Medi-Cal Asset Limits – They’re Back!

Medi-Cal Asset Limits – They’re Back!

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As of December 2023, approximately 15 million Californians were enrolled in Medi-Cal, the state’s Medicaid program. This is roughly 38 percent of the state’s population. In the context of personal injury litigation, this represents a substantial percentage of plaintiffs whose health care benefits and net tort recoveries are directly impacted by settlement outcomes.

Prior to July 2022, older adults and individuals with disabilities were subject to strict asset thresholds in order to qualify for Medi-Cal: $2,000 for an individual and $3,000 for couples. These limits, which had not been updated since 1989, posed significant challenges in personal injury cases. If a plaintiff’s net recovery exceeded these thresholds, Medi-Cal eligibility was placed at risk. Common workarounds included structured spend-downs or establishing a Special Needs Trust [SM1] to preserve eligibility for public benefits.

The inequity of this outdated system was debated and studied extensively. In response, the Legislature included reforms in the 2021 to 2022 CA state budget, adopting a phased elimination of the asset test. As of July 2022, the asset limits increased to $130,000 for an individual, with an additional $30,000 allowed per household member. In January 2024, the asset limits were fully eliminated.

However, the unanticipated impact or removing asset limits on Medi-Cal enrollment, particularly among older adults and people with disabilities, has contributed to a growing budget deficit. In response, the Legislature and Governor reached a new budget agreement which included the reinstatement of asset thresholds beginning January 1, 2026. The reinstated limits will return to $130,000 for an individual and $65,000 for each additional household member. Whether the asset limits will roll back further in years to come is unclear.

This reinstatement raises important and unresolved legal questions. For example, what happens when a case resolves and funds are disbursed in 2024 or 2025, during the period when no asset test has been in effect? If use of a Special Needs Trust was not previously considered due lack of an asset limit qualification for Medi-Cal benefits, Plaintiffs who have received settlements may find themselves over the asset limit and at risk of losing their Medi-Cal benefits come 2026. What remedies are available? What proactive strategies can be applied?

Personal injury attorneys have a duty to counsel their clients, but financial planning and public benefit preservation are often beyond the scope of their practice and, ideally, beyond the scope of their retention. In such cases, the prudent approach is to refer clients to qualified professionals who can provide the appropriate advice and planning. While it is important to help clients understand the settlement process, counsel must also stay within the boundaries of their legal role. In other words - stay in your lane!

Although the asset limits will not be reinstated until January 2026, cases that settle today must account for the legal and financial implications of the coming change. Failure to do so could result in preventable lapses in benefits and unintended consequences for clients.

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