Medi-Cal is California’s version of Medicaid, a federally supported but state-administered welfare program. Medi-Cal is thus a combined federal and California program, funded by general tax revenues. The federal government reimburses California for a percentage of the Medi-Cal payments the state makes on behalf of recipients. Medi-Cal is a needs-based system whereas Medicare is an entitlement for those who have paid into the system during their lifetime.

Medi-Cal is the health insurer of last resort designed to help pay for the medical care of public assistance recipients and other low-income people and for long-term nursing home care not otherwise covered by insurance. It is governed by the California Department of Health Care Services (DHCS) (formerly Department of Health Services (DHS)) but administered at the local level by county departments of social services.

The most important Medi-Cal benefit for most seniors is long term care in a skilled nursing facility. Medi-Cal may cover residential care facilities or in-home care on a limited basis. It should be noted that skilled nursing, especially in California, can be extremely expensive (i.e., $15-20 thousand per month). And good caring facilities are full usually with a lengthily waiting list.

Previously, to qualify for Medi-Cal benefits, an individual could not have more than $2000 in countable assets, referred to as a nonexempt property reserve. On July 1, 2022 this was increased to $130,000 per person plus $65,000 per household member. On July 1, 2024, the asset test will be eliminated entirely.

Countable assets do not include assets classified as “exempt” or “unavailable.” The most important exempt asset is real property used as the individual’s residence. There are a myriad of administrative requirements surrounding transfers exclusively to qualify for Medi-Cal benefits. Generally, if an applicant transfers assets for less than fair market value in order to qualify for Medi-Cal, the property transfer rules work to calculate an ineligibility period during which the applicant is disqualified for Medi-Cal benefits.

Medi-Cal recipients who own assets at their death (particularly assets of substantial value, such as a residence) may have their estates subjected to claims for repayment of benefits received. The state refers to this process as “estate recovery.” Significantly, the state’s right to recover does not come into existence until after the death of the Medi-Cal recipient. To avoid the Medi-Cal recovery claim, recipients and their spouses often transfer assets to a Medi-Care Asset Protection trust or gift assets during their lifetimes. The state’s right to recover is limited to the amount actually paid for care, or the value of the property passing at the Medi-Cal recipient’s death, whichever is less. No recovery is allowed during the lifetime of the surviving spouse, the minority of surviving children, or when the recipient is survived by a child who is blind or permanently and totally disabled. And only assets in the decedent’s probate estate are subject to recovery (i.e., those in the trust are not).

The rules for Medi-Cal eligibility, recovery, and benefits are complex. Whether you should divest yourself of assets to qualify for long-term care is something requiring careful consideration best done with an attorney conversant in all aspects of Medi-Cal planning.