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How Medi-Cal Can Be Dangerous to Your Home?

Many homeowners who are under the California Medi-Cal health plan are concerned about whether their homes will be taken away from their children after their deaths because they used Medi-Cal during their lives. Although, California is one of the most liberal states out of the 50 states, there some traps for the unwary to consider. Therefore, read on because one day you or your loved one might need Medi-cal. Below are some common questions that I have assembled so that homeowners can make wise and informed decisions when applying for Medi-Cal.

What is Medi-Cal?

Medi-Cal is the short name for “California Medical Assistance Program”. Medi-Cal is California’s version of Medicaid, which is the Federal Health Insurance Program for people and families with low incomes and resources. California participates in Medicaid under the name Medi-Cal. The funding for Medi-Cal comes from the Federal and California government. In a nutshell, Medi-Cal is a California public health insurance program which provides health care services for low-income individuals including families with children, seniors, persons with disabilities, foster care, and pregnant women. There are about 12 million Californians who are under Medi-Cal, which is roughly 31% of California population.

How to apply for Medi-Cal?

There are a number of ways to apply for Medi-Cal. The simplest way is to visit www.DHCS.CA.GOV, this website will walk you through the various ways of applying for this great health insurance benefits program. Medi-Cal eligibility is based on the amount of your monthly income and your assets. Even if you own a $700,000 house free and clear of any mortgage you can still qualify for Medi-Cal.

Can Medi-Cal take my home after I die?

First, if you own a home, you can still qualify for Medi-Cal. California has one of the best health services in this regard because California does not ask that you sell your home and pay for your medical needs, but rather it will front all the medical bills for you while you are alive. However, once you are dead any assets in your estate will be subject to Medi-Cal’s claim.

What Happens after I die if I Received Medi-Cal?

Probate Code Section 215 states that the person in-charge of the decedent’s estate “shall give the Director of Health Care Services notice of the decedent’s death not later than 90 days after the date of death”. Normally, a certified death certificate is sent to the Department of Health Care Services (DHCS). All medical bills used by the decedent after age 55 that are paid by Medi-Cal will be collected from the estate. Medi-Cal keeps track of the total amount of benefits its pays out over the lifetime of a Medi-Cal participant. However, regardless of age, any Medi-Cal bills used in a skilled nursing home will be subject to Medi-Cal recovery. In practice, Medi-Cal recovery will take place upon the death of the last spouse. Therefore, if the first spouse to die incurred $50,000 of Medi-Cal bills, that $50,000 will be collected after the surviving spouse’s death. In a probate, the court will not allow the heirs to get their inheritance unless the Department of Health Care Services is notified of the probate. In a trust administration setting, where no probate is necessary, it is important that the son or daughter, who is the successor trustee, understands this notice requirement and give notice to the DHSC to avoid any personal liability as the successor trustee.

Are there any exceptions to not paying Medi-Cal back?

Yes, there are exceptions. First, California is prohibited from recovery of any Medi-Cal expenses used if there is a surviving spouse. As long as the surviving spouse is still alive, Medi-Cal recovery will not happen just yet. However, once the surviving spouse dies then Medi-Cal recovery will start. If there is a minor child under the age of 21 or a blind child, or a disabled child, then the State of California is prohibited from any Medi-Cal recovery. Of course, Medi-Cal recovery takes place only if there are any assets or money left in the estate; therefore, if the Medi-Cal participant dies broke or without any assets under his or her name, then Medi-Cal is out of luck. Furthermore, the heirs may want to look into any hardship waivers and “caregiver exemption” to escape any Medi-Cal recovery.

Will I lose my home if I receive Medi-Cal?

The Federal and State law mandate the recovery of assets from an estate of the deceased for Medi-Cal benefits received while in a skilled nursing home and for Medi-cal benefits received after age 55. Please understand that your home may be “exempt” for the Medi-Cal eligibility analysis but it is not exempt from Medi-Cal recovery. Any assets left in a Medi-Cal participant’s name at the time of death will be subject to Medi-cal recovery. Therefore, if you own a home and it is under your name and you were using Medi-cal then your house is fair game for Medi-cal to come after your home. You cannot escape Medi-Cal recovery if the grant deed  to the house is in your name, in your revocable living trust, joint tenancy or tenant in commons.

Is its it possible to keep my home and avoid Medi-Cal Recovery? 

Yes, you can. First, your primary residence is an “exempt asset” for purpose of the Medi-Cal eligibility process, meaning your primary residence is not counted as a resource for Medi-Cal qualification because it is an exempt asset. Current California law is clear that all exempt assets, such as the primary residence, may be gifted to your children to escape the Medi-Cal recovery rule. The California Department of Health Services will not go after your home if you retain a right to return home. This transfer of your primary residence to escape Medi-Cal recovery can be accomplished by transferring your home to an irrevocable trust, naming your children as the beneficiaries, however, you have to retain a “life estate” in your primary residence.

When you gifted your primary residence which is an exempt asset to an irrevocable trust, you no longer own the home for Medi-Cal to come after you. Your children will not have to pay any capital gain taxes when they sell your primary residence after you die because they will get a stepped-up basis. This is really “have your cake and eat it too” scenario. You can receive your Medi-Cal benefits and still keep the State of California from taking your home after you die.

This is a form of Medi-Cal asset protection trust that I handle in my law practice. Please call me at 626-695-7310 or 800-380-7076 if you would like to discuss any Medi-Cal planning.