Medi-Cal is getting meaner. The Deficit Reduction Act of 2005 ("DRA") enacted by Congress and signed into law by President Bush on February 8, 2006, sharply restricts the transfer of assets, caps the amount of equity you can have in your home, and restricts the well spouse's ability to preserve assets for his or her support. The following are the changes that will most significantly affect Medi-Cal.

Income First Rule

In the case of spouses, Medi-Cal allows the well spouse to retain unlimited exempt resources plus $109,560. This is the Community Spouse Resource Allowance ("CSRA").

In addition to the CSRA, Medi-Cal contains provisions for the well spouse to have a Minimum Monthly Maintenance Needs Allowance ("MMMNA"). In 2010, the well spouse is entitled to retain $2,739 of the spouses' combined monthly income before any of the ill spouse's income must be used toward the ill spouse's skilled nursing care. In lieu of an allocation of the ill spouse's income when the well spouse's income is low, the well spouse always had the option in California of increasing the CSRA beyond the standard amount to provide a sufficient fund to generate additional income for the well spouse.

The DRA now makes the "Income-First Rule" mandatory for all states. The Income-First Rule requires the well spouse take a portion of the ill spouse's monthly income in order to meet the MMMNA before allowing an increase in the CSRA.

Limit on Amount of Home Equity

The DRA provides that an individual can only have $500,000 in home equity and still qualify for Medi-Cal (although a state can increase the cap to up to $750,000).

Lengthening the Look-Back Period for Gifts

Medi-Cal currently "looks back" to see if any gifts of nonexempt assets were made 30 months prior to application. If so, Medi-Cal will assess a penalty period of ineligibility. The DRA lengthens the look back period to 60 months.

Change in Beginning Date for Period of Ineligibility

Currently, the penalty period for gifting starts from the month of transfer. The DRA changes the penalty period start time to when an individual moves into a skilled nursing facility and is otherwise eligible for Medi-Cal but for the transfer.

Fractional Periods of Ineligibility

The DRA requires states to apply partial months of ineligibility for gifts made during the look back period. California currently rounds down to the nearest whole number. For example, a gift of $12,000 divided by the 2010 Average Private Pay Rate of $6,311 equals 1.9 months. Under current practice in California, this would result in only 1 month of ineligibility from rounding down. Without rounding down, this gift would essentially result in 2 months of ineligibility.

Documentation Requirements

The DRA mandates that applicants must provide documentation of U.S. citizenship (U.S passport or Birth Certificate + Driver License/Senior Identification Card). This will also be required for those currently on Medi-Cal at the time of their annual redetermination of benefits.

For more discussion on the DRA's anticipated implementation in California , please see www.canhr.org .