What happens if you need skilled nursing care before retirement? Although we often think of nursing homes as a place for the very old, life is hardly so predictable that we can ignore the risk of needing such care while still working. Fortunately, long-term Medi-Cal recognizes that risk, and specially provides for business property in defining eligibility for the program.
In short, business property is exempt property, but there are some important caveats to that statement. In this post, I want to provide a quick refresher of long-term Medi-Cal basics (with links so you can read more if interested), and then a brief overview of how Medi-Cal deals with business property.
Long-Term Medi-Cal Basics
In California, long-term Medi-Cal can help pay for skilled nursing care. Medi-Cal is California’s implementation of Medicaid, a joint state-and-federal program that helps low-income Americans access the health care they need.
Because the program is meant to help those with limited resources, long-term Medi-Cal eligibility is restricted based on a person’s assets. In general, a person can only qualify for long-term Medi-Cal if he or she has no more than $2,000 in countable (or non-exempt) assets. Many types of assets are exempt, meaning that they are not counted in the $2,000 limit.
(A higher asset limit is available if the applicant is married and his or her spouse will remain in the community.)
Importantly, exempt assets are only exempt for purposes of Medi-Cal eligibility. But qualifying for the program is not the end of the story. When a person dies, the state may seek reimbursement for program benefits out of his or her estate—the property remaining in his or her name at that time.
Effectively planning for long-term Medi-Cal requires taking Medi-Cal Estate Recovery into consideration, because there are legal—and relatively simple—ways to protect your property from it.
With this understanding of the basics of long-term Medi-Cal in mind, we can now turn to the question at hand: How does Medi-Cal treat business property?
Long-Term Medi-Cal Eligibility and Business Property
Medi-Cal’s treatment of business property is a little bit complicated. You can find the basic rule at 22 CCR § 50485, which is a regulation created by the Department of Health Care Services. The general rule is this: Equipment, inventory, licenses, and materials (or just “business property” for short) owned by the applicant are exempt assets if they are:
- Necessary for employment;
- Necessary for self-support; or
- Necessary for an approved plan of rehabilitation or self-care necessary for employment.
Of course, this being a regulation, each of those conditions is given further explanation:
- Business property is “necessary for employment” if the applicant’s employer requires him or her to provide the property as a condition of employment. If the applicant is unemployed, the property can still be “necessary for employment” if it was required in this way in the past and the applicant is seeking similar work.
- Business property is “necessary for self-support” if the applicant receives a reasonable rate of return from using it. A reasonable rate of return is 6% of the net value of the property, except that no rate of return is needed during the first year of operation.
- Business property is “necessary for an approved plan of rehabilitation or self-care” if it is necessary for training that leads to employment or self-support; for future employment or self-support that results from a plan of rehabilitation established by the county or Department of Rehabilitation; or employment or self-support after a period of illness.
When it comes to Estate Recovery, business property will be treated similarly to other property. So, you need a plan!
Now, even this discussion doesn’t cover all the details. I could go on and on with sub-rules, caveats, and exceptions. The bottom line is simply this: You don’t have to give up your business property to qualify for long-term Medi-Cal. But keeping it can be complex, and you should seek assistance from an experienced Medi-Cal attorney if you need Medi-Cal and own such property.