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"Nursing home vs. own home:
Seniors home equity now a factor for Medi-Cal"

Inside Bay Area

Article Last Updated: 3/17/2006 07:17 AM
By Francine Brevetti, BUSINESS WRITER
Inside Bay Area

Retired truck driver John Rocha and his wife, Marcia, worked all their lives to pay off their Pleasanton home, which they thought would give them security in their retirement.

But new, stricter qualifications for Medi-Cal could leave the Rochas and thousands of other California seniors who own their homes struggling to pay for nursing home care or even prevent them from receiving Medi-Cal benefits.

The new rules for Medicaid — known as Medi-Cal in California — tighten the eligibility requirements for the joint state-federal government program, which helps pay for medical care for the needy.

Under the Deficit Reduction Act, which President Bush signed into law last month, seniors have to dispose of their assets sooner if they want to qualify for Medi-Cal. Also, seniors with more than $500,000 of home equity cannot qualify for Medi-Cal unless their spouse or a dependent child still lives in the house.

This second provision could be particularly problematic in the Bay Area, where the median home price is $607,000, and a number of seniors have accumulated more than $500,000 in home equity. States have the option of raising the limit to $750,000, but they don't have to. Previously, seniors home equity did not count in calculating their assets to determine if they could qualify for Medi-Cal, which many seniors rely on to help pay for nursing home care.

John Rocha feels very threatened by the new rules.

Im on a fixed income, and Im not feeling at the top of the world. That guy (President Bush) doesnt realize weve worked hard all our lives. My home is paid for and worth about $600,000. If I had to sell my house ... those are terrible rules, he said.

Not everyone feels pity for those facing difficulty under the new rules.
The government is expected to give too many handouts, said Robert Defillo of Pleasanton, who grew up poor and has worked all his life to retire comfortably.Its not pleasant to have to sell your house, but youre going into a nursing home at the expense of the state — that is not fair. People, if they have the means to pay for their medical needs, they should do that.

The White House says the new law will reduce the growth of Medicaid spending by nearly $5 billion over five years. But critics say it will make it more difficult for seniors to afford medical care and could lead to elder financial abuse.

Under the new rules, eligibility screeners can review seniors personal-asset transfers going back five years before their Medicaid application. This is a longer look-back period than before, and means that seniors will have to dispose of their assets earlier if they want to qualify for Medi-Cal.

The longer it takes to qualify for Medi-Cal, the more likely the senior can be exposed to fraudulent financial offers, said Gene Coffey, staff attorney with the National Senior Citizens Law Center.

California, like all other states, will need to comply with the new rules but has yet to formally implement them. The state is expected to do so in the next few months, but the process could take as long as a year or two.

Experts in senior legal and health matters anticipate that 120,000 seniors nationally will be denied Medicaid. Ten percent of those will be Californians. This would make it more difficult for them to pay for medical care such as a nursing home. They would have to rely on their savings or those of their family, or might need to tap into their home equity or buy costly long-term care insurance.

Senior legal and health experts are concerned that these restrictions might persuade seniors to buy financial products they dont need or sell their homes rashly.

People are going to end up doing something dramatic with their property. I foresee a surge in financial abuse, said Prescott Cole, staff attorney with the California Advocates for Nursing Home Reform. Who knows what kinds of financial products are going to be innovated for people to get equity out of their homes? They may, for instance, convince them to transfer their homes into annuities or reverse mortgages.

We know seniors are going to living trust seminars, which are telling them to avoid probate and selling them cheap living trusts, Cole said. This gives the salesmen the opportunity to sell to them personally and to get into (the equity of) their homes. They proceed to sell them an annuity, endangering their financial well-being because they dont need annuities.

An annuity is an insurance policy that pays the insured an income periodically over a certain period of time. A living trust allows a person to decide how his or her estate will be distributed after he or she dies, and avoid probate.

Cole said he personally assisted a client who was 94 and bought a 20-year annuity — an instrument the man would never live to use.

And reverse mortgages arent necessarily the way to transfer your wealth, Cole said. As soon as he or she leaves the home, it is sold and any equity not used to repay the loan will only serve to disqualify the senior for Medi-Cal eligibility.
According to the White House, the new law tightens the loopholes that allowed people to game the system by transferring assets to their children so they can qualify for Medicaid benefits.

Some nonprofits and lawyers have been helping moneyed people hide their assets so they can qualify for Medi-Cal, said Allen Hamm, president of Superior LTC Planning Services Inc. in Pleasanton.

Why would people want to be in a nursing home on Medi-Cal if they could afford not to be?

These attorneys do not explain to seniors the quality of care (at nursing homes), Hamm said. The seniors end up there, without control of their money, because their children now have control and dont care what happens to their parents.

That, of course, is not the case with Rocha of Pleasanton. His $600,000 house would keep him from entering a nursing home on Medi-Cal. However, because his Teamsters benefit package now requires him to pay $780 a month for his medical bills and the state of his health requires a daily in-home helper, we are spending what little savings we have, he said.

Many people feel that under the new rules, Californians are likely to be at risk because more here tend to be property rich and cash poor.