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Medi-Cal Planning: Options & Ethics
The Fear Factor
Can the state take my home when I die? Will the nursing home take all of my assets to pay for care? Will I lose everything if my husband goes on Medi-Cal? Can I give money to my children and still be eligible for Medi-Cal? If these questions sound all too familiar, then you are probably among the ranks of legal professionals who deal with Estate Planning and Medi-Cal for Long Term Care.
The fears that most elderly consumers have about entering a nursing home and going on the Medi-Cal program is certainly not paranoia, but could better be called heightened awareness. Indeed, the state does place claims against deceased Medi-Cal beneficiaries’ estates, and they will collect on those claims whenever they can. A single Medi-Cal beneficiary does have to deplete non-exempt assets to a minimal level, if she enters a nursing home and needs Medi-Cal.
However, these fears of long term care costs and ultimate poverty have given rise to a proliferation of businesses that prey on the elderly and their family members. Whether the business is run by someone who advertises himself as a "former" Eligibility Worker, a specially trained senior "advisor," or some other title that alleges special knowledge of the Medi-Cal system, the goals of these businesses are clear: scare the hell out of seniors; let them think that they won’t qualify for Medi-Cal without their services; and charge them as much as possible to fill out a Medi-Cal application. In the case of the trust mills, of course, the goal is to sell them an annuity.
Medi-Cal "Specialists," "Advisors," "Case Managers," "Consultants," etc.
You’ve seen the ads and the hype: "Medi-Cal is so complicated that you couldn’t possibly fill out the forms yourself." "Medi-Cal is not a poverty program, but a "special" entitlement program set up for people who need long term care." "Nursing homes don’t discriminate between private pay and Medi-Cal residents."
These half-truths are designed to make people feel that the Medi-Cal program is just another insurance program and that, if you pay the knowledgeable Medi-Cal "specialist" enough money, anyone can and should get on Medi-Cal.
The facts are different.
While Medi-Cal is a complicated program, unless one has a complicated estate, most of the questions can be answered for free at a legal services for seniors program or by calling the CANHR toll-free hotline. If a more complicated estate, incapacity or the transfer of a home is involved, consumers need a qualified attorney knowledgeable about Medi-Cal, not a Medi-Cal consultant who was an Eligibility Worker in some past life.
Medi-Cal (Medicaid) is a needs-based program, designed to assist states in providing low income and low asset citizens with basic health care coverage. Yes, anyone probably could qualify for Medi-Cal if they know the ropes, but the question must be asked:
Why, if they have the money to avoid it, would they want to be on the Medi-Cal program?
Nursing home providers do, indeed, know the difference between Medi-Cal and private pay - which is often $1,500+ per month higher than the Medi-Cal rate. It is becoming more and more difficult for a Medi-Cal-eligible person to find a Medi-Cal bed in a facility of choice. Discrimination is rampant at admission.
Indeed, many residents receive the same mediocre level of care regardless of payment source, but once a person converts to Medi-Cal, at least in the larger facilities, they often end up in the Medi-Cal "ghetto" - sharing a small room with no view with two or three others. Medi-Cal does not pay for a private room.
A Special Case
Mrs. V, who was in the process of admitting her husband to a local nursing home, recently contacted our office. In August of last year, while she was caring for her husband at home and in the process of planning for nursing home care, she heard an advertisement on the radio for "Medi-Cal Planning." She called the number advertised, set up an appointment with a "Medi-Cal Case Manager," and paid them $17,500 to assist her in getting her husband into a nursing home and on the Medi-Cal program.
The couple had about $15,000 in a Certificate of Deposit and another $140,000 in an annuity that was purchased in 1989. She was advised to cash in the CD to pay the "Medi-Cal Planning" agency, to reduce the annuity to the CSRA amount and to gift the remainder to a relative in concurrent transfers of $4,300. As of May 2003, Mr. V still had not qualified for Medi-Cal, since the "Case Manager" had never submitted the application. Of course, Mr. V would have qualified for Medi-Cal immediately, since they were well under the CSRA and the annuity was a pre-1993 annuity. The Eligibility Worker at the County (a real Medi-Cal Case Manager) assisted them in completing the application and approved the benefits within a month. However, Mrs. V lost over $40,000 that she will only recover through litigation, i.e., by suing the attorney who runs the business.
Fear + Greed = A Breeding Ground for Scams
These and similar cases flood our phones every week. The fear factor wreaks havoc on those who have relatives about to enter a costly long-term care facility and who think they will lose everything in the process. This fear, coupled with the greed of some children who want to ensure that everything Mom and Dad have is left to them, has been a breeding ground for unscrupulous Medi-Cal planning businesses, for attorneys and non-attorneys, for insurance agents and other sales agents selling investment products.
Yes, everyone wants to leave something to their children, and they should be able to, particularly their homes. But when someone who has substantial assets wants to transfer everything to the kids (or most likely, when the children of an incapacitated parent want to transfer everything to themselves), they probably don’t realize the consequences.
If a father has $200,000, perhaps a better approach is to suggest that Dad retain $100,000 for private pay, rather than transferring it all to his son. If the Dad has some income, he could well be private pay in a private room for the rest of his days.
The Medi-Cal system is a relatively flexible system that in many ways allows beneficiaries to retain substantial assets, to gift assets and to transfer the family home.
However, the goal should not be to get everyone on a Medi-Cal program that is denying services to children because of budget cuts, but a more holistic approach as to what is in the best interests of the person about to be institutionalized for the rest of his or her life.
Living Trust Seminars
A recent article in the SF Weekly (Son of Super Swindler, September 10-16, 2003), by Matt Smith, uncovers the mechanisms behind such Estate Planning firms as EPI-Estate Planning Inc., part of a group of firms with the names EPI, EPICO, the American Association of Independent Paralegals and AAIP - all of whom conduct living trust seminars around the state. Their current company, EpoC, has placed large ads in newspapers touting their free seminars and a "complete living trust" for only $399. While all of the seminars are advertised as being presented by attorneys, the fine print notes the following: "A licensed insurance representative will contact you to present your trust once it has been processed."
Now a prudent person might ask why, if I’m purchasing a living trust, do you need an insurance agent to deliver it? Perhaps the agent is a graduate of "Annuity University," where he/she has been taught to "treat them like they’re a blind 12-year old," and, "Tell them it’s like a CD — it’s safe, it’s guaranteed." Perhaps not. Perhaps they truly have the best interests of the elderly consumer in mind. You decide. (For a copy of the article, see www.sfweekly.com)