Medi-Cal and Long-Term Care Insurance

Recently, I wrote about how Medi-Cal counts to $2,000 to determine who is eligible for long-term Medi-Cal. As I said then, that post was not an exhaustive list of all exempt property. One unique rule that Medi-Cal follows concerns its treatment of payments made by a long-term-care (LTC) insurance policy that has been certified by the California Partnership for Long-Term Care. In one sense, Partnership policies are an alternative to Medi-Cal, since they cover the costs of long-term care just like Medi-Cal would. But in another sense, they aren’t an alternative to Medi-Cal, but can be used as an alternative to “spending down” your assets to qualify for Medi-Cal. If that sounds a little mysterious, keep reading!

The California Partnership for Long-Term Care

In 1994, California launched the California Partnership for Long-Term Care. The Partnership is a partnership between the state of California and private insurers. Its goals are to educate Californians about long-term care, to increase sales of LTC insurance to Californians, to improve the quality of LTC insurance available at an affordable price, and to reduce the number of Californians who must “spend down” to qualify for Medi-Cal. To achieve these goals, the Partnership certifies certain LTC insurance policies. These Partnership policies cost the same as other policies, but come with some big advantages when a person applies for long-term Medi-Cal.

How Medi-Cal Treats Long-Term-Care Payments by Partnership Policies

Under Medi-Cal rules, an applicant’s otherwise-countable assets can become exempt assets if the applicant has a Partnership policy that has paid for his or her long-term care. This exemption covers property with a value up to the amount of benefits paid under the Partnership policy for long-term care. For example, imagine that John, an unmarried man, has $100,000 in countable assets. But he also has a Partnership policy. That policy pays $100,000 towards long-term care for John before the policy expires. Then, John applies for long-term Medi-Cal. Normally, he wouldn’t qualify because of his $100,000 in countable assets. He would have to “spend down” those assets until he has only $2,000. But because John had a Partnership policy that paid $100,000, his $100,000 in otherwise-countable assets are now exempt, and he qualifies for Medi-Cal without having to spend down.

That’s not the only advantage that Partnership policies offer for Medi-Cal recipients, however. Recall that, normally, just because an asset is exempt when applying for Medi-Cal doesn’t mean that the state won’t try to recover its payments by going after that asset when the recipient dies. For instance, an applicant’s home is exempt when Medi-Cal is determining his or her eligibility. But the state may seek to recover the amount it paid for that person’s long-term care by forcing his or her estate to sell the house after death. The Partnership-policy exemption extends to estate recovery. That is, any property exempted because of payments by a Partnership policy are exempt not only when Medi-Cal is considering eligibility, but also when Medi-Cal is considering whether it can recover from a recipient’s estate.

Here’s an example of that second advantage: Sarah, an unmarried woman, owns a house worth $200,000. She also owns countable assets worth $100,000. She has a Partnership policy. Before the policy expires, it spends $300,000 on long-term care for Sarah. When it expires, she applies for Medi-Cal. Her house is exempt property because personal residences are always exempt property. The $100,000 in what would normally be countable assets are exempt because of the Partnership policy payments. When Sarah dies, Medi-Cal would normally be able to seek to recover the amounts it paid for her long-term care, and it could go after the house and the countable assets. But because her Partnership policy paid $300,000, Medi-Cal cannot try to recover against her estate, because its full value is exempted by those payments.

By now, you probably understand what I meant when I said that Partnership policies are both an alternative and not an alternative to Medi-Cal. Such policies can be used to cover the costs of long-term care without applying to Medi-Cal, but also make it easier to apply to Medi-Cal without the need for “spending down” assets. Of course, not everyone needs a Partnership policy, and not everyone can afford one. What’s best for you depends on your personal circumstances, which is why you should consult with a knowledgeable and experienced long-term Medi-Cal attorney when planning for your future needs.