The Government Changed the Rules on Long-Term Care. Here's What Every California Family Needs to Know.
Imagine this: Your mother is 78, sharp as a tack, and living independently in the home she's owned for 35 years. You're not worried — she has some savings, a paid-off house, and you've always assumed that if she ever needed a nursing home, Medi-Cal would be there to help.
That assumption just got a lot more complicated.
In the span of a single year, two major legal changes — one from Washington D.C. and one from Sacramento — have quietly rewritten the rules on how Californians pay for long-term care. Together, they affect how much your parents need to save, whether they can qualify for help, and critically, whether the family home will be there for you to inherit when they're gone.
This isn't a distant, theoretical problem. For families with aging parents, it's happening right now.
First, Let's Talk Numbers
Before we get into the law, it helps to understand what we're actually planning for.
Nursing home care in California is brutally expensive. A private room at a skilled nursing facility runs about $13,600 per month — that's roughly $163,000 per year. A semi-private room is slightly less, around $11,700 per month, but still over $140,000 annually. These figures are well above the national average, reflecting California's higher cost of living and labor.
Source: Genworth Cost of Care Survey.
Here's the part that catches most families off guard: Medicare doesn't cover this. Medicare will pay for up to 100 days of skilled nursing care following a qualifying hospital stay — think short-term rehabilitation after a hip replacement. But the day-to-day custodial care that most nursing home residents need, help with bathing, dressing, eating, getting out of bed — that's not covered by Medicare at all. Not a single day.
Source: Medicare.gov, "Skilled Nursing Facility Care.”
Many nursing home residents require care for multiple years. At California prices, even a relatively short stay can cost hundreds of thousands of dollars. Most families don't have that sitting in a savings account. So what happens?
Most people pay out of pocket until their savings are gone, and then they turn to Medi-Cal — California's version of Medicaid, the federal-state program that covers low-income Americans. Medi-Cal is, in fact, the largest single payer for nursing home care in the country. Roughly two-thirds of all nursing home residents eventually rely on it.
Which is exactly why the recent changes matter so much.
Change #1: The Federal Government Just Made Major Changes to Medicaid Funding
On July 4, 2025, President Trump signed the federal budget reconciliation law commonly known as the “One Big Beautiful Bill Act.” The law makes major reductions to federal Medicaid spending over the next decade. KFF, relying on Congressional Budget Office estimates, reported that the Medicaid provisions are expected to reduce federal Medicaid spending by hundreds of billions of dollars and lead to millions fewer people being covered by Medicaid by 2034. California officials estimated that the law could eliminate health coverage for up to 3.4 million Californians and reduce federal Medicaid funding to California by at least $28.4 billion.
Sources: KFF, “Health Provisions in the 2025 Federal Budget Reconciliation Law; KFF, “Allocating CBO’s Estimates of Federal Medicaid Spending Reductions and Enrollment Loss Across the States,” Governor of California, “Governor Newsom slams Trump over bill that would cut millions in health coverage, food assistance for California”
Now, to be clear: the cuts don't eliminate Medicaid overnight. Many of the changes phase in over several years, between 2026 and 2028, and their exact impact will depend on how California chooses to respond. States have some flexibility in how they administer Medicaid within federal guidelines.
Regardless of how the changes ultimately affect individual states, many analysts expect the law to place additional financial pressure on state Medicaid programs and the families who rely on them. For California families concerned about long-term care, that uncertainty makes advance planning more important than ever.
Change #2: California Quietly Reinstated Its Own Asset Rules
At the same time the federal government was reducing Medicaid funding, California was moving in the opposite direction — at least temporarily.
California's phase-out of Medi-Cal asset limits actually began years before most families noticed. Effective July 1, 2022, the state dramatically increased the asset limit for older adults and people with disabilities, raising it to $130,000 for an individual applicant. This marked the beginning of a multi-year effort to eliminate the asset test altogether.
Then, on January 1, 2024, California removed Medi-Cal asset limits entirely. For the next two years, applicants generally could qualify for Medi-Cal regardless of how much they had in savings, investments, or other countable assets. Many families and their advisors adjusted their planning strategies during this period because traditional asset-limit concerns largely disappeared.
That window is now closed.
Effective January 1, 2026, California reinstated asset limits for older adults and people with disabilities seeking Medi-Cal long-term care benefits. The current limits are:
$130,000 in countable assets for a single applicant
$195,000 for a married couple when both spouses are applying for Medi-Cal
The rules become more nuanced when only one spouse requires long-term care. In that situation, the spouse applying for Medi-Cal may generally retain up to $130,000 in countable assets, while the spouse remaining at home may be entitled to retain additional assets under the Community Spouse Resource Allowance (CSRA). For 2026, the maximum CSRA is $157,920. Families facing a nursing home admission should not assume a single asset-limit figure applies to every married couple.
If an applicant's countable assets exceed the applicable limit, Medi-Cal may require those assets to be spent down before benefits become available.
To put this in perspective: if your parent has $200,000 in savings and a modest brokerage account, they may not qualify for Medi-Cal on day one. At $13,600 per month for a nursing home, that $200,000 could be exhausted in well under two years.
Sources: California Department of Health Care Services (DHCS), Asset Limit Frequently Asked Questions; DHCS All County Welfare Directors Letter (ACWDL) 25-18; Medicare Savings Programs and Community Spouse Resource Allowance guidance.
And Then There's the Look-Back Period
Here's where estate planning becomes truly critical — and where families often make costly mistakes.
California has also reinstated a 30-month look-back period for nursing home Medi-Cal, effective January 1, 2026. This means that when your parent applies for Medi-Cal to cover nursing home care, the state will look back at all financial transactions over the past 30 months. If they find that assets were transferred — gifted to children, for example — for less than fair market value during that window, Medi-Cal can impose a penalty period during which your parent is ineligible for coverage.
In other words: you can't just give the money away once a health crisis arrives. The clock has to start ticking long before there's any emergency.
This is one of the most important reasons families are urged to plan now, not later. Once a parent is already in a nursing home, many of the most effective legal strategies are simply no longer available.
"But Our Parents Own a Home — That's Exempt, Right?"
Yes — and no. This is the nuance that trips up even financially sophisticated families.
Your parent's primary residence is generally exempt from Medi-Cal's asset limit calculation while they're alive. In other words, owning a home doesn't automatically disqualify you from Medi-Cal coverage.
But here's the catch most people never see coming: the exemption ends when they die.
California runs what's called the Medi-Cal Estate Recovery Program. After a Medi-Cal beneficiary passes away, the state has the right to seek reimbursement for the cost of care paid on their behalf — and the family home is usually the largest asset available to satisfy that claim.
The program only applies to benefits received after age 55, and it only reaches assets that go through probate — the court process by which a deceased person's estate is distributed. But for families whose parents never set up a living trust or other probate-avoidance tools, the family home can end up as a Medi-Cal repayment rather than an inheritance.
The key rule to understand is this: if the home remains part of your parent's probate estate at death, it may be subject to Medi-Cal estate recovery.
A Real-Life Scenario
Let's put this together with a realistic example.
Maria is 74 and owns her home in the San Fernando Valley, which she's had for 30 years. It's worth about $650,000, and she has $85,000 in savings. She lives alone and has been managing fine — until she has a stroke at 76 and needs skilled nursing care.
Because her savings are below the applicable asset limit and her home is generally exempt, Maria may qualify for Medi-Cal long-term care benefits.
Three years later, Maria passes away. Her estate consists of the house. Her children assume they'll inherit it.
The Estate Recovery Program files a claim against her probate estate for $421,200. If the estate lacks other assets to satisfy the claim, the home may need to be sold. The family inherits whatever is left after the state is repaid.
Could this have been avoided? Potentially, yes — but only with planning that happened years earlier, before Maria's stroke, while she had the legal capacity to act and the time to satisfy the 30-month look-back period.
What Can Families Actually Do?
The good news is that the law does provide legitimate tools to protect assets. But they have to be used proactively — not in the middle of a health crisis.
1. A Revocable Living Trust
A properly funded living trust keeps assets out of probate. Under California's current Medi-Cal Estate Recovery Program, repayment is generally limited to assets that pass through probate. As a result, assets held in a properly funded revocable living trust will typically not be subject to estate recovery because they do not become part of the beneficiary's probate estate. However, estate recovery laws can change, and families should consult with a qualified estate planning or elder law attorney regarding their specific circumstances. For many Californians, a revocable living trust remains one of the most accessible and flexible estate planning tools available.
Source: California Department of Health Care Services, Estate Recovery Program
2. A Medi-Cal Asset Protection Trust (MAPT)
A Medi-Cal Asset Protection Trust (MAPT) is a type of irrevocable trust that may allow a person to transfer assets — including a home — out of their name while preserving certain benefits and protections. When properly structured, a MAPT may help protect certain assets while also supporting future Medi-Cal planning objectives. The trade-off is that the trust is irrevocable, meaning the person transferring the assets gives up direct ownership and significant control over those assets. Because of California's 30-month look-back period, this type of planning must be implemented well in advance of any anticipated need for long-term care benefits.
Not all irrevocable trusts qualify for Medi-Cal planning purposes, and trust design is critical. Families should consult with a qualified estate planning or elder law attorney before transferring assets to any trust.
Sources: California Department of Health Care Services (DHCS), Asset Limit Frequently Asked Questions; DHCS All County Welfare Directors Letter (ACWDL) 25-18 regarding implementation of the Medi-Cal transfer-of-assets and look-back rules.
3. Transfer-on-Death Deeds and Beneficiary Designations
California allows homeowners to use a transfer-on-death deed to transfer real property directly to named beneficiaries without probate. Likewise, payable-on-death (POD) and transfer-on-death (TOD) beneficiary designations allow many financial accounts to pass directly to named beneficiaries outside of probate. Because California's current Medi-Cal Estate Recovery Program generally limits recovery to probate assets, these probate-avoidance tools generally keep those assets outside the probate estate and therefore outside the scope of California's current estate recovery rules. However, families should consult with a qualified attorney before relying on any particular strategy, as estate recovery laws and individual circumstances can vary.
Sources:
• California Department of Health Care Services, Estate Recovery Program
• California Probate Code, Revocable Transfer on Death Deed Act.
• California Probate Code, Nonprobate Transfers at Death.
4. Long-Term Care Insurance
For clients in their 50s or early 60s who are still healthy enough to qualify, long-term care insurance is worth a serious conversation. California also has a "Partnership Program" where a qualifying long-term care insurance policy allows you to protect a matching dollar amount of assets from both Medi-Cal's eligibility test and estate recovery — dollar for dollar.
Source: California Partnership for Long-Term Care, California Department of Health Care Services.
The Timing Problem
Everything above depends on one thing: acting before the crisis hits.
The 30-month look-back period means that any strategy involving asset transfers has to begin at least 2.5 years before a nursing home admission is foreseeable. Many of the most effective tools — irrevocable trusts, strategic gifting, property transfers — become unavailable or legally risky once a parent is already in care or has already lost cognitive capacity.
There's also the question of the federal cuts phasing in. The full impact of the One Big Beautiful Bill Act on California's Medi-Cal program will unfold between now and 2028. Some of those changes may further tighten eligibility or shift more of the cost burden onto families. Planning today gives you the maximum number of options.
The Bottom Line
If you have aging parents — or if you're in your 40s, 50s, or 60s and thinking about your own future — there are three things worth understanding right now:
1. The safety net you thought existed has changed. Federal Medicaid funding has been significantly reduced, and California has reinstated its own asset limits. Medi-Cal is still available, but it now requires meeting strict financial criteria and careful advance planning.
2. Owning a home doesn't protect your inheritance. Even if your parent qualifies for Medi-Cal, the family home can be lost to estate recovery after death — unless specific legal steps are taken to keep it out of probate.
3. The most powerful planning tools require time to work. The 30-month look-back period means that families who wait until a health crisis to seek legal advice may find themselves with far fewer options. The best time to review your plan was a few years ago. The second-best time is now.
If your family's estate plan was built before 2026 — or if you've never had a proper plan in place at all — these changes are a strong signal that it's time to take a fresh look.
This article is intended for general informational purposes and does not constitute legal advice. California's Medi-Cal rules are complex and fact-specific. Please consult a qualified estate planning or elder law attorney to discuss your family's individual situation.