Long-Term Medi-Cal: Spend Down and Its Alternatives

One of the most common questions that Californians have about qualifying themselves or a loved one for long-term Medi-Cal is whether they will have to lose all of their property to be eligible. After all, long-term Medi-Cal has asset limits that a person must satisfy to qualify for the program.

Even so, the answer is no: Some property—including some major assets like a home or car—is exempt, and Medi-Cal won’t consider it when determining eligibility. As a result, many people can qualify for long-term Medi-Cal already, even if they own, say, an expensive home. But even for those with substantial “countable assets”—the ones that Medi-Cal’s property limits apply to—there are strategies for “spending down” those assets to qualify.

However, the spend-down process is fraught with risks. Doing so improperly can result in a lengthy period of ineligibility. Doing so correctly requires planning and working with a knowledgeable estate-planning attorney. By taking those steps, a person can spend down his or her assets safely—and without becoming impoverished in the process—or avoid the need for spend down with a spend-down alternative. Let’s discuss these points in more detail.

Proper and Improper Spend-Down Techniques

When determining your eligibility for long-term benefits, Medi-Cal will look back over the last 30 months to ascertain whether you improperly spent down any countable assets. If you have, then you will be ineligible for long-term Medi-Cal for a certain amount of time—up to 30 months, in some cases!

But that’s only if you spend down improperly. In general, this happens when you transfer countable assets without adequate consideration—that is, without receiving something of equal value in return.

Fortunately, not every reduction of countable assets is improper or triggers a period of ineligibility. In particular, transfers in exchange for adequate consideration are not counted against you.

What might that involve? Well, say you sell a second car that you no longer need, and you sell it for its full Blue Book value. Because you received “adequate” consideration, the sale will not trigger a period of ineligibility. But you should notice a problem with this strategy: You’ve exchanged one countable asset (a second car) for another (cash). So you’re no closer to qualifying for long-term Medi-Cal than you were before you sold the car!

That’s where a Medi-Cal planning attorney like me comes in. I help clients recharacterize or dispose of countable assets in a way that reduces total countable assets without triggering an ineligibility period.

For instance, by paying off debts, you can reduce your cash on hand, eliminate an ongoing expense, and all without becoming ineligible for Medi-Cal benefits. Likewise, you could pay for improvements to your home (which is exempt), improving your (or your spouse’s) quality of life, increasing the value of your home, and—again—avoiding ineligibility.

Alternatives to Spend Down

And that’s not all: There are also some alternatives to spending down your countable assets, depending on how much time you have to plan. One alternative is to buy long-term care insurance certified by the California Partnership for Long-Term Care. Benefits paid under such a policy can shelter the recipient’s countable assets when he or she applies for long-term Medi-Cal.

Another alternative to spend down is to apply for an increased Community Spouse Resource Allowance. This procedure can enable a spouse who remains in the community to retain more property than he or she otherwise could, potentially making it unnecessary for the couple to spend down their countable assets.

Do You Need Help Qualifying for Long-Term Medi-Cal?

Whether you’re at a stage where you must spend down countable assets quickly to qualify for long-term Medi-Cal benefits, or you simply want to plan ahead and consider some alternatives to spend down, you need to consult a knowledgeable estate-planning attorney to understand your options and select the best one for you.

Whatever your circumstances, call me today, and I will be happy to discuss how to qualify for long-term Medi-Cal and what steps you can take now to begin that process.

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