Should You Plan for Medi-Cal?

One of the biggest decisions you must make in structuring your estate plan a good five years before your perceived timing of prolonged medical care — as in three months of hospital and rehabilitation care, or long-term skilled nursing care, or the co-payment of the balance on the portion Medicare will pay when you turn 65 years old — is whether you should apply for Medi-Cal.

If you’re indigent, you need not worry. But if you plan to make yourself indigent in order to apply for Medi-Cal, then this is serious business.

Medi-Cal has a five-year “look-back’’ to make certain you didn’t give your wealth away in questionable transactions to siblings, friends, trusts or the wrong kind of irrevocable trust in order to make your estate indigent. The application form is a test of your time, diligence and bookkeeping abilities just to get your foot in the door. Any and every transaction in the past five years must be verified on both ends to make certain of its legitimacy. Then you must reapply every year in a shorter form, but usually face to face with your case worker.

If your application isn’t verified, you will be penalized by a formula based on how much money you gave away (which was not exempt) in order to get your estate down to the $2,000 minimum in liquid assets. The penalty is the amount of time you will remain ineligible before you are able to reapply for Med-Cal. It may be months or years, which means you are almost certain to be indigent by the time you are eligible — given the cost of surgeries and skilled medical care.

Why would someone plan to become indigent? The simple answer in the general case is that at 65 years old (some choose 62), you begin to draw Social Security benefits based on the amount of money and years you paid into the program. With this monthly financial stipend, you automatically can sign up for the federal Medicare health insurance benefits. If you had very poor insurance coverage, or no coverage at all, Medicare will greatly reduce the cost of your health care — but it doesn’t pay for it all. There is a long range of co-pays for which you are personally responsible to pay. But if you also have Medi-Cal, it will cover the co-pay for you.

California’s system of comprehensive medical coverage is different from any other Medicaid coverage in the other states. Unfortunately, there aren’t counselors standing in line to help the elderly understand what they should do because it is so complicated in its conflicts with many of the benefits from Medicare that you could do more harm than good in some cases. Medi-Cal is not for everyone, and it would be ill-advised to recommend it. The application takes initiative — and sometimes it’s too late.

Medicare is an offspring of the Social Security Administration and intertwines with that agency so much that if you did start receiving benefits at 62, you automatically become entitled to the health insurance program at age 65. Medicare provides some — but not all — the benefits you may need to pay for a $500-a-night stay in the hospital, particularly longer than 100 days. That’s why there is Medi-Cal.

As for Medicare, if you postpone signing up for Medicare when you’re 65, and continue to work and stay with your employer’s health-care plan, you have made your eligibility options for Medicare when you do retire much more complicated and limited. You can’t just sign up when you feel like it. There are deadlines that must be met. If you want the least hassle, apply during the seven-month enrollment period beginning three months before your birthday month and three months after — giving you seven months.

But you must be aware of what you’re getting from Medicare. It’s broken down into four parts. Part A covers hospitalization for free for those age 65 or older, before the co-pay. Part B covers doctor visits and other forms of outpatient care, but this is based on specific needs and the environment in which you live. You can be certain that it will not be sufficient to cover all of your costs. It keeps skilled nursing and home caregiver hours to an absolute minimum. After that, you either pay for it yourself, which is impossible if you have only $2,000, you have insurance to pay for it or you’re taken to a home from which your chances of returning to your own home are very slim.

Part C is an individual “Advantage” plan from Medicare that A and B don’t cover and for which the individual pays a premium. If you can work that out while being on Medi-Cal, you have accomplished more than most people can do; and Part D, etc.

Generally speaking, medical expenses for nearly all seniors in California are covered by Medicare, supplemental insurance, HMOs, veterans benefits, Medi-Cal and any combination of those. You can file for Medicare and be eligible for the benefits, even if you’re still working and even if you’re not collecting Social Security.

Medi-Cal is a combined federal and state program that pays for health care and long-term care for eligible low-income citizens and legal residents of the United States. Some people receive both Medicare and Medi-Cal; many do not.

Whatever the case for you or those you love, winding through the maze of limitations and benefits needs more than a treasure map. You need an attorney trained by the National Academy of Elder Law Attorneys, the National Elder Law Foundation or a California State Bar specialist in estate planning and probate in the Elder Law Section.

— No opinion herein is a “marketed opinion” and no information provided herein can be used to avoid tax penalties for which the taxpayer would otherwise be responsible. I have lived in Santa Barbara for more than 30 years and practiced law here for 25 years. My book, Estate Planning: The Heroes Way for Baby Boomers, can be purchased via my Web site, www.MarkCornwall.com; Amazon.com; or locally at Chaucer’s and Borders bookstores. To schedule an appointment, contact me at mark@babyboomerpublishing.com or 805-845-7558.