Medicaid covers long-term care for the elderly and people with disabilities who qualify for coverage. To be eligible for this coverage, you must meet the program’s strict income and asset guidelines. Also, unlike Medicare, which is totally federal, Medicaid is a joint state-federal program. Each state operates its own Medicaid system, but this system must conform to federal guidelines in order for the state to receive federal money, which pays for about half the state’s Medicaid costs. (The state picks up the rest of the tab.)
Most states cap assets at $2,000, meaning that if your assets (with the exception of your home and one vehicle) exceed this amount, you would not qualify for Medicaid assistance. The program’s strict asset rules compel many applicants to "spend down" their assets before they can qualify for coverage.
Such a low asset cap means that eligible applicants have no financial safety net to protect against an emergency. And renters, without the asset of a home and its associated equity, are left in an even more precarious financial position.
This excessively low limit, “prevents people from saving money for a new roof, new car or any type of emergency, and promotes financial instability,” says California Health Advocates.
This year, California will become the first state to phase out the asset test altogether. The next state budget bill begins this process by increasing the asset limits over a two-and-a-half year period before removing it entirely, so that eligibility for Medicaid funds, known as Medi-Cal, would be determined solely by income.
As of July 1, 2022, the asset limit for an unmarried applicant for Medi-Cal will be raised from $2,000 to $130,000 and from $137,400 to $267,000 for a married applicant. These changes will significantly increase the pool of Medi-Cal recipients and, for many, may reduce the need to spend down or gift assets to qualify for benefits. The asset test will be fully eliminated by July 1, 2024.
Although California is moving to eliminate the asset test for Medi-Cal programs, it will remain in place for Supplemental Security Income (SSI). In other words, individuals who choose to retain their assets and qualify for Medi-Cal based on income may no longer also qualify for SSI.
In addition, Medi-Cal’s income and estate recovery rules remain intact. This means that income planning will be important to keep Medi-Cal coverage, and on death many more people’s estates will be subject to estate recovery by the state – without proper planning in advance.
Although California is the first (and so far only) state to make such a major change to how it assesses eligibility for state assistance, it’s possible that other states will follow suit, particularly so-called “blue states,” whose legislatures favor more government assistance for the elderly and people with disabilities.
The impact of removing the asset test on long-term care planning in California is likely to be significant; if you are a resident or planning a move to the Golden State, talk to your California elder law attorney now. Even if you are not a California resident and you have already made changes to your finances to qualify for Medicaid down the line, or to support someone in your family, it’s important to watch for similar policy changes in your own state. Check in with your elder law planner on an annual basis and before making any major decisions to your financial picture.