Intern & Staff Lunch, Summer 2025
To our Friends & Family —
Last fall, U.S. estate planners were preparing for the possibility of stricter estate tax rules, while, in California, estate planners were considering new possibilities for their clients in view of the state’s 2024 abolition of the Medi-Cal asset cap.
Now, in late 2025, the weather has changed.
The new winds favor inherited wealth. Under recent legislation, the unified gift and estate tax threshold will continue to increase. Federal estate tax will not apply to people who die during 2026 with less than $15 million in assets. California has not had any state-level estate tax since before 2005. (The Congressional Research Service has posted a good analysis of the new estate tax legislation with details and context.)
However, the current season is less favorable to U.S. health care supports such as Medicare, Medicaid (Medi-Cal in California), and Affordable Care Act programs (Covered California and "MAGI" Medi-Cal).
This summer's HR 1 reconciliation law, Public Law 119-21, also called the "One Big Beautiful Bill Act," imposes phased reductions on many U.S. health care supports. Cuts and restrictions under the new law began to reduce health care supports in 2025. Public Law 119-21 has scheduled further cuts and restrictions to apply every few months until 2029 and beyond. These federally imposed cuts will often take effect by forcing state and local officials and medical providers to deny care.
California legislators and officials, anticipating federal cuts, have imposed three of the most clearly defined early cuts to Medi-Cal:
1. The California Legislature reimposed the former $130,000 cap on assets for Medi-Cal eligibility, effective January 1, 2026. The Department of Health Care Services (DHCS) issued a regulatory letter this summer, ACWDL 25-14, that provides the main currently available nuts-and-bolts guidance on the asset cap. DHCS has also posted an Asset Limits FAQs page with some general explanations, and has additionally posted explanations via MEDIL I25-23, which Medi-Cal recipients may receive in letter form.
2. One of the earliest deadlines under this summer’s Public Law 119-21 is a requirement for state governments to impose "work requirements" by January 1, 2027 for most adults under 65 to qualify for "MAGI" Medi-Cal. The requirements call for 80 hours per month of proven paid or unpaid work, or some other formally approved commitment of time. Exceptions from the work requirement other than age include proven disability and pregnancy.
3. California has begun to impose stricter immigration status limits in compliance with new federal rules and institutional pressures. These cuts will increasingly fall on legally present immigrants who do not have U.S. citizenship or permanent resident (“green card”) status (See MEDIL I25-22). Federal law already denies medical subsidies to undocumented immigrants. Some California programs provide limited state-funded medical care for people who cannot prove legal presence in the U.S. but the state is now reducing such care.
DHCS has posted a new page of simply phrased explanations for the changes discussed above and for other new restrictions and rules. The agency's directory of ACWDL and MEDIL guidance letters will be a better source to watch for more detailed Medi-Cal rule changes during this unusual year.
Because of the state-level changes, applicants must start reporting assets again on or after January 1, 2026. Ongoing Medi-Cal consumers must start reporting assets again at their next annual benefits renewal during 2026, unless something happens first that calls for review under the usual Medi-Cal rules. This might be a redetermination caused by reporting a change in circumstances, such as the household’s income or assets, household size or tax filing status, citizenship or immigration status. Another reason might be a loss of contact with Medi-Cal if mail is returned as undeliverable. As always, the Medi-Cal program requires all enrollees to report changes that could affect their benefits eligibility within 10 days. (See ACWDL 25-14, pp. 2-3. Check individual timing obligations with great caution.)
As information only, with no endorsement implied: Useful resources at nonprofits include the asset cap FAQ posted by California Assets for Nursing Home Reform (CANHR), and the timeline for starting dates of health care cuts posted by the KFF News.
As with shifting weather, we all will need to adjust our plans. We expect to share more news with you as time goes on. Following is our more detailed question-and-answer guide about changing rules that affect asset protection and why Medi-Cal is not just for low-income households.
With our best wishes,
Cal Estate Planning, PC
Q: How and when will Medi-Cal asset limits change?
This summer the California Legislature reimposed the Medi-Cal asset cap at the $130,000 level, effective January 1, 2026.
At the end of 2025, California will have had two years without a Medi-Cal asset cap. From January 1, 2024 through December 31, 2025, Californians with low incomes could (and during this fall, still can) qualify for full Medi-Cal coverage, of the type that covers long-term custodial care, on the basis of illness or age and low income, without submitting evidence about their savings or other non-exempt assets.
On January 1, 2026, the cap will go back into effect. The asset cap will apply to people who qualify for Medi-Cal under “non-MAGI” programs who are over age 65, disabled, or in need of long-term care. Single individuals will be allowed up to $130,000 in non-exempt assets and couples will be allowed up to $195,000 in non-exempt assets, plus an additional $65,000 per additional household member, up to 10 additional household members. Some exceptions exist (and should be checked specifically) for people covered under the “Pickle Amendment,” Disabled Adult Child coverage, or Disabled Widow/er coverage.
The new asset cap will be similar to the cap that applied during 2022 and 2023, but not as harsh as the $2000 federal cap on non-exempt assets. That limit applies in most states’ Medicaid programs, as it did in California before 2022.
Certain assets have been exempt all along from Medi-Cal asset restrictions. Examples of such exempt assets include: a house that is a personal residence, household goods and personal effects, jewelry, one car, some IRAs and pensions (when the owner is receiving payments — check rules carefully), some life insurance policies and burial funds, and some real property used for business or self-support. What will change starting in 2026 is that any assets that are not exempt will count against the $130,000 asset limit for Medi-Cal eligibility. For all Medi-Cal applicants and recipients, state and county officials will be phasing in renewed requirements for showing proof of assets’ values and/or proof that assets are exempt.
Income eligibility for Medi-Cal, distinct from the asset cap, has not changed. Throughout the changes in the asset cap, the Medi-Cal income limit has remained at 138% of the federal poverty level for the applicable household size. In 2025, the Medi-Cal income limit is $21,597 per year or $1799.75 per month for a single adult and $29,187 per year or $2432.25 per month for a two-person household.
Californians who have modified adjusted gross income (MAGI) below 138% of the federal poverty level may be eligible for basic Medi-Cal coverage, regardless of the value of their assets, through “MAGI” Medi-Cal, which is part of the Medicaid expansion under the Affordable Care Act (ACA). MAGI Medi-Cal does not cover long-term care, nor does it cover "home and community-based services" (HCBS) such as In-Home Support Services (IHSS).
With the return of the asset cap, DHCS will need to update its guidance, last issued in 2023, about California's handling of the "community spouse resource allowance" (CSRA) -- the limit on assets that a non-Medi-Cal spouse of a nursing home resident may keep without disrupting the ill spouse’s Medi-Cal coverage. We know that the federally determined CSRA for 2025 is $157,920, but we’ll need to watch for details on how the Medi-Cal system will apply it. This is a good example of an issue to recheck from time to time in the DHCS directory of ACWDL and MEDIL letters.
Another issue to watch: California’s new Medi-Cal laws and rules are still not as harsh as the default federal Medicaid eligibility limits. California depends on waivers and state plan approvals from the federal Centers for Medicare and Medicaid Services (CMS) for permission to run Medi-Cal differently from other states’ Medicaid programs. It remains to be seen if such permissions will continue.
Q: When is it time to start reporting assets again?
A: As noted above in more detail, new applicants must start reporting assets again on or after January 1, 2026. People with ongoing Medi-Cal benefits report assets at their next annual benefits renewal or if a change prompts a need for a report sooner. See ACWDL 25-14 for now, but it’s a good idea to keep checking over time whether rules on this issue have been changed or interpreted in new ways.)
Q: What can people do to get ready?
A: People with assets above $130,000 (or above the applicable asset cap for their household size) may need to think about spend-down measures. These may include spending money on exempt assets, such as paying for repairs on their own home or car, buying a more reliable car, or making gifts that follow specific rules, which can be strict. Rules in this area may apply differently if a Medi-Cal consumer is likely to move to long-term care soon.
Q: Who will have to meet the 80-hour monthly work requirement for Medi-Cal coverage?
A: By January 1, 2027, states must require 80 hours per month of employment or other approved study, training, or "volunteer" work from each adult aged 19 to 64 who receives "MAGI" Medi-Cal because of low income. The rule does not apply to people who receive MAGI Medi-Cal because of a characteristic such as youth (18 or younger), age (65 or older), proven disability, or current or recent pregnancy. The currently posted state information sheet on expected changes says exemptions will be available for these reasons and for parents of young children, recently released prisoners, current or former foster youth under age 26, American Indians or Alaska Natives, and recipients of Medicare Part A or Part B benefits. The work requirement is one of many future effects of Public Law 119-21 summarized by DHCS in an August 2025 summary, MEDIL I25-18.
Q: What else is changing?
A: Starting in 2027, Medi-Cal must plan and staff for twice-yearly eligibility reviews instead of the current annual schedule. Medi-Cal must also reduce retroactive health care support for some new applicants to one month rather than three. And in 2028, copayments are likely to be added for some types of care.
Public Law 119-21 did not continue Enhanced Premium Tax Credits, which protect some Covered California health care rates under the Affordable Care Act (ACA), especially for households with middle-class incomes. The Covered California website has posted general information on federal changes to ACA coverage and has warned of premium increases while offering some state-funded protections for plan members who have incomes up to 150% of the federal poverty level.
Additional cuts beyond the scope of this article are expected. The KFF timeline on implementation of this summer's federal legislation is a helpful start for looking at the bigger picture.
Q: Isn't Medi-Cal a poverty program? Why does it matter to homeowners who have Medicare coverage too, or others who have enough assets and income to need estate planning?
A: Even for middle-class homeowners who have pensions and private insurance, the Medi-Cal program can serve as a powerful shield against medical debt. According to the California Health Care Foundation (no endorsement implied), "Medi-Cal is the primary payer for more than 6 in 10 Californians in nursing homes." DHCS reports that in July 2024, 38% of Californians were "certified eligibles" enrolled in some form of Medi-Cal benefits.
Medi-Cal is the only public subsidy that will cover long-term care for more than 100 days. Medicare, the program for older Americans, only covers acute care for injuries and other short-term medical episodes, plus 100 days of nursing-level care. The Congressional Research Service reported that, as of 2023, Medicaid paid for 45.6% of the "long-term services and supports" needed for continuing use during disability or chronic illness. Public health programs generally paid for nearly 70% of such care.
Paperwork requirements, such as the twice-yearly eligibility reviews, are likely to require more effort and expense from elders and their families to receive Medi-Cal for long-term care. Restrictions against immigrants will affect lawfully present immigrant elders in complex ways, principally affecting those who do not have permanent residency or citizenship.
Many disabled or elderly Medi-Cal members are able to live at home, not in institutional settings, thanks to Medi-Cal home and community-based services (HCBS). HCBS programs range from In-Home Support Services (IHSS) which assists with non-medical tasks such as shopping and housekeeping, to skilled nursing services that can be comparable to nursing home care. They also can help families survive and stay together by paying family caregivers for the work they do at home. HCBS programs are always precariously funded. For now, they continue to operate.
Q: Medicare and Medicaid have been around since the 1960s. Why is middle-income health care so much more connected to public subsidies now?
A: It was 60 years ago in 1965 that President Lyndon B. Johnson signed the bill establishing the basic insurance programs that became Medicaid. Medi-Cal was founded in 1966 as California's version of Medicaid. About six percent of Californians qualified for Medi-Cal at its inception. Since then, the Medi-Cal program has been through boom and bust cycles . In general, the development of Medi-Cal has tended to echo the development of the federal Medicaid and Medicare programs. It grew during the 1960s and 1970s, and then was cut during the 1980s and 1990s when many private employers reduced employee health care coverage. Following decades of cuts, the programs experienced an expansion boosted especially by the 2010 Affordable Care Act and by temporary relaxations of Medi-Cal eligibility during the worst years of the Covid pandemic.
The cost to U.S. households of medical treatment and nursing care has increased over the past few generations to the point where health insurance is essential for all. Realistically, private health insurance is unaffordable to many households. Long-term stays in skilled nursing facilities eat away at family savings. The Medi-Cal "Average Private Pay Rate" for 2025 estimates this cost at $13,656 per month.
As a result, middle-class homeowners with substantial savings can unexpectedly find that they need Medi-Cal benefits for support. Cuts to Medi-Cal and other health programs are therefore matters of concern for much of the public.
This is general information and not legal advice. Links to nonprofits or other sources are not intended to imply endorsements and are provided only for information. The general information here is no substitute for qualified individualized legal advice.