Helping Clients Navigate Medi-Cal’s New Asset Rules

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, did more than raise estate tax exemptions. It also reduced federal funding for Medicaid, forcing states like California to reassess how they administer long-term care benefits. One of the most significant outcomes is the reinstatement of strict asset tests for Medi-Cal eligibility.

For decades, Medi-Cal has provided a vital safety net for California families facing the staggering costs of nursing homes and long-term care. But under the OBBBA, access is tightening. Advisors now face a critical responsibility: helping clients understand how these rules may impact their financial future and taking steps to protect assets before a health crisis leaves families with limited options.

What Has Changed?

The OBBBA’s funding cuts mean California is reasserting asset limitations for Medi-Cal applicants:

• Countable assets capped between $2,000 and $130,000. Depending on marital status and eligibility category, this could leave clients with little room to preserve wealth.
  
• Retirement savings and investment accounts included. IRAs, annuities, and brokerage accounts may disqualify clients who previously would have qualified.
  
• Multiple properties scrutinized. Owning anything beyond a primary residence—such as a rental property or vacation home—could jeopardize eligibility.
  
• Work requirements for some adults under 65. This further complicates long-term planning for individuals who rely on Medicaid before reaching retirement age.
  

These changes shift the conversation from assuming Medi-Cal will “always be there” to recognizing that even moderate savings or investments may now prevent eligibility.

Who Is Most at Risk?

Certain client groups are especially vulnerable under the new rules:

• Retirees with savings: Clients who responsibly accumulated retirement accounts may now find themselves ineligible when they need care.
  
• Families with real estate portfolios: A second property—once considered an asset to pass on—could now disqualify them entirely.
  
• Middle-income households: These families may have too much to qualify for Medi-Cal but not enough to self-fund years of long-term care, putting them in a dangerous “in-between” zone.
  

Why Advisors Must Act Proactively

The reinstated asset tests make advance planning essential. If clients wait until they are in crisis—facing a sudden diagnosis or the need for nursing home care—options will be severely limited. Advisors should initiate conversations early, helping clients:

• Evaluate asset exposure: Review retirement accounts, real estate holdings, and brokerage balances against new thresholds.
  
• Explore alternative funding strategies: Consider long-term care insurance, hybrid life policies, or private pay strategies to reduce reliance on Medi-Cal.
  
• Plan for cash flow flexibility: Ensure retirement income streams can adapt to the possibility of higher care costs.
  

These steps not only protect wealth but also reduce the stress and conflict families face when care decisions must be made quickly.

Collaboration is Key

No single advisor can address these challenges alone. Collaboration with elder law attorneys is critical to ensuring clients have access to legal tools that protect wealth while preserving Medi-Cal eligibility. Options may include:

• Establishing irrevocable trusts to reposition assets.
  
• Transferring ownership of certain properties in a compliant manner.
  
• Coordinating benefits with veterans’ programs or spousal protections.
  

By working as a team, advisors and elder law attorneys provide clients with a comprehensive approach—one that balances tax efficiency, asset protection, and eligibility for care.

The Takeaway

The OBBBA has transformed Medi-Cal planning in California. With strict asset tests reinstated, clients with even modest savings or additional properties may find themselves unexpectedly disqualified from coverage. Advisors who address these risks head-on will distinguish themselves as proactive, trusted partners in protecting client wealth.

Insight for Advisors: Begin these conversations now. By partnering with elder law attorneys and guiding clients through asset protection strategies, you help them preserve both their financial stability and their access to quality long-term care.