing home because it is medically necessary, then there is no reason all of your assets should be used up in the process. Medi-Cal planning is designed to make sure your hard earned assets go to your family and not to the State or the nursing home.
The cost of the nursing home is now the biggest threat to your hard earned assets. The average cost of care in a Skilled Nursing Facility in California costs $10,298.00 per month and every year that amount goes up. Medical science is constantly developing new treatments that keep our bodies alive, but they can't necessarily keep our brains functioning properly.
There are only four ways to pay for a nursing home. They are:
Long Term Care Insurance
You can write the nursing home a check every month until you run out of money. This is not the plan that my client's want. Too often I hear of stories of nursing home social service workers telling the family that they must spend all of their money and then apply for Medi-Cal to pay for the rest of their care. This is incorrect information. With a Medi-Cal plan, you can preserve a great deal, if not all, of your assets and still qualify for Medi-Cal.
Long Term Care Insurance
Long Term Care Insurance is helpful, but not always the best solution when facing a stay in a nursing home. If you need it and don't already have a policy, you cannot get one. It would be like trying to buy fire insurance for a house that is on fire. If you have a policy, the premiums are expensive and the policy usually only covers three to five years of nursing home care. In many policies, there is a large deductible that must be paid by the policy owner before the insurance will start paying the nursing home. Also, the policy usually won't cover the whole bill of the nursing home. They only will pay so much per day. Usually, the policies don't keep up with inflation. I have clients who are surprised when I review their policy that they will have to pay over $30,000.00 to the nursing home as a deductible and then the policy will only pay $3,500.00 per month when the bill is over $10,000.00 per month.
Medicare is the Federal Government's health insurance program that most senior citizens receive at retirement. Medicare only covers certain stays at the nursing home and is geared more towards rehab. Medicare will pay for up to 100 days at a skilled nursing facility in connection with a Medicare supplement insurance policy. However, the patient must continue to improve in their condition or Medicare will stop paying for the stay. If the stay is not for rehab, Medicare will not cover pay the bill.
The Medi-Cal Program
Medicaid is a federal health insurance program administered by the states. Every other state calls their program Medicaid. California calls the Medicaid program "Medi-Cal" because we're special, I guess. Medi-Cal will pay the entire cost for room and board at the nursing home and for most prescription drugs. There are two aspects to Medi-Cal - Qualification and Estate Recovery.
In order to qualify for Long Term Care Medi-Cal, a single applicant can only have $2,000.00 in cash in their name and they are allowed to own their house. Their house is an exempt resource and does not disqualify them for Medi-Cal. The rules are slightly different for a married couple. A married applicant can only have $2,000.00 in their name and are allowed to own a house. However, the well spouse who is not applying for Medi-Cal is allowed to keep over $130,000.00 in cash as an exempt resource. Medi-Cal laws allow for many different exemptions and strategies to help someone qualify for Medi-Cal. In general, assets above the allowed Medi-Cal limits must be spent down in order to qualify for Medi-Cal. Medi-Cal planning is using the Federal and State rules of Medi-Cal to spend down in a way that preserves the assets for the family and prevents them from being spent on the cost of care.
I recently learned that the Medi-Cal program is making changes to the Asset limits. In July of 2022, a single Medi-Cal applicant's asset limit is increased from $2,000.00 to $130,000.00 in cash in their name. For a married applicant, the ill spouse's limit will increase to $130,000.00 and the well spouse still has an exempt resource allowance of $130,380.00. If both spouses are applying for Medi-Cal at the same time, they can have $195,000 between them and still qualify. All the other rules will still apply. By 2024, California is going to eliminate the asset limits completely.
Medi-Cal Estate Recovery
When a Medi-Cal recipient dies, their estate is subject to Medi-Cal "Estate Recovery". Estate recovery is when Medi-Cal seeks to get repaid from the assets of the Medi-Cal recipient (i.e., the house). Medi-Cal can place a lien on the home and get repaid when the home is sold. On January 1, 2017, Governor Brown of California signed a law that limited California's Medi-Cal estate recovery to the Probate estate of the Medi-Cal recipient. That means that only assets that go through probate can be recovered against by Medi-Cal. If you have a properly funded Revocable Living Trust, the assets in the trust are not recoverable by Medi-Cal.
Another aspect of Medi-Cal planning is defeating Estate Recovery. As I just mentioned, this is best handled through a Living Trust estate plan because Medi-Cal cannot recover against a trust. This is true whether a person is single or married. Trust planning is an essential and ideal way to handle the issues surrounding disability and paying for a nursing home. Statistics show that 70% of all people will someday need a skilled nursing facility. With a Living Trust, you can plan for the worst and hope for the best.
A Medi-Cal pre-plan is for clients who want to maximize their savings by preparing in advance for the possibility of entering a skilled nursing facility. Soon, a pre-plan will be required in order to maximize savings. In 2006, the Federal rules of Medi-Cal made changes that will make it impossible to qualify for Medi-Cal quickly. California lawmakers say they are in the process of writing the rules and regulations to implement the new Federal Rules. Forty-Nine other states have adopted the new Federal Rules. California's current rules are very favorable to Medi-Cal planning. I can help very large estates prepare and pre-plan for the nursing home in a relatively short period of time.