Medi-Cal Now Considers Income, Not Assets, of Enrollees

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For many years, volunteer work at her local church brought Maria close to other seniors in her community. When one of those acquaintances passed away several years ago, Maria unexpectedly inherited $80,000. Because Maria was facing some major expenses, such as vehicle repairs, the bequest provided much-needed financial relief.

Then she learned that her friend’s gift would disqualify her from continuing participation in Medi-Cal, California’s Medicaid program for people with low incomes. At the time, anyone with more than $2,000 in qualified assets, including cash savings, was ineligible for Medi-Cal. “We had to scurry around to see how we could make health care affordable for my mom,” said her daughter, Tatiana Fassieux, an education and training specialist with California Health Advocates.

Now, after years of planning and implementation by state officials, people in Maria’s situation are no longer faced with the financial and health insecurity created by the asset test. On January 1, 2024, Medi-Cal eliminated any asset limit for enrollees and instead considers only applicants’ income when assessing financial eligibility for benefits.

The asset test originally applied to everyone in Medi-Cal — until the 1980s, when the state removed the requirement for pregnant women, infants, and children. When the Affordable Care Act took effect in 2014, the asset test was no longer applied to adults under age 65 who were without disabilities. That left only the elderly, people with disabilities, and those living in long-term care facilities as the remaining applicants still affected by the asset limit.

In 2021, Governor Gavin Newsom signed Assembly Bill 133 into law, starting a two-phase process (PDF) for elimination of the asset test. Phase I began in 2022 by raising the individual asset limit from $2,000 to $130,000.

“That opened up the door for a lot of people who were near [eligibility] but not all the way there,” said Michael Guerrero, a certified Medicaid planner and the CEO of Eldercare Resource Planning, a firm that helps older Americans complete their Medicaid applications. In the first 18 months, more than 12,000 individuals became newly eligible because of the Phase I changes in policy.

Phase II of implementation began in January 2024, when Medi-Cal did away with asset limits entirely, making California the first state in the nation to do so. People who seek long-term care services through Medi-Cal because of age or disability will no longer be penalized for having savings, a change that will give them and their families greater financial security. While officials have yet to release updated numbers from the Phase II changes, Griselda Melgoza, a spokesperson for the California Department of Health Care Services (DHCS), said the state estimates that 30,000 Californians with low incomes are newly eligible to enroll.

Relieving Financial and Health Insecurity

The motivations for the change, according to Melgoza, were simple: to offer people enrolled in Medi-Cal a better opportunity to achieve financial stability and to create a more equitable system for older Californians and state residents with disabilities. People in those groups are more likely to need costly long-term care services in nursing facilities or home- and community-based settings — services that can be inaccessible without Medi-Cal coverage.

“Equitable access to health care for historically marginalized communities, such as the disabled and elderly, is in line with … the goals and values of DHCS,” said Melgoza.

While advocates agree that the policy change has many upsides, they say the new asset test policy raises some questions about how Medi-Cal can continue to improve access, advance equity, and treat patients with dignity.

More Money in the Bank

Perhaps the most immediate benefit to consumers is that people with low incomes and some financial assets will no longer be forced to drain their savings to qualify for services like skilled nursing and long-term care. The practice of “spending down” one’s assets to qualify for Medi-Cal had severe repercussions for individuals and their families.

“People were being forced to impoverish themselves and to risk their financial future in order to access Medi-Cal benefits,” said Tiffany Huyenh-Cho, JD, director of California Medicare and Medicaid advocacy at Justice in Aging, which fights poverty among the elderly. When the asset limit was in place, her colleagues would try to educate clients on ways to spend down responsibly, usually by prepaying anticipated expenses, like rent. Still, the result was that individuals had fewer dollars available for emergencies.

“That could have been money that someone could have saved for a rainy day,” Huyenh-Cho said.

Maura Gibney, MSW, executive director of California Advocates for Nursing Home Reform (CANHR), said that before 2022, the group frequently received calls from people who had already drained their assets to below the $2,000 limit to qualify for Medi-Cal and now faced an expense they could not afford, such as a roof repair.

“They weren’t allowed to have money in the bank to pay those costs,” Gibney said. “They were left with nothing.”

“Two thousand dollars is really not a big number,” especially in California, said Huyenh-Cho.

Now, people eligible for Medi-Cal who might need long-term care are able to make savvier financial decisions, Fassieux said. People used to avoid selling their homes — even if their family needed the funds, or it was a favorable time for sellers in the market — because while real estate was exempt from the asset test, cash from the sale of a home was not. “Now, there is no fear of that,” she said. Fassieux recommends that families consult with a financial planner or tax specialist before selling a Medi-Cal eligible person’s home.

Reducing Administrative Burdens

In addition to enhancing an enrollee’s financial security, the new asset policy reduces administrative burdens for Medi-Cal enrollees and plan administrators. Previously, navigating eligibility requirements in the application or renewal process meant that individuals and their families had to pull together documents detailing their financial histories. It wasn’t always clear which assets were exempt from consideration, such as a primary home or vehicle, or an individual retirement account, and which assets were not — personal bank accounts, stock holdings, secondary vehicles, etc.

Applying was a major undertaking, especially for people unfamiliar with Medi-Cal or lacking English-language proficiency, Huyenh-Cho said.

“Often we were contacted by relatives or caregivers of a person who needed long-term care,” she said. “They would express a lot of fear or concern about not being familiar with Medi-Cal itself, the rules around Medi-Cal eligibility, income, assets — the entire process of applying for Medi-Cal and gathering documentation. It’s very overwhelming.”

Without those requirements, the process is more efficient for the state and theoretically should reduce wait times and margins of error. Pauline Shatara, MA, the deputy director of CANHR, hopes it will lead to fewer individuals being denied coverage incorrectly.

“So many people were either denied because they had an IRA [individual retirement account] or told they had to cash it out and spend it,” she said, adding that an IRA was never supposed to be counted toward the asset limit. “That isn’t going to be an issue anymore.”

Addressing Enrollment Influxes and Access

Some advocates worry that a large influx of Medi-Cal applications resulting from the end of the asset test could cause application backlogs or crowd out access to the pool of providers who accept Medi-Cal patients.

“Eligibility workers in general are pretty overwhelmed already,” said Guerrero, referring to the staff at county human services agencies who evaluate Medi-Cal applications. With more applications in the pipeline, Guerrero expects to see further delays in decisionmaking, which can affect a person’s ability to receive necessary care.

Fassieux worries about how increased enrollment will affect providers in rural areas where few clinicians accept Medi-Cal’s reimbursement rates, which are lower than fees paid by private plans. She imagines that because vacation homes will no longer be counted toward an asset limit, the number of retirees dually enrolled in Medi-Cal and Medicare will increase substantially. That may overwhelm rural providers or force rural residents to travel greater distances for care.

But Huyenh-Cho does not expect Medi-Cal to face a torrent of new enrollees. After all, individuals’ incomes must still fall below the monthly income limit of $1,667 to qualify, which she describes as “the biggest barrier people are facing” to becoming eligible.

“People think that any expansion of eligibility means thousands, millions of people are going to apply,” she said, but she thinks that scenario is unlikely because the income limit has not changed. “People with limited incomes generally don’t have a lot of assets,” meaning most already qualified for Medi-Cal, she said.

Shatara doesn’t believe the estimated 30,000 newly eligible individuals in a program of 15 million enrollees will significantly affect the number of available beds in skilled nursing facilities. Not every new enrollee will be seeking long-term care, she said. Moreover, the reason most Medi-Cal patients are denied beds is that some facilities have shifted their business models to favor short-term patients over long-term Medi-Cal enrollees, Shatara said. “They don’t really want long-term care Medi-Cal people because it pays less and they’re going to be there a really long time.”

Jeff Sandman, director of reimbursement at the California Association of Health Facilities, an organization that represents skilled nursing facilities, said the state’s payment rates make it difficult for facilities to balance their books. “Medi-Cal is not covering costs, especially for more expensive facilities,” he said.

“Facilities will likely have more than the anticipated number of Medi-Cal residents,” said Medicaid planner Guerrero. “That could have economic consequences for [them].”

DHCS acknowledges that these considerations may force a skilled nursing home resident newly eligible for Medi-Cal to be forced to move, depending on that facility’s relationship to Medi-Cal.

“Individuals who are eligible for long-term care services through Medi-Cal are guaranteed nursing home coverage, but they are not guaranteed coverage in any facility they choose,” said Melgoza. “Not all long-term care facilities are enrolled as Medi-Cal providers or contracted with all Medi-Cal managed care plans to provide services to Medi-Cal members. If an individual currently residing in long-term care believes they may now qualify for Medi-Cal due to … elimination [of the asset test], it is recommended that the individual verify that their current facility is enrolled as a Medi-Cal provider and/or contracted with the Medi-Cal managed care plan or plans in their location to avoid any disruption in services.”

The Millionaire Myth

Some have expressed fears that removal of the asset test will make it easy for wealthy people to game the system and take advantage of a program designed for people with low incomes. Advocates say there isn’t much chance of that happening. Stock dividends, interest income, and other investment distributions from large amounts of investment assets make it unlikely that a wealthy person would meet the low-income requirements needed for full-scope Medi-Cal.

Any wealthy person could theoretically qualify for Share of Cost Medi-Cal, which has no income limit and uses an income-based sliding scale to determine how much enrollees must contribute as a sort of copay for long-term care services. However, it would likely not be a favorable deal for a person with income levels that greatly exceed their Social Security income. The asset limit elimination will open doors mostly for working-class Californians who, under the old system, were on the threshold of eligibility.

“The majority of people who have not been able to qualify for Medi-Cal [because the old rules considered the value of their assets too high] and have needed this safety net for long-term care — they’re not millionaires,” Gibney said. “They are people who have held up our society, have saved a certain amount of money for their retirement, and have modest fixed incomes,” she said.

Wealthier people have the financial flexibility to choose private, comprehensive at-home care, Shatara said. “If somebody really has a lot of money, a nursing home would be a last resort,” she said.

Ensuring Continued Improvement

The elimination of the asset test is major progress toward achieving health equity for Californians who are elderly or have disabilities, advocates say. But work remains to be done to ensure that everyone who needs long-term care can get the most out of benefits to which they are entitled.

Education will be paramount, said Fassieux. She is pleased that the state plans to reach out to people who were previously advised that they did not qualify for Medi-Cal because of their assets, and she hopes the education campaign focuses on enrollment steps, Share of Cost coverage, and provider limitations.

For Huyenh-Cho and other advocates, Share of Cost rules remain “a problem in California,” as people who need Medi-Cal covered services often have expenses that exceed the low allowances they are permitted to keep out of their income each month. That amount is $600 for individuals who receive care in the community and only $35 for Medi-Cal residents of skilled nursing facilities.

“What if they need new glasses? What if their clothes get lost?” Shatara asked, noting that misplaced clothing is a common occurrence in skilled nursing facilities. “They don’t have money to buy new clothes, have a cellphone, or just have a good haircut. They’re still people with desires and wants.”

Gibney contemplates with dismay how a Share of Cost arrangement would have affected her father while he was in skilled nursing last year. “We would have been faced with the choice of him possibly losing his rent-controlled apartment [because] all of his income would have gone toward Share of Cost,” she said. As a result, he would have lost the option of returning home after a few weeks at the facility.

In 2022, the state committed to addressing Share of Cost reform and to making the program more accessible and affordable for people with incomes that are not low enough to qualify for full-scope Medi-Cal. “We’re still hoping for that,” said Huyenh-Cho.

Share of Cost reform was not included in the 2024–2025 proposed state budget released by Newsom in January. Changes to the program are set to be implemented next year, but it is not clear whether this will happen if it is not included in the final budget, Huyenh-Cho said.

Despite these concerns, advocates insist that the elimination of the asset test is a win for Californians. Not only does it create “parity” between older and younger generations, said Huyenh-Cho; it also gives people the power to live better and more secure lives in the years prior to entering a skilled nursing facility.

Previously, when people thought they might soon need to move into a nursing home, they would start to spend down their assets, said Shatara.

“Now, you have people who can actually save money and try to plan for the future they want,” she said. “It’s a good thing.”

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