Using Annuities to Spend Down for Medi-Cal

Medi-Cal spend down with an annuityIf you live long enough the odds are that you will need some form of help that isn’t covered by medical insurance.  Services like Assisted Living, Private Nursing, Respite Care, In Home Assistance, and Nursing Home care.  Medicare and most Major Medical insurance plans have extremely limited coverage in fact neither one covers the service in any capacity longer than 100 days.  The average stay for a person with Alzheimer’s is 10-12 years!

The cost of Long-Term in a Nursing Home Facility has an average cost of  $91,250 a year for a semi-private room in CA according to a Genworth study (see footnote 5).  Unless you have purchased Long Term Care insurance, you will need to pay for the cost of care out of your family’s personal funds.  At $91,250 a year, this can have serious consequences on you and your spouse’s retirement plans.  However, if you have no funds or have exhausted the funds you have,  Medi-Cal or Medicaid will provide the services in a nursing home setting only (assisted living voucher may be available on a very limited basis.)  The facilities available to you will be limited to the ones that accept Medi-Cal and they are not usually the nicest places available.  This may be your only option if you chose not to have Long-Term Care insurance or it wasn’t available when you were young enough to afford it.

How to qualify for Long-Term care Medi-Cal

You must exhaust all your personal non-exempt assets such as personal savings, retirement savings, and most hard assets that are not your primary residence ( vacation homes, boats RV’s valuable collections).  You must also qualify according to income, the current income limit in 2016 for an individual is $16,243 and the level for a couple is $21,983.  The asset level is $2,000 for an individual and $3000 for a couple, but if you have a spouse living in your primary home it can be excluded from your assets for qualifying reasons.  However, California along with many other states uses estate recovery to help pay back the expenses incurred for your care.  Therefore, even if your primary residence is initially excluded, once neither you or your spouse is living in the house the state holds a lien on your home in the amount of the cost of care.  They will give your next of kin the choice of paying back the cost of care or selling the home to repay the costs with a refund of any amount exceeding the cost of the care.


How to make the best of the situation

IMPORTANT: Before taking any steps in the process of “spending down for Medi-Cal” please consult a highly qualified Elder Law Attorney.  Depending on where you live we may be able to recommend an attorney that had meet our vetting process.

After learning that you have to exhaust your own funds before receiving any help you may be tempted to find a way to “give away your assets to a family member that will help care for you.  Medi-Cal wasn’t born yesterday and they have measure in place to prevent people from devaluing or giving away assets to family members.  In fact, Medi-Cal has a 5 year look back period!  They will examine all the assets for intentional directing of funds, and if they find that you gave your funds away for less than the value they will impose a penalty in the form of a waiting period till they will help with the care.

Need some good news?

Here’s the good news there are very specific annuities that are designed to help you “spend down your assets” to qualify for Medi-Cal they widely used by Elder Law attorneys and have been around for quite some time.  Since you no longer have control of your funds with the annuity they are no longer considered you assets, but you can receive the income from the annuity so long as there is no death benefit or refund of assets.  The income also cannot pay out longer than your life expectancy.

Contact us for more information or a quote.