California Medi-Cal Traps to Avoid

Problems from Lack of Proper Medi-Cal Planning

Medi-Cal rules are very complex, and good Medi-Cal planning requires a skilled lawyer experienced in handling Medi-Cal cases and preparing the needed legal documents. Financial mistakes made in attempting to qualify for Medi-Cal without good legal advice can result in Medi-Cal being denied, additional taxes being owed, and thousands of dollars in assets and income being lost.

To protect your financial health, you'll want to avoid making these mistakes:

1. Confusing Medicare and Medi-Cal. A federal program called Medicare pays for 100 days of nursing home care after a 3-day hospital stay, and only so long as the ill person is making progress on rehabilitation. But Medicare runs out after 100 days, and it can take 45-90 days for Medi-Cal to be granted once a person qualifies. Even if Medicare is paying the bills, if the non-exempt assets and income of the ill person and spouse are above the Medi-Cal limits, you should consult an experienced Medi-Cal attorney as soon possible.

2. Thinking it is "too late" to apply for Medi-Cal. Steps to protect assets and income can be taken even after an ill person has been admitted to a nursing home, and even if the person has previously been turned down for Medi-Cal.

3. Filling out your Medi-Cal application without the help of an experienced attorney. The Medi-Cal application is long and complicated, and many of the words used are legal terms that most people are unfamiliar with. The application is filed under penalty of perjury and everything on it must be completely truthful; you can be criminally prosecuted for lying or intentionally leaving out necessary information. In some cases, financial documentation must also be submitted with the application. An improper application, or lack of the required financial documentation, can result in Medi-Cal's denial of the application.

4. Thinking that a revocable living trust will protect assets from Medi-Cal consideration or collection efforts. A living trust has many benefits, but it does not help protect your assets from Medi-Cal eligibility consideration or after-death collection efforts. An at-home spouse can create a living trust that will not be subject to Medi-Cal collection once the ill spouse qualifies for Medi-Cal, but the trust needs to be funded with assets owned in the sole name of the at-home spouse. Exempt assets that are held in the name of both spouses should be transferred to the sole name of the at-home spouse before being placed in a living trust.

4. "Spending down" your money, either on unneeded items, or on nursing home and medical bills. As explained on the other pages of this website, a person can still be eligible for Medi-Cal even when they have significant assets and income. However, since Medi-Cal limits the "countable" assets an ill person and their spouse can keep, it is important that countable assets above these limits be converted to exempt assets. (See, Protecting Assets) It may also be appropriate to petition the court to allow an at-home spouse to keep extra countable assets to generate additional income, either because the couple's income is below the legal minimum, or because the at-home spouse has greater needs (such as for home health care) than the legal minimum will cover. (See, Protecting Income) Also, since many of the better nursing homes only accept patients who can pay from their own funds for a certain number of months before switching to Medi-Cal, you may want to preserve some of your assets for that purpose.

5. Giving assets to adult children or other persons. Gifts made within the five years before the ill person applies and qualifies for Medi-Cal can result in a penalty period during which Medi-Cal will not pay unless severe hardship is shown. Transfers of assets should only be made to persons who can receive them without penalty, or if there will still be enough money left over to pay cash for nursing home costs (and/or perhaps buy an annuity for a well spouse) during the penalty period. Transfers can also result in capital gains tax, increased property tax, loss of a stepped-up basis, and the obligation to file a gift tax return. These consequences can often be minimized or avoided entirely with good legal advice and document preparation. (See, Protecting Assets)

6. Buying a non-complying "Medi-Cal Qualified" annuity. No matter what an insurance sales person or financial planner says, an annuity owned by either an ill person or their at-home spouse is a "countable asset" that can result in California Medi-Cal disqualification unless the annuity complies with Medi-Cal's very strict rules. (See, Protecting Assets) However, the experienced attorneys at San Diego Law Firm can often arrange for a non-exempt annuity to be converted to an annuity that is exempt, and in some cases can persuade the insurance company to not charge any additional sales commission for the conversion.

7. Not understanding that Medi-Cal will attempt to collect for the amounts it has paid against both the remaining "countable" and the "exempt" property, up the amount of the assets owned by the ill person on their death and then passed to the spouse, or left when the ill person dies without a spouse. Or, not using the correct legal documents to transfer exempt property after the Medi-Cal application is granted, which may result in an invalid transfer or in additional income and property taxes that could otherwise be avoided.

8. Not understanding that Medi-Cal laws change constantly. Because of this, you should get skilled legal advice whenever you intend to make any property transfers or have any legal documents prepared, either before you qualify for Medi-Cal, or after your application is granted. Advice on many websites and in self-help books is often outdated and relying on it can cost you thousands of dollars in lost Medi-Cal payments.

Click links below for More Medi-Cal Information:

Medi-Cal: California Eligibility Overview

Medi-Cal: Protecting Assets under California Law

Medi-Cal: Protecting Income under California Law

How to Contact Us

For more information or an appointment, please call San Diego Law Firm at 619-794-0243 or, if you prefer, send us an e-mail at and an attorney from our office will contact you. Please note that making a phone call or sending an e-mail does not create an attorney-client relationship; this requires a written agreement. Please do not e-mail any confidential information to us until an agreement is signed; at that point, we can exchange confidential information freely.