A reader requested that I discuss Medi-Cal’s gifting rules. Under existing MediCal regulations, anyone who applies for Medi-Cal to assist paying for long term care at a “Skilled Nursing Facilities” (“SNF Medi-Cal”) must disclose all transfers by the applicant and his or her spouse during the 30 month period prior to application; the so-called “look back period”. (It is 60 months for transfers made directly from the person’s living trust.)
“Community Based Medi-Cal” that pays for doctors, hospitals and prescription drugs is different. Unlike SNF Medi-Cal and SSI, there is no ineligibility period for gifting assets to qualify for Community Based Medi-Cal. In fact gifting will facilitate eligibility for such Medi-Cal, but it can hurt later-on for SNF Medi-Cal. Now let us examine SNF Medi-Cal gifting rules.
Certain transfers do never trigger ineligibility for SNF Medi-Cal: Transfers between spouses and transfers of exempt assets. Exempt assets include one’s home, one’s personal possessions, and one’s car (amongst others). Also, any transfers by the applicant’s spouse of his or her own separate property are exempt for determining the applicant’ own eligibility. That said, however, any property converted by the applicant into his or her spouse’s own separate property is only exempt when transferred until after the applicant moves into a skilled nursing facility. Then the spouse becomes a “community spouse” and can currently transfer all of his or her separate property rights without triggering any period of ineligibility for the applicant. Such transfers might affect the spouse’s own eligibility if the spouse herself later applies for SNF Medi-Cal.
Transfers by the applicant of ownership interest in non-exempt (countable) assets during the look back period trigger a period of ineligibility. Presently, each transfer creates its own separate period. Each period is calculated by dividing the value of the asset transferred by the so-called “Average Private Pay Rate” (APPR”), presently $6,840. The resulting number is rounded down to the nearest whole number.
Each ineligibility period starts from when the underlying transfer occurred. Each period runs concurrently with any other overlapping ineligibility period, which can greatly expedite eligibility.
For example, consider a hypothetical applicant who applies for Medi-Cal on July 1, 2011, the look back period starts on January 1, 2009 and ends July 1, 2011. The APPR for 2011 is $6,840. Let us say that the applicant made two gifts of non exempt assets to his child during that period, as follows: First, $125,000 on January 1, 2011; and, Second, $50,000 on February 15, 2011. The first transfer creates an ineligibility period of 18 months (i.e., $125,000 divided by $ 6,840 is 18.27, and rounded down to 18). The second creates an ineligibility period of of 7 months. The first ineligibility period would commence on January 1, 2011 and end on July 1, 2012. The second would commence on February 15, 2011 and end on September 15, 2011. In September, 2011, the applicant, if otherwise eligible on any one day that month, he would qualify for SNF Medi-Cal.
These rules, however, will change dramatically once California implements its overdue DRA regulations. Three biggest changes under DRA are as follows: First, the look back period is 60 months; Second, each ineligibility periods runs separately (not concurrently); and Third, the cumulative ineligibility period only starts once the applicant is otherwise eligible to receive Medi-Cal but for the ineligibility period.
No one knows when California’s DRA regulations will be implemented. It is possible, but not probable, that such regulations might come in late 2012. Under DRA transfers are much more likely to create ineligibility periods that bite. Given that DRA will not be retroactive, however, there is an incentive to act now under present rules. Anyone wishing to plan should consult a qualified Medi-Cal advisor before proceeding.
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