Will Medi-Cal Take My Home?

In our view, there's more misinformation in the community about Medi-Cal's nursing home care program than about any other program or law impacting older adults. And the misinformation often leads people to make serious mistakes.

In particular, we see and hear of confusion and mistakes concerning the most important assets that people own - their homes. Concerned about needing nursing home care, people sell or even give away their homes based on misunderstandings of the Medi-Cal rules. Not only can their actions result in loss of the place where they really want to live, but they can also create capital gains and other tax problems and even cause ineligibility for Medi-Cal.

In this article, we work to set the record straight on how a person's home is treated under the Medi-Cal nursing home program rules.

Medi-Cal Eligibility
Under current rules, owning your own home will not keep you from being eligible for Medi-Cal to help with nursing home costs as long as you "intend to return home" or your spouse or certain other related persons live there.

You "intend to return home" if you want to be there. The fact that it might take a miraculous improvement in your health to make the return possible is irrelevant. Under coming rule changes, however, home equity limits will apply in the future. For more information, see Medi-Cal Update:Overall.

Selling the Home
If you sell your home, the proceeds will count against you (unless you set aside the proceeds and intend to buy a new home within six months).

The Vacant Home
What if your home would be vacant during a prolonged stay at a nursing home? You then run into a number of practical issues, including:

• How will your home be kept safe?
• Because Medi-Cal will expect you to use much of your income to pay part of the nursing home bill, how will you pay the costs of maintaining your home (insurance, taxes, maintenance, utilities, etc.)?
• Will you lose your homeowners' insurance because the home is vacant?

An answer that works under the Medi-Cal rules: rent the home to a reliable person. The home will then be kept safe by being occupied, and the homeowners' insurance can be kept in place. And the rental income can be used to pay the ongoing home ownership costs (with only the net profit going to pay the nursing home costs). To retain your ability to return to the home, the rental should be short-term or month-to-month.

Medi-Cal Estate Recovery
The treatment of the home is quite different under the Medi-Cal estate recovery rules. While your home might not count under the eligibility rules, it can easily be an asset from which the Department of Health Services (DHS), the agency that administers the Medi-Cal program, will seek recovery once you die.

DHS keeps track of the amounts it pays to help a person with nursing home care. In general, DHS is required to seek repayment of those amounts once the Medi-Cal user dies. This is known as the Medi-Cal estate recovery program.

The estate recovery program is, however, subject to important limits, including:

• DHS can only seek recovery from assets owned by the Medi-Cal user on the user's date of death.
• Only the value of the Medi-Cal user's interest is available (for example, a Medi-Cal user's 50% joint tenancy interest).
• During a surviving spouse's lifetime, no recovery can be made against assets transferred to the surviving spouse at the Medi-Cal user's death.
• No recovery can be made if the Medi-Cal user is survived by a disabled or minor child.
• There is no recovery from a person inheriting an asset who is granted a hardship waiver. The waivers, unfortunately, have been difficult to obtain.

Giving the Home Away While on Medi-Cal
As noted, DHS can only recover against an asset owned by a Medi-Cal user on the user's date of death. So, if you don't own the home on your date of death, there will be no claim against it.

A Medi-Cal user can make a gift of the home and not be penalized, by acting within the Medi-Cal rules. As examples, homes can be given to spouses and to children with disabilities, and to children who have lived in the home for at least two years and provided care that helped the Medi-Cal user avoid institutionalization. Further, depending on the circumstances, it is possible to make a gift of the home to others without penalty.

We urge extra caution in this area. You should never give away your home without first getting advice from your own attorney (not the attorney for the person who would receive your home). Your attorney should be one who is knowledgeable in both the Medi-Cal rules and the tax impacts of a home transfer. Failing to precisely follow the rules can result in making the giver of the home ineligible for an extended period. And lifetime gifts of homes can create significant capital gains, estate and gift, and property tax consequences.

The Bottom Line
Under current rules, as long as you intend to return home or your spouse or cerain other related persons live there, the Medi-Cal program won't impact your home during your lifetime. The rules will be changing, however, and home equity limits of $500,000 or more may affect eligibility for some individuals in the future. If you use Medi-Cal for nursing home care, and die still owning an interest in your home, DHS can seek recovery from the value of your interest. But the recovery is subject to important limits.