Q. Our mother just moved into a nursing home for care and has qualified for a Medi-Cal subsidy to help with the cost. However, Medi-Cal wants all of mom’s income to go to the nursing home as her “co-pay”. That leaves nothing to cover her home expenses, including her mortgage, property taxes, insurance and upkeep. We want to keep her home in the family, but we do not have the funds to make these payments. Is there anything we can do?
A. Good news: Yes, there is ! But first a bit of background: Medi-Cal assumes that all of mom’s care needs will be met in the nursing home, and that there is therefore no need to permit an income set-aside to pay to pay for home expenses while she is not actually living there.
Indeed, with the exception of a very modest income set-aside, consisting of a $35 Personal Needs Allowance and enough to pay her medical insurance premiums, all of mom’s income must go toward her nursing home bill as her “Share of Cost” (“SOC”), before Medi-Cal will pay the balance. This leaves nothing to pay for her house expenses.
Further, the option of selling the home would usually not be wise, as this would convert an exempt asset into a large amount of cash which would then likely terminate her Medi-Cal eligibility.
Still further, most Medi-Cal applicants prefer to keep their home, whether in the hope that they may one day be able to return home, or so that they can pass it on to their children as an inheritance.
But there are two solutions to the problem of finding monies to pay these expenses:
(1) Physician’s Certification: The first is where her doctor certifies in writing that it is likely that she will be able to return home within 6 months of entry into the nursing home. If the doctor so certifies, then a portion of mom’s income may be set aside to pay house expenses but only for that 6 month period. While this option is theoretically available, as a practical matter it is rare that a physician is able to so certify, as most residents are chronically ill and not likely to return home. Further, even with this certification, the home upkeep allowance would be limited to only $209 per month, a number that hasn’t been changed in decades and is wholly inadequate to preserve one’s home in today’s economy. Note: There is an Assembly Bill now pending which — if passed and signed by the Governor– would increase this deduction. See below.
(2) Rent Out the Home: The second circumstance is much more “doable”. If, instead of keeping the home vacant, you rent out her home, then the rental income may first be used to pay home-related expenses, and only the excess after payment of these expenses (i.e., the net rental income) would go to the nursing home as mom’s SOC.
Note: If there is a mortgage, Medi-Cal only permits the use of mom’s gross rental income to pay the interest portion of the monthly mortgage, but not the principal portion. Fortunately, however, the interest portion is usually the lion’s share of most mortgage obligations, and in these situations, the family is usually able to muster the modest additional funds necessary to cover the smaller principal portion. It may also be prudent to rent out the home to reduce the risk of vandalism (vacant homes are at greater risk), and to eliminate the risk that mother’s homeowner’s insurance may lapse (which may well occur were the home left vacant).
And even though the net rental income, after payment of these expenses, will increase mom’s SOC, this increase does not impose any real financial hardship upon mom, as it is essentially funded by the renter.
Where your goal is to preserve mom’s home, this rental option is likely the most practical method of preserving your mother’s home, honoring her wishes, and avoiding a forced sale.
References: 22 CCR §50605 [“Maintenance Need–Persons in Long Term Care“. and §(b)(3) “verified medical determination”]; 22 CCR §50508 [“Net Income From Property“. Calculation of “net income” from property].
Note: the Medi-Cal Home Upkeep Allowance limited to only $209 per month even with physician certification; Medi-Cal Eligibility Division Information Letter No.: I 09-01 (April 16, 2009). Note, an Assembly Bill has been introduced into the California Legislature that would, if passed, increase this home upkeep allowance: AB 1042 (Wood); Text of AB 1042