The Department of Health Care Service (“DHS”) has released for public comment draft regulations regarding the implementation of federal Deficit Reduction Act’s (DRA’s) reforms to Medi-Cal for long term skilled nursing care (not Community Based Medi-Cal). This brings California closer to DRA implementation which will occur once the final regulations are implemented; which some say may arrive in 2014. While most other states have implemented DRA since 2006, California still has not.
Fortunately, anyone receiving Medi-Cal any time prior to the final regulations implementation will not be held to the new stringent standards. California law prohibits retroactive application to anyone already qualified prior to the final regulations taking effect.
Furthermore, anyone who transfers assets before the enactment of the final Medi-Cal regulations will do so under the existing transfer rules, even if they apply for Medi-Cal after the new regulations take effect. That means, that anyone who is seriously considering that Medi-Cal may become relevant to them in the next five years — the new “transfer look back” period under DRA — may decide to make assets transfers now to ensure eligibility under the existing very favorable Medi-Cal transfer regulations. The existing transfer rules will become history once the new DRA regulations are enacted.
Moreover, most all California residents, with some limited exceptions, will still be able to transfer their home (an exempt asset) to family members without affecting Medi-Cal eligibility. Only those persons with homes appraised at over $800,000 will have some extra hurdles to cross.
However, anyone who waits to transfer non exempt assets after the final regulations become law will be subjected to harsh DRA rules restricting how they can become eligible for Medi-Cal. Let’s look at some of the major restrictions reflected in the released draft regulations (a sign of things to come).
First, all transfers made during the new sixty-month look back period will be added together and a single ineligibility period computed. Presently each separate transfer now creates its own separate ineligibility period. This is a huge difference.
Presently persons may transfer their non exempt assets incrementally with each transfer triggering its own ineligibility period. For example, presently someone may transfer a total of $120,000 using twenty $6,000 increments on ten (10) separate days to his/her two children. Each child receives ten $6,000 checks on ten days. Each check triggers its own ineligibility period.
Second, under the new rules the ineligibility period will only commence when the Medi-Cal applicant would otherwise have been eligible to receive Medi-Cal but for the ineligibility period.
Presently each disqualifying transfer’s ineligibility period begins at date of transfer. Accordingly, an ineligibility period may expire prior to when the applicant later applies for Medi-Cal, depending on when the transfer occurred in relation to the application for Medi-Cal.
Returning to our example, the ineligibility period created by each $6,000 gift check is presently computed by dividing each $6,000 by the so-called “Average Private Pay Rate” in California, presently $7,549. This equates to 0.79 months ineligibility per check. Fractions, like this one, are rounded down. Here the rounding down creates a zero, meaning no period of ineligibility for any check!
But in the future, under the final DRA regulations, transferring $120,00 (whether done all at once or gradually) will result in 15.90 months of ineligibility that is not rounded down and that commences only when the applicant is otherwise eligible to receive Medi-Cal.
Third, the look-back period doubles from 30 to 60 months. The extra 30 months will be phased-in once the final (future) regulations become effective and only fully attained 60 months from the final regulations effective date.
The draft regulations are a milestone towards future implementation of DRA in California. Anyone receiving Medi-Cal for long term skilled nursing home care can relax. Those who may need it in 2014 onwards, however, should pay close attention and may wish to consider the options before the window closes.
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