Navigating the complexities of long-term care for yourself or a loved one can be overwhelming. Understanding the financial aspects, especially when considering nursing home care, is crucial. Many families find themselves comparing Medicare and Medi-Cal, often unsure which program offers the right support. This guide focuses on the medical long term care program offered through Medi-Cal, California’s Medicaid program. We will clarify how Medi-Cal can be a vital resource for covering long-term care costs, particularly in skilled nursing facilities, and how it differs significantly from Medicare.
Navigating Long-Term Care Options: Medi-Cal vs. Medicare
It’s important to distinguish between Medicare and Medi-Cal when planning for long-term care. Medicare, the federal health insurance program primarily for those 65 and older and younger people with disabilities, offers limited coverage for skilled nursing care. While Medicare can cover up to 100% of skilled nursing care costs for the first 20 days after a qualifying 3-day hospital stay, this coverage is far from comprehensive for long-term needs. For days 21-100, a co-payment is required, and crucially, Medicare provides no coverage for nursing home care beyond 100 days within a benefit period. Furthermore, Medicare only covers “skilled nursing care,” which is medically necessary care provided by licensed professionals, and does not cover “custodial care,” which involves assistance with daily living activities. The average Medicare-covered nursing home stay is often less than 24 days, highlighting its limitations in addressing substantial long-term care expenses.
For individuals needing more extensive long-term care support, particularly in a nursing home setting, Medi-Cal’s medical long term care program presents a significant alternative. Medi-Cal, California’s implementation of Medicaid, is a need-based program designed to assist low-income residents with medical expenses. Unlike Medicare, eligibility for Medi-Cal is not automatic and requires an application process and meeting specific criteria. This guide will primarily focus on Medi-Cal’s long term care benefits, specifically how it can help cover the costs associated with skilled nursing facilities and nursing homes. It’s important to note that Medi-Cal also offers community-based services for those requiring care at home or in assisted living settings, which are distinct from the nursing home coverage discussed here.
Medi-Cal Long Term Care Eligibility: Who Qualifies?
A significant change in Medi-Cal eligibility took effect on January 1, 2024. Medi-Cal no longer counts assets when determining eligibility for most programs, including the medical long term care program. This landmark shift means that individuals can now qualify for Medi-Cal regardless of their asset holdings. This expansion of eligibility encompasses various groups, including:
- Individuals residing in skilled nursing or intermediate care facilities, or those who qualify for home and community-based services.
- Individuals aged 65 or older, blind, or disabled.
- Low-income families with dependent children.
- Children under the age of 21.
- Pregnant women.
Furthermore, individuals receiving Supplemental Security Income (SSI) and other categorically-related recipients are automatically eligible for Medi-Cal, streamlining access to healthcare and long-term care services. This asset test elimination greatly simplifies the process and opens up access to the medical long term care program for a wider range of Californians needing assistance with nursing home costs.
Understanding Monthly Resident Costs in Nursing Homes (Formerly “Share of Cost”)
While Medi-Cal can cover the majority of nursing home expenses for eligible individuals, residents of skilled nursing facilities are generally required to contribute a portion of their monthly income towards the cost of their care. This contribution is known as the “monthly resident cost,” previously referred to as “share of cost,” and functions similarly to rent payments. The resident is responsible for paying this monthly resident cost directly to the nursing facility, and Medi-Cal then covers the remaining approved costs for that month.
The calculation of the monthly resident cost is based on a straightforward formula:
Monthly Resident Cost = Gross Monthly Income – (Out-of-Pocket Medical Premiums + Personal Needs Allowance)
The Personal Needs Allowance (PNA) is a set amount that nursing home residents are allowed to keep each month for personal expenses. In California, the standard PNA for Medi-Cal recipients in nursing homes is $35 per month. However, this amount can be higher in certain situations:
- SSI Recipients: Residents who receive SSI benefits have a higher Personal Needs Allowance of $50 per month.
- VA Aid and Attendance Benefits: Residents receiving Veterans Affairs Aid and Attendance benefits are entitled to a total of $125 per month for personal needs, as they receive an additional $90 on top of the standard $35 PNA.
Example: Calculating Monthly Resident Cost
Let’s consider an example to illustrate how the monthly resident cost is calculated:
Seth enters a skilled nursing facility. His gross monthly income is $1,800, and he pays $50 per month for a supplemental vision insurance plan.
Calculation:
$1,800 (Gross Monthly Income)
- $50 (Medical Premium)
- $35 (Personal Needs Allowance)
$1,715 (Seth’s Monthly Resident Cost)In this scenario, Seth’s monthly resident cost would be $1,715, which he would pay to the nursing home. The remaining $35 is his Personal Needs Allowance for personal expenses. Medi-Cal would cover the remaining approved costs of his nursing home care.
Additional Deductions from the Monthly Resident Cost
Besides medical premiums and the Personal Needs Allowance, other deductions may be applicable to further reduce the monthly resident cost. These deductions can include:
- Medical Premiums: Premiums for Medicare Part B, supplemental vision, or dental insurance are deductible.
- Unpaid Medical Bills: Under the Hunt v. Kizer legal settlement, recipients can utilize old, unpaid medical bills to reduce their monthly resident cost. To qualify, original documentation of the billing statement with an outstanding balance must be provided to the County eligibility worker. Specific information required on the documentation includes provider details, patient name, service description, procedure code, provider ID, service date, billing date (within 90 days or a recent bill for older debts), and the amount owed by the individual. This deduction is not automatic and requires discussion with the Medi-Cal county eligibility worker.
- Medically Necessary Uncovered Expenses: The Johnson v. Rank settlement allows long-term care residents to use their monthly resident cost to pay for medically necessary supplies, equipment, or services that are not covered by Medi-Cal. This requires a current physician’s prescription included in the patient’s plan of care. After presenting the prescription and bill to the facility, the facility will deduct the cost from the monthly resident cost and bill the resident for the remaining balance.
These deductions can significantly impact the monthly resident cost, making the medical long term care program more accessible and affordable for individuals with varying financial situations and medical needs.
What Services Does Medi-Cal Long Term Care Cover?
Medi-Cal’s medical long term care program covers a wide range of healthcare services deemed “medically necessary.” These services are essential for maintaining or improving a patient’s health and are prescribed or ordered by a healthcare professional. Covered services include:
- Prescriptions: While Medicare Part D now covers most prescription medications, Medi-Cal provides coverage for some prescriptions as well.
- Physician Visits: Regular check-ups and specialist consultations are covered.
- Adult Day Health Services: Day programs offering therapeutic and social activities for adults needing daytime care.
- Dental Care: Some dental services are included, focusing on essential care.
- Ambulance Services: Medically necessary transportation by ambulance.
- X-rays and Laboratory Services: Diagnostic imaging and lab tests.
- Orthopedic Devices: Braces, supports, and other orthopedic equipment.
- Eyeglasses and Hearing Aids: Vision and hearing aids to improve sensory function.
Certain services, such as home health care, durable medical equipment, and some medications, may require prior authorization from Medi-Cal before they can be approved and covered.
Nursing home care is a primary benefit of the medical long term care program, provided it is deemed medically necessary and receives prior authorization from a physician or healthcare provider. Admission to a nursing home under Medi-Cal requires a doctor’s order and a determination that the stay is medically necessary to address the individual’s health needs.
For individuals eligible for Medi-Cal’s medical long term care program, private “medigap” insurance or HMO plans are not necessary to cover basic healthcare costs. If a beneficiary does have such supplemental insurance, the premiums are deducted from their income when calculating the monthly resident cost, effectively making the supplemental coverage cost-neutral. Maintaining HMO coverage, particularly if it includes drug benefits, might be advantageous as it could offer more comprehensive drug coverage than Medicare Part D alone.
Assets and Medi-Cal Long Term Care: What You Need to Know
While the asset test has been eliminated for Medi-Cal eligibility, it’s crucial to understand how assets are considered within the context of the medical long term care program. Although assets themselves no longer disqualify an individual from Medi-Cal, income generated from assets may be counted when calculating the monthly resident cost. Medi-Cal requires applicants and beneficiaries to report income from all sources, and certain types of asset-generated income are included in the monthly resident cost calculation. Examples of such countable income include:
- Rental Property Income: Net income from rental properties.
- Retirement Account Distributions: Periodic payments and required minimum distributions from IRAs, self-employed retirement plans, and work-related pensions.
- Annuity Payments: Distributions received from annuities.
- Investment Income: Interest and dividends earned from investments, savings accounts, etc.
For a comprehensive list of countable and excluded income sources, refer to ACWDL 23-21.
Income from Real Property: A Closer Look
If a Medi-Cal beneficiary receives rental income from real property, including their primary residence, the “net” income is used to determine the countable income for the monthly resident cost. This means that certain expenses associated with the rental property can be deducted from the gross rental income to arrive at the net income. Allowable deductions include:
- Property taxes and assessments.
- Mortgage interest payments (principal payments are not deductible).
- Property insurance premiums.
- Utilities (if paid by the property owner).
- Upkeep and repairs.
The deduction for upkeep and repairs is calculated as the greater of either: the actual amount spent on upkeep and repairs during the month or 15% of the gross monthly rental income, plus $4.17 per month. (22 CCR §50508). Specific calculations apply to income from renting rooms or units in multi-dwelling properties (22 CCR §50508). Understanding these nuances regarding asset income is essential for accurate monthly resident cost calculations within the medical long term care program.
Transferring or Gifting Assets and Medi-Cal Eligibility
The rules regarding asset transfers and gifting have undergone significant changes, particularly impacting individuals seeking medical long term care program benefits in skilled nursing facilities. The “lookback period,” which previously scrutinized asset transfers made within a certain timeframe before applying for Medi-Cal, no longer applies to transfers made on or after January 1, 2024. This is a major shift simplifying asset management for those planning for long-term care.
For transfers made prior to January 2024, a 30-month lookback period may still be applied when assessing eligibility for Long Term Care Medi-Cal. However, transfers made in 2024 and going forward will not be subject to transfer penalties. Counties will review transfers made in the 30 months prior to application for Long Term Care Medi-Cal services, but will not penalize transfers occurring from 2024 onwards (ACWDL 23-28).
A transfer of non-exempt assets before 2024 could potentially lead to a period of ineligibility for Medi-Cal if the value of the transferred assets, divided by the average private pay rate (APPR) for nursing home care, equals one or more months. The current APPR is $12,608 (effective January 1, 2024).
Examples of Asset Transfers and Lookback Rules
Example 1: Transfers Made On or After January 1, 2024
Josh enters a nursing home in October 2024 and applies for Medi-Cal’s medical long term care program. In August 2024, he transferred $150,000 to his brother. Because this transfer occurred in 2024, it will not be subject to a transfer penalty. The county will review transfers made in the 21 months prior to January 1, 2024, but the 2024 transfer will not be penalized.
Example 2: Transfers Made Prior to January 1, 2024
In December 2023, Maya cashed out her retirement account and gifted $250,000 to her daughter. In June 2024, she enters a nursing home and applies for Long Term Care Medi-Cal. Because the transfer occurred before 2024 and within the lookback period, it could result in a period of ineligibility.
To calculate the potential period of ineligibility:
$250,000 (Amount Transferred) / $12,608 (APPR) = 19.82
Maya’s period of ineligibility would be 19 months (Medi-Cal does not count partial months). Per ACWDL 23-28, the county must submit the period of ineligibility to DHCS for approval, who will review for undue hardship.
Exempt Transfers
Certain asset transfers are always exempt from penalties, regardless of when they occur. Assets can be transferred at any time without penalty to:
- A Blind or Disabled Child: Transfers to a child of any age who is blind or disabled (meeting Social Security Act disability requirements).
- A Spouse: Transfers to a spouse are always permitted without penalty.
It’s important to note that while transferring assets to a blind or disabled child will not affect the Medi-Cal applicant’s eligibility for the medical long term care program, it may impact the child’s eligibility for SSI benefits. Consulting with an SSI specialist is recommended in such cases. Additionally, before imposing any transfer penalty, Medi-Cal must review the applicant’s case for “undue hardship” and obtain approval from the DHCS, Medi-Cal Eligibility Division (ACWDL 23-28).
Spousal Impoverishment Protections for Long-Term Care Residents
The medical long term care program incorporates Spousal Impoverishment laws to protect the financial well-being of the spouse of a nursing home resident (referred to as the “institutionalized spouse”). These laws recognize that when one spouse requires long-term care, the other spouse (the “community spouse”) should not be left in financial hardship.
Under Spousal Impoverishment rules, the community spouse can keep their income and assets without having to contribute them towards the institutionalized spouse’s monthly resident cost in the nursing home. For instance, if the community spouse has a monthly income of $5,000, they retain the entire amount without it affecting the Medi-Cal recipient’s eligibility or contribution.
Furthermore, if the community spouse has a low income, California law provides a Minimum Monthly Maintenance Needs Allowance (MMMNA). For 2024, the MMMNA is $3,854 and is adjusted annually. If the community spouse’s income is below the MMMNA, they are entitled to receive an income allocation from the institutionalized spouse’s income until their income reaches the MMMNA.
Example: Spousal Impoverishment and Income Allocation
Seth and Logan are registered domestic partners. Seth enters a nursing home and qualifies for Long Term Care Medi-Cal with Spousal Impoverishment protections. Seth’s monthly income is $3,000, and Logan’s monthly income is $1,435, which is below the MMMNA.
Step 1: Calculate Maximum Allocation to Community Spouse
$3,854 (MMMNA)
- $1,435 (Community Spouse Income)
$2,419 (Maximum Allocation to Community Spouse)Seth can allocate up to $2,419 of his income to Logan to help Logan reach the MMMNA.
Step 2: Calculate Institutionalized Spouse’s Monthly Resident Cost
$3,000 (Institutionalized Spouse Income)
- $2,419 (Allocation to Community Spouse)
$581 (Remaining Income after Allocation)- $35 (Personal Needs Allowance)
$546 (Institutionalized Spouse’s Monthly Resident Cost)In this example, Seth’s monthly resident cost to the nursing facility is $546 after allocating income to Logan.
Couples can also petition for a fair hearing to request an increase in the MMMNA to generate additional income for the community spouse and/or seek a court order to obtain additional income-generating resources. These Spousal Impoverishment protections are a crucial element of the medical long term care program, ensuring that community spouses are not financially devastated when their partner requires nursing home care.
Family Allocation for Dependents of Medi-Cal Recipients
In addition to Spousal Impoverishment protections, the medical long term care program allows for income allocation to support dependent “family members” residing with the community spouse. Under federal and state laws, Medi-Cal recipients can allocate income for dependent family members when there is a community spouse. Eligible family members are narrowly defined and include:
- Natural or adopted minor children.
- Dependent adult children.
- Dependent parents or siblings of either spouse residing with the community spouse.
Crucially, to receive the maximum family member allocation, there must be a community spouse. This rule has disproportionately impacted grandparents with legal guardianship of grandchildren, as foster children are not considered “children” or “family members” for Long Term Care Medi-Cal purposes.
The family member base allocation amount is adjusted annually. Effective July 1, 2024, through June 30, 2025, the maximum family member allocation amount is $2,555. This allocation is only possible if the institutionalized spouse has sufficient income remaining after the spousal allocation to the community spouse (if applicable).
The family allocation is calculated separately for each eligible family member. Any income received by the family member is deducted from the maximum allocation amount, and the remaining amount is divided by 3 to determine the actual family allocation per family member. If a child has no income, the maximum family allocation for that child would be $821.67 ($2,555 / 3).
Example: Family Allocation Calculation
| Calculation Component | Amount |
|---|---|
| Maximum Family Allocation Amount | $2,555 |
| Less: Child’s Social Security Income | -$300 |
| Remaining Amount | $2,255 |
| Divided by 3 (to determine individual allocation) | $751.67 |
| Maximum Family Allocation per Child | $751.67 |
(Source: ACWDL 24-07; Form MC 176 W, section IX)
Family allocation provides additional financial support within the medical long term care program, recognizing the broader family needs when one member requires nursing home care and has dependents at home.
Medi-Cal Recovery: Estate Recovery and Long-Term Care Benefits
A critical aspect to be aware of when considering the medical long term care program is Medi-Cal Recovery. Medi-Cal is legally obligated to attempt to recover the costs of long-term care services paid for beneficiaries after age 55. This recovery process, known as estate recovery, typically involves placing a claim against the deceased beneficiary’s estate to recoup the funds Medi-Cal spent on their care. The primary asset subject to recovery is often the beneficiary’s home.
Medi-Cal applicants, beneficiaries, and their spouses should proactively understand Medi-Cal Recovery rules and engage in estate planning to potentially mitigate or avoid recovery claims on their home or other assets. For detailed information on the Medi-Cal Recovery program, it is highly recommended to consult CANHR’s consumer booklet on Medi-Cal Recovery, available at https://canhr.org/wp-content/uploads/Medi-Cal_Recovery.pdf. Understanding estate recovery is a vital part of making informed decisions about long-term care planning and utilizing the medical long term care program effectively.
