Asset Preservation & Medi-Cal Planning

Is Public Benefits Planning Ethical?

We are sometimes asked whether it is ethical, or even lawful, for an individual or couple to take planning steps in order to qualify for a Medi-Cal Long-Term-Care subsidy or other government benefits.  In our view, the answer is an unequivocal,    YES !

Consider the following:

(1)        Like Tax Planning For The Middle-Class:   In our firm, we consider Medi-Cal planning to be similar to tax planning, albeit for the middle class.  The wealthy plan their affairs and design their business strategies in order to minimize their tax.  They may hire very sophisticated financial advisors, accountants and attorneys to assist them in this effort.  Their success is applauded and often highly compensated.  When you think about it,  this undertaking  is really no different than the effort on the part of the middle class to likewise plan their affairs in order to qualify for government benefits, e.g.  Medi-Cal.  The impact upon the public treasury is precisely the same!

(2)        Unfair That Some Illnesses Are Covered, While Others Are Not:   It is well known that every senior who has worked and paid taxes is entitled to Medicare coverage for hospital stays, acute illnesses, surgeries, heart transplants and the like.  What may not be well known, however, is that Medicare will not cover extended stays in a care facility due to chronic, as opposed to acute, illnesses.  In other words, Medicare will, for example,  cover the cost of quadruple  heart bypass surgery and the associated hospital stay costing, say, $250,000, but it will not pay for an extended nursing home stay for someone suffering from Alzheimer’s, Parkinson’s, Lou Gehrig’s disease, Multiple Sclerosis, dementia, or just plain frailty.  Yet, the cost may be the same; indeed, the cost of the four-way bypass may be even greater!   Thus, the individual having the ‘good fortune’ to need a quadruple bypass has an insurance safety net, while the individual suffering from Alzheimer’s Disease does not.  Is this fair?  To put the matter another way, whether a particular illness is covered is largely a matter of chance, kind of like playing Russian roulette.   Both individuals have presumably been good citizens,  served in the military, saved when they could, paid their taxes, and both are loved just as much by their families, friends and neighbors.  Why should only one of them receive covered health care?

(3)        The Letter and Spirit of the Law Endorse Planning:  Back in 1988, Congress passed the Medicare Catastrophic Coverage Act (MCCA), which included special provisions to avoid Spousal Impoverishment.  These provisions sought to protect a couple’s savings  (up to a limit), income, home and other assets, so as not to impoverish the At-Home spouse or other dependents when a family member needed a long term care Medi-Cal subsidy.  MCCA also authorized a judge to expand those protections even further where the circumstances warranted. Many of these provisions, and the spirit of asset preservation they endorsed, remain in effect through the present.

Indeed, California has expanded these protections.  For example, in California the law  requires that the Medi-Cal worker give out to Medi-Cal applicants written instructions advising that strategies may be lawfully employed to protect the home from a later Medi-Cal pay-back claim !  Unfortunately, implementing these strategies is usually difficult without the services of an Elder Law attorney.

(4) The Role Of The Elder Law Attorney: We are a nation of laws, where every individual is important.  The role of the Elder Law Attorney is to vigorously advocate for his or her clients and to apply relevant law to assure that they, and their families, receive the benefit of available government subsidies, so that they may live  with dignity in their frail years and without fear of impoverishment. That is the American way.