Dear Len & Rosie,
It looks like my mother needs nursing home care soon, probably in the next year. I asked a lawyer friend of mine if there's anything that can be done to protect my mother's home and her $200,000 in savings. He said he heard that it would take five years to qualify my mother for Medi-Cal benefits. But he also said he doesn't do elder law like you (he's into securities) so I should ask someone who works in the field. Is there anything my mother can do to protect her assets?
Your friend was right to send you to an elder law attorney. The rules regarding Medi-Cal are very strange. On February 8, 2006, the federal government enacted the Deficit Reduction Act of 2005 ("DRA"). Under DRA, when someone like your mother applies for Medi-Cal benefits, she will have to disclose any gifts she has made in the five years prior to the date of application. Each gift triggers a transfer penalty period during which your mother won't qualify for nursing home Medi-Cal benefits.
The length of this penalty is calculated by dividing the total amount gifts your mother made in the last five years by the Average Private Pay Rate (the average monthly cost of nursing home care in California), which is $7,092for 2012. If she were to give away $200,000 all at once, there will be a 28 month penalty (rounded down from 28.2 months) unless your mother waits five whole years before applying for Medi-Cal, and this penalty will start when your mother applies for benefits.
Except that it doesn't work that way at all. The California Department of Health Care Services ("DHCS") has not yet implemented the federal rules imposed by DRA, even though it's been more years since its passage. But that should come as no surprise. DHCS failed to implement any of the rules created by the Omnibus Budget Reconciliation Act of 1993. Even more surprising, Medi-Cal's current eligibility rules, with few exceptions, are based on temporary emergency regulations published in 1990. We are not kidding. Under the current rules, your mother could make multiple gifts within one month, and the transfer penalties will run at the same time instead of being added together.
When will the new rules under DRA come into effect? As of now, DHCS has prepared draft regulations, but these proposed rules have not yet been published in the California Regulatory Notice Register, which is the first step in the official process of getting new regulations made into law. This could take years. The 1993 regulations were in the process of official review in 2006 (after 15 years) when they were removed from the table after the passage of DRA.
So for now, people like your mother who may need nursing home care in the foreseeable future don't have to worry about a five year look back period. Only gifts made in the thirty months prior to applying for benefits trigger transfer penalties. Also the penalties are retroactive. They start running on the first day of the month in which the gift was made. There are many planning opportunities available for your mother. You and she should see an elder law attorney soon. Not only is it possible to shelter a large portion of your mother's life savings, her home can be protected from Medi-Cal estate recovery claims as well.
Len & Rosie