Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services and under which qualified low-income persons receive health care benefits. The Medi-Cal program is, in part, governed and funded by federal Medicaid provisions.

Existing federal law requires the state to seek adjustment or recovery from an individuals estate for specified medical assistance, including nursing facility services, home and community-based services, and related hospital and prescription drug services, if the individual was 55 years of age or older when he or she received the medical assistance. Existing federal law allows the state, at its own option, to seek recovery for any items or services covered under the states Medicaid plan.

Existing state law, with certain exceptions, requires the department to claim against the estate of a decedent, or against any recipient of the property of that decedent by distribution or survival, an amount equal to the payments for Medi-Cal services received or the value of the property received by any recipient from the decedent by distribution or survival, whichever is less. Existing law provides for certain exemptions that restrict the department from filing a claim against a decedents property, including when there is a surviving spouse during his or her lifetime. Existing law requires the department, however, to make a claim upon the death of the surviving spouse, as prescribed. Existing law requires the department to waive its claim, in whole or in part, if it determines that enforcement of the claim would result in a substantial hardship, as specified. Existing law, which has been held invalid by existing case law, provides that the exemptions shall only apply to the proportionate share of the decedents estate or property that passes to those recipients, by survival or distribution, who qualify for the exemptions.

This bill would instead require the department to make these claims only in specified circumstances for those health care services that the state is required to recover under federal law, and would define health care services for these purposes. The bill would limit any claims against the estate of a decedent to only the real and personal property or other assets the state is required to seek recovery from under federal law. The bill would delete the proportionate share provision and would delete the requirement that the department make a claim upon the death of the surviving spouse. The bill would require the department to waive its claim when the estate subject to recovery is a homestead of modest value, as defined. The bill would limit the amount of interest that is entitled to accrue on a voluntary postdeath lien, as specified. The bill would also require the department to provide a current or former beneficiary, or his or her authorized representative, upon request, with the total amount of Medi-Cal expenses that have been paid on his or her behalf that would be recoverable under these provisions, as specified. The bill would apply the changes made by these provisions only to individuals who die on or after January 1, 2016.

Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services and under which qualified low-income persons receive health care benefits. The Medi-Cal program is, in part, governed and funded by federal Medicaid provisions.

Existing federal law requires the state to seek adjustment or recovery from an individuals estate for specified medical assistance, including nursing facility services, home and community-based services, and related hospital and prescription drug services, if the individual was 55 years of age or older when he or she received the medical assistance. Existing federal law allows the state, at its own option, to seek recovery for any items or services covered under the states Medicaid plan.

Existing state law, with certain exceptions, requires the department to claim against the estate of a decedent, or against any recipient of the property of that decedent by distribution or survival, an amount equal to the payments for Medi-Cal services received or the value of the property received by any recipient from the decedent by distribution or survival, whichever is less. Existing law provides for certain exemptions that restrict the department from filing a claim against a decedents property, including when there is a surviving spouse during his or her lifetime. Existing law requires the department, however, to make a claim upon the death of the surviving spouse, as prescribed. Existing law requires the department to waive its claim, in whole or in part, if it determines that enforcement of the claim would result in a substantial hardship, as specified. Existing law, which has been held invalid by existing case law, provides that the exemptions shall only apply to the proportionate share of the decedents estate or property that passes to those recipients, by survival or distribution, who qualify for the exemptions.

This bill would instead require the department to make these claims only in specified circumstances for those health care services that the state is required to recover under federal law, and would define health care services for these purposes. The bill would limit any claims against the estate of a decedent to only the real and personal property or other assets the state is required to seek recovery from under federal law. The bill would delete the proportionate share provision and would delete the requirement that the department make a claim upon the death of the surviving spouse. The bill would require the department to waive its claim when the estate subject to recovery is a homestead of modest value, as defined. The bill would limit the amount of interest that is entitled to accrue on a voluntary postdeath lien, as specified. The bill would also require the department to provide a current or former beneficiary, or his or her authorized representative, upon request and free of charge, request, with the total amount of Medi-Cal expenses that have been paid on his or her behalf that would be recoverable under these provisions, as specified. The bill would apply the changes made by these provisions only to individuals who die on or after January 1, 2016.

Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services and under which qualified low-income persons receive health care benefits. The Medi-Cal program is, in part, governed and funded by federal Medicaid provisions.

Existing federal law requires the state to seek adjustment or recovery from an individuals estate for specified medical assistance, including nursing facility services, home and community-based services, and related hospital and prescription drug services, if the individual was 55 years of age or older when he or she received the medical assistance. Existing federal law allows the state, at its own option, to seek recovery for any items or services covered under the states Medicaid plan.

Existing state law, with certain exceptions, requires the department to claim against the estate of a decedent, or against any recipient of the property of that decedent by distribution or survival, an amount equal to the payments for Medi-Cal services received or the value of the property received by any recipient from the decedent by distribution or survival, whichever is less. Existing law provides for certain exemptions that restrict the department from filing a claim against a decedents property, including when there is a surviving spouse during his or her lifetime. Existing law requires the department, however, to make a claim upon the death of the surviving spouse, as prescribed. Existing law requires the department to waive its claim, in whole or in part, if it determines that enforcement of the claim would result in a substantial hardship, as specified. Existing law, which has been held invalid by existing case law, provides that the exemptions shall only apply to the proportionate share of the decedents estate or property that passes to those recipients, by survival or distribution, who qualify for the exemptions.

This bill would instead require the department to make these claims only in specified circumstances for those health care services that the state is required to recover under federal law, and would define health care services for these purposes. The bill would limit any claims against the estate of a decedent to only the real and personal property or other assets the state is required to seek recovery from under federal law. The bill would delete the proportionate share provision and would delete the requirement that the department make a claim upon the death of the surviving spouse. The bill would require the department to waive its claim when the estate subject to recovery is a homestead of modest value, as defined. The bill would limit the amount of interest that is entitled to accrue on a voluntary postdeath lien, as specified. The bill would also require the department to provide a current or former beneficiary, or his or her authorized representative, upon request and free of charge, with the total amount of Medi-Cal expenses that have been paid on his or her behalf that would be recoverable under these provisions, as specified. The bill would apply the changes made by these provisions only to individuals who die on or after January 1, 2016.

Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services and under which qualified low-income persons receive health care benefits. The Medi-Cal program is, in part, governed and funded by federal Medicaid provisions.

Existing federal law requires the state to seek adjustment or recovery from an individuals estate for specified medical assistance, including nursing facility services, home and community-based services, and related hospital and prescription drug services, if the individual was 55 years of age or older when he or she received the medical assistance. Existing federal law allows the state, at its own option, to seek recovery for any items or services covered under the states Medicaid plan.

Existing state law, with certain exceptions, requires the department to claim against the estate of a decedent, or against any recipient of the property of that decedent by distribution or survival, an amount equal to the payments for Medi-Cal services received or the value of the property received by any recipient from the decedent by distribution or survival, whichever is less. Existing law provides for certain exemptions that restrict the department from filing a claim against a decedents property, including when there is a surviving spouse during his or her lifetime. Existing law requires the department, however, to make a claim upon the death of the surviving spouse, as prescribed. Existing law requires the department to waive its claim, in whole or in part, if it determines that enforcement of the claim would result in a substantial hardship, as specified. Existing law, which has been held invalid by existing case law, provides that the exemptions shall only apply to the proportionate share of the decedents estate or property that passes to those recipients, by survival or distribution, who qualify for the exemptions.

This bill would instead require the department to make these claims only in specified circumstances for those health care services that the state is required to recover under federal law, and would define health care services for these purposes. The bill would limit any claims against the estate of a decedent to only the real and personal property or other assets the state is required to seek recovery from under federal law. The bill would delete the proportionate share provision and would delete the requirement that the department make a claim upon the death of the surviving spouse. The bill would require the department to waive its claim when the estate subject to recovery is a homestead of modest value, as defined. The bill would also require the department to provide a current or former beneficiary, or his or her authorized representative, upon request and free of charge, with the total amount of Medi-Cal expenses that have been paid on his or her behalf that would be recoverable under these provisions, as specified. The bill would apply the changes made by these provisions only to individuals who die on or after January 1, 2016.

Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services and under which qualified low-income persons receive health care benefits. The Medi-Cal program is, in part, governed and funded by federal Medicaid provisions.

Existing federal law requires the state to seek adjustment or recovery from an individuals estate for specified medical assistance, including nursing facility services, home and community-based services, and related hospital and prescription drug services, if the individual was 55 years of age or older when he or she received the medical assistance. Existing federal law allows the state, at its own option, to seek recovery for any items or services covered under the states Medicaid plan.

Existing state law, with certain exceptions, requires the department to claim against the estate of a decedent, or against any recipient of the property of that decedent by distribution or survival, an amount equal to the payments for Medi-Cal services received or the value of the property received by any recipient from the decedent by distribution or survival, whichever is less. Existing law provides for certain exemptions that restrict the department from filing a claim against a decedents property, including when there is a surviving spouse during his or her lifetime. Existing law requires the department, however, to make a claim upon the death of the surviving spouse, as prescribed. Existing law, which has been held invalid by existing case law, provides that the exemptions shall only apply to the proportionate share of the decedents estate or property that passes to those recipients, by survival or distribution, who qualify for the exemptions.

This bill would instead require the department to make these claims only in specified circumstances for those health care services that the state is required to recover under federal law, and would define health care services for these purposes. The bill would limit any claims against the estate of a decedent to only the real and personal property or other assets the state is required to seek recovery from under federal law. The bill would delete the proportionate share provision and would delete the requirement that the department make a claim upon the death of the surviving spouse. The bill would also require the department to provide a current or former beneficiary, or his or her authorized representative, upon request and free of charge, with the total amount of Medi-Cal expenses that have been paid on his or her behalf that would be recoverable under these provisions, as specified. The bill would apply the changes made by these provisions only to individuals who die on or after January 1, 2016.

Existing law provides for the Medi-Cal program, which is administered by the State Department of Health Care Services and under which qualified low-income persons receive health care benefits. The Medi-Cal program is, in part, governed and funded by federal Medicaid provisions.

Existing federal law requires the state to seek adjustment or recovery from an individuals estate for specified medical assistance, including nursing facility services, home and community-based services, and related hospital and prescription drug services, if the individual was 55 years of age or older when he or she received the medical assistance. Existing federal law allows the state, at its own option, to seek recovery for any items or services covered under the states Medicaid plan.

Existing state law, with certain exceptions, requires the department to claim against the estate of a decedent, or against any recipient of the property of that decedent by distribution or survival, an amount equal to the payments for Medi-Cal services received or the value of the property received by any recipient from the decedent by distribution or survival, whichever is less. Existing law provides for certain exemptions that restrict the department from filing a claim against a decedents property, including when there is a surviving spouse during his or her lifetime. Existing law requires the department, however, to make a claim upon the death of the surviving spouse, as prescribed. Existing law, which has been held invalid by existing case law, provides that the exemptions shall only apply to the proportionate share of the decedents estate or property that passes to those recipients, by survival or distribution, who qualify for the exemptions.

This bill would instead require the department to make these claims only in specified circumstances for those health care services that the state is required to recover under federal law, and would define health care services for these purposes. The bill would delete the proportionate share provision and would delete the requirement that the department make a claim upon the death of the surviving spouse. The bill would also require the department to provide a current or former beneficiary, or his or her authorized representative, upon request and free of charge, with the total amount of Medi-Cal expenses that have been paid on his or her behalf that would be recoverable under these provisions, as specified. The bill would apply the changes made by these provisions only to individuals who die on or after January 1, 2016.

SENATE THIRD READING

STR Bill Id:SB 33

Author:(Hernandez)

As Amended Ver:August 28, 2015

Majority vote

SENATE VOTE: 37-0

SUMMARY: Limits Medi-Cal estate recovery by the Department of Health Care Services (DHCS) to only those services required to be recovered under federal Medicaid law.

FISCAL EFFECT: According to the Assembly Appropriations Committee:

1. Losses from Recovery. In 2013-14, DHCS collected $61 million in recoveries. Given these expected reductions in recovery amounts, annual revenues losses associated with this bill are projected to be in the range of $40-$50 million ($20-$25 million General Fund (GF)).

2. Future losses from recovery. The Patient Protection and Affordable Care Act (ACA) resulted in increased enrollment for both "mandatory" populations (those eligible under pre-ACA rules) and "optional" expansion populations, for which costs are largely federally funded.

1. Mandatory population. The state shares costs with the federal government for the "mandatory" population on a 50:50 basis. The ACA also requires the state to remove "asset tests" for eligibility and requires every individual to maintain health insurance or face a penalty. Therefore, foregone revenues are likely to grow in future years because the total population enrolled under pre-ACA eligibility rules (and for which the state would collect 50% of the estate claim) will be larger than it was in 2013-14, and there is a somewhat greater likelihood that beneficiaries will have assets against which the state could submit a claim.

2. Optional expansion population. The state will incur unknown future revenue loss, mostly federal funds, from foregone claims on the estates of deceased Medi-Cal beneficiaries eligible under the Medi-Cal expansion, with minor GF losses beginning in 2017 (5% – 10% GF, 95% – 90% federal funds). As part of its implementation of the federal ACA, the state has expanded Medi-Cal coverage to childless adults with incomes up to 138% of the federal poverty line. Under current law, in future years, health care costs for members of this population over 55 years of age would be subject to cost recovery, including health care costs for which recovery is optional. Under this bill, the state will forego some of those revenues. It is important to note that for the Medi-Cal expansion population, the federal government will pay 100% of the cost at first, declining to 90% of costs by 2020. Any cost recovery made by the state from this population would largely be returned to the federal government. Therefore, the GF impact from eliminating some cost recovery from this population is limited.

3. Administrative costs in the low hundreds of thousands (50% GF, 50% federal) to DHCS to process additional requests for the amount of recoverable Medi-Cal expenses that have been paid on behalf of a beneficiary. Costs could be lower or higher depending how robustly beneficiaries are notified of the availability of this data, and the ease of requesting it.

4. Administrative cost savings. Based on narrower estate recovery rules, administrative cost savings from fewer staff working on estate recovery should be significant. The current budget for estate recovery is approximately $4.5 million (25% GF, 75% federal). The effect of this bill on these administrative costs is unknown, but it appears reasonable to assume such a significant reduction in the number of recoverable estates should result in a nearly proportionate decrease in administrative staff costs to pursue estate recovery claims.

COMMENTS: According to the author, Medi-Cal estate recovery is unfair to Medi-Cal beneficiaries, is a deterrent to signing people up for Medi-Cal, and is counter to state and federal efforts to enroll people into health care coverage. The author states California currently implements several federal options to collect from Medi-Cal beneficiaries beyond what is required under federal law, and has failed to implement a federal option to establish a homestead exemption that would allow Medi-Cal beneficiaries to pass a home of modest value onto their heirs. The author contends that by recovering for health care services beyond those required by federal law, California forces low income individuals age 55 and older to choose between signing up for basic healthcare services, and passing on their home and other limited assets they possess to their children. The author states Oregon and Washington discontinued estate recovery collection amounts required by federal law due to the negative impact estate recovery rules were having on enrollment. The author maintains California's estate recovery program undermines the idea of Medi-Cal as a health care entitlement program by essentially turning Medi-Cal coverage for basic medical services into a loan program, with collection taking place at death; this unfairly places part of the burden on financing the cost of health care in Medi-Cal on the estates of deceased Medi-Cal beneficiaries with limited assets.

The Western Center on Law and Poverty, a cosponsor of this bill, states that the effort to enroll Californians in public and subsidized health coverage programs is being impaired by the fact that DHCS conducts estate recovery for certain Medi-Cal services; when consumers learn this fact they become fearful that if they enroll in Medi-Cal they will lose their homes to pay for services received. California Advocates for Nursing home Reform, a cosponsor of this bill, contends that Medi-Cal estate recovery disproportionately affects minority homeowners who enroll in Medi-Cal, as they are often not informed of their rights. Supporters conclude that no one should be forced to choose between their personal health and their ability to pass assets along to their heirs.

There is no known opposition to this bill on file.

Analysis Prepared by: An-Chi Tsou / HEALTH / (916) 319-2097 FN: 0001707

Date of Hearing: July 15, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

SBPCA Bill Id:SB 33

Author:(Hernandez) – As Amended Ver:June 1, 2015

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill limits estate recovery in Medi-Cal (collection from the estate of a deceased Medi-Cal beneficiary) to the minimum that is federally required. Specifically, this bill:

1. Limits the definition of “estate” to the minimum federally allowable, which exempts from recovery all non-probated assets (non-probated estates provision).

2. Eliminates estate recovery against the estate of a surviving spouse of a deceased Medi-Cal beneficiary (surviving spouse provision).

3. Requires DHCS, when determining the existence of substantial hardship, to waive its claim to the estate recovery when the estate is a homestead of modest value, as defined (homestead of modest value provision).

4. Requires DHCS to claim against the estate of a deceased Medi-Cal beneficiary only for individuals permanently institutionalized, or age 55 or older receiving specified long-term care services and supports (LTSS) (LTSS provision).

5. If DHCS proposes and accepts a voluntary post-death lien, requires the voluntary post-death lien to accrue interest at a rate equal to the monthly average received on investments in the Surplus Money Investment Fund in the State Treasury, or simple interest at 7% per year, whichever is lower (interest rate provision).

6. Requires DHCS, upon request, to provide the amount of recoverable MediCal expenses that have been paid on behalf of a beneficiary, once per year, for a reasonable fee not to exceed five dollars if the beneficiary meets certain conditions.

7. Requires DHCS to conspicuously post on its Internet Website a description of how a request for information may be made, and requires the information to be included in DHCS’ pamphlet for the Medi-Cal Estate Recovery Program and in any other notices distributed to beneficiaries regarding estate recovery.

FISCAL EFFECT:

1. Losses from Recovery. In 2013-14, DHCS collected $61 million in recoveries. Given these expected reductions in recovery amounts, annual revenues losses associated with this bill are projected to be in the range of $40-$50 million ($20-$25 million GF). The exact revenue losses associated with each provision are unknown, since there is an unknown amount of overlap between the categories (i.e., they are not completely independent of each other. One claim could fall in multiple categories). The low end of the range assumes total overlap of claims in other categories with claims in the non-probated estates category, which has the largest single effect of any provision, and the high end assumes no overlap. Based on 2013-14 DHCS collections data, percentage losses in recovery amounts projected with each provision, and used to calculate this range, are as follows:

1. Non-probated estates provision: 65% of collections came from non-probated estates; thus, recoveries are expected to be reduced by at least this amount.

2. Surviving spouse provision: 9% of recoveries are against the estate of a surviving spouse, and would be eliminated by this bill.

3. Homestead of modest value provision: 9% would fall into this category. Depending on the cost of the estate recovery claim and the cost of the homestead, some recovery may be possible on estates that qualify for this exemption if there are other non-homestead assets available.

4. LTSS provision: 51% of total Medi-cal expenditures are for services that would be non-recoverable under this bill. However, it is unknown how many claims actually include expenses for LTSS (which are mandatory for collection), other health care services (for which states can opt to collect), or some combination of the two. DHCS suggests there is some overlap and that about 10% of the time, expenditures for LTSS are sufficient to cover the cost of the claim, regardless of whether there were optional services on the claim as well. Thus, DHCS suggests reducing the percentage by 10% is reasonable, meaning about a 46% reduction in collections could be expected due to this provision. This also assumes the proportion of expenditures on LTSS versus services that are optional for collection translates directly into the number of claims for LTSS versus optional services, which is not apparent, but is perhaps a reasonable assumption given the lack of better data.

5. Interest rate provision: Losses associated with the interest rate provision could range from none to the low hundreds of thousands of dollars, depending how interest rates in the Surplus Money Investment Fund compare to the 7% cap specified in the bill (the interest rate on voluntary liens is currently 7%).

2. Future losses from recovery. The Patient Protection and Affordable Care Act (ACA) resulted in increased enrollment for both "mandatory" populations (those eligible under pre-ACA rules) and "optional" expansion populations, for which costs are largely federally funded.

1. Mandatory population. The state shares costs with the federal government for the "mandatory" population on a 50:50 basis. The ACA also requires the state to remove "asset tests" for eligibility and requires every individual to maintain health insurance or face a penalty. Therefore, foregone revenues are likely to grow in future years because the total population enrolled under pre-ACA eligibility rules (and for which the state would collect 50% of the estate claim) will be larger than it was in 2013-14, and there is a somewhat greater likelihood that beneficiaries will have assets against which the state could submit a claim.

2. Optional expansion population. The state will incur unknown future revenue loss, mostly federal funds, from foregone claims on the estates of deceased Medi-Cal beneficiaries eligible under the Medi-Cal expansion, with minor GF losses beginning in 2017 (5% - 10% General Fund, 95% - 90% federal funds). As part of its implementation of the federal ACA, the state has expanded Medi-Cal coverage to childless adults with incomes up to 138% of the federal poverty line. Under current law, in future years, health care costs for members of this population over 55 years of age would be subject to cost recovery, including health care costs for which recovery is optional. Under this bill, the state will forego some of those revenues. It is important to note that for the Medi-Cal expansion population, the federal government will pay 100% of the cost at first, declining to 90% of costs by 2020. Any cost recovery made by the state from this population would largely be returned to the federal government. Therefore, the GF impact from eliminating some cost recovery from this population is limited.

3. Administrative costs in the low hundreds of thousands (50% GF, 50% federal) to DHCS to process additional requests for the amount of recoverable MediCal expenses that have been paid on behalf of a beneficiary. Costs could be lower or higher depending how robustly beneficiaries are notified of the availability of this data, and the ease of requesting it.

4. Administrative cost savings. Based on narrower estate recovery rules, administrative cost savings from fewer staff working on estate recovery should be significant. The current budget for estate recovery is approximately $4.5 million (25% GF, 75% federal). The effect of the bill on these administrative costs is unknown, but it appears reasonable to assume such a significant reduction in the number of recoverable estates should result in a nearly proportionate decrease in administrative staff costs to pursue estate recovery claims.

COMMENTS:

1. Purpose. According to the author, Medi-Cal estate recovery is a deterrent to signing people up for Medi-Cal, and is counter to state and federal efforts to enroll people into health coverage. The author argues California’s estate recovery program undermines the idea of Medi-Cal as a health care entitlement program by essentially turning Medi-Cal coverage for basic medical services into a loan program, with collection taking place at death. The author states this unfairly places part of the burden on financing the cost of health care in Medi-Cal on the estates of deceased Medi-Cal beneficiaries with limited assets. Furthermore, the author argues estate recovery is inequitable as it primarily applies to individuals age 55 and over, and does not apply to tax-subsidized coverage in Covered California or to the federal Medicare program.

2. Background. Federal law requires states to implement a Medicaid estate recovery program and to collect the costs of providing institutional and long-term care services from beneficiary estates after their death, with some limitations such as allowances for surviving spouses. The state can choose to collect for the costs of other health care services for individuals over 55 against beneficiary estates, and is required to do so by state law. Revenues recovered from estates are generally shared with the federal government consistent with the ratio at which benefits were paid, generally 50:50. The state’s share of estate recovery revenue is placed in the state Health Care Deposit Fund, which funds Medi-Cal. DHCS indicates the average claim is for $95,000 and the average estate recovery case that is closed with payment yields about $15,000. Nearly 4,000 cases were closed with payment in fiscal year 2012-13. There has been concern among advocates for low-income individuals that estate recovery poses a barrier to Medi-Cal enrollment. Recent survey research also suggests that it poses particular concern for Latinos, who are disproportionately likely to be uninsured.

This bill limits estate recovery to the minimum collection required by federal law by including several provisions that implement federally allowable exemptions.

3. Support. This bill is jointly sponsored by the California Advocates for Nursing Home Reform (CANHR) and the Western Center on Law & Poverty (WCLP), who argue this bill would help reduce an enrollment barrier by eliminating the optional portions of estate recovery. WCLP states that, under the ACA, most individuals are required to have health coverage or they will face a financial penalty. However, when consumers learn about estate recovery, they are fearful that if they enroll in Medi-Cal, they will lose their homes to pay for the care they received while on Medi-Cal. WCLP also points out for the new 100% federally funded Medi-Cal expansion population, estate recovery effectively makes the state a collection agency for the federal government, as all funds collected by the state for this population are required to be returned to the federal government. CANHR states it has received numerous emails and phone calls from low income and minority homeowners who are reluctant to enroll in Medi-Cal if they are aged 55 or older. CANHR argues savvy beneficiaries can avoid estate recovery through appropriate estate planning, so estate recovery only affects beneficiaries who cannot afford or don't know about these services. CANHR contends this bill brings equity to the recovery system.

4. Previous Legislation.

1. SB 1124 (Ed Hernandez), of 2014would have limited state recovery from the estate of a deceased Medi-Cal beneficiary to only those costs for health care services that the state is required to recover under federal law. SB 1124 was vetoed by the Governor, who stated “allowing more estate protection for the next generation may be a reasonable policy goal. The cost of this change, however, needs to be considered alongside other worthwhile policy changes in the budget process next year.” The 2015-16 Budget Act did not address estate recovery.

2. AB 2493 (Lieber), of 2004 also limited estate recovery and was held on the Suspense File of this committee.

5. Staff Comment. The State Controller's Office generally publishes a quarterly interest rates for the Surplus Money Investment Fund, but the bill requires a lien to accrue interest at the lower of (1) a 7% per annum interest rate or (2) the monthly average Surplus Money Investment Fund rate. Monthly or quarterly interest rates are usually compounded on monthly a quarterly basis. A technical clarification to this provision may be advisable, in order to translate the SCO's published interest rate into an annual rate and to make this requirement more straightforward and easier to understand and operationalize. For example, the author may wish to reference an annualized rate based on the Surplus Money Investment Fund rate over the last year.

Analysis Prepared by: Lisa Murawski / APPR. / (916) 319-2081

Date of Hearing: July 7, 2015

ASSEMBLY COMMITTEE ON HEALTH

Rob Bonta, Chair

SBPCA Bill Id:SB 33

Author:(Hernandez) – As Amended Ver:June 1, 2015

SENATE VOTE: 37-0

SUBJECT: Medi-Cal: estate recovery.

SUMMARY: Limits Medi-Cal estate recovery by the Department of Health Care Services (DHCS) to only those services required to be recovered under federal Medicaid law. Specifically, this bill:

1. Requires DHCS to claim against the estate of a deceased Medi-Cal beneficiary, or against any recipient of the property of that beneficiary by distribution, an amount equal to the payments for the health care services received or the value of the property received by any recipient from the deceased Medi-Cal beneficiary by distribution, whichever is less, only if the beneficiary was either of the following:
   
   

   1. A permanently institutionalized individual of any age; or,

   2. An individual age 55 or older receiving nursing facility services (NFS), home and community-based services (HCBS), or related hospital and prescription drug services.
      
      

2. Limits the definition of “estate” for the purposes of estate recovery to all real and personal property and other assets that are subject to a claim for recovery under federal law, excluding any other real and personal property or other assets in which the individual had any legal title or interest at the time of death, to the extent of that interest, consistent with federal law.
   
   

3. Eliminates estate recovery against the estate of a surviving spouse of a deceased Medi-Cal beneficiary.
   
   

4. Requires DHCS, when determining the existence of substantial hardship, to waive its claim to the estate recovery when the estate is a homestead of modest value. Defines a “homestead of modest value” as a home with a fair market share of 50% or less than the average price of homes in the county in which the homestead is located, as of the date of the Medi-Cal beneficiary’s death.
   
   

5. If DHCS proposes and accepts a voluntary post-death lien, requires the voluntary post-death lien to accrue interest at a rate equal to the monthly average received on investments in the Surplus Money Investment Fund in the State Treasury, or simple interest at 7% per year, whichever is lower.
   
   

6. Requires DHCS, upon request of a current or former Medi-Cal beneficiary, or his or her authorized representative, to provide him or her with the total amount of recoverable Medi-Cal expenses that have been paid on behalf of that beneficiary, once per year for a reasonable fee not to exceed five dollars if the beneficiary meets either of the following conditions:
   
   

   1. The beneficiary is 55 years of age or older when he or she received health care services, defined as NFS, HCBS, and related hospital and prescription drug services; or,

   2. The beneficiary is a permanently institutionalized.
      
      

7. Requires DHCS to conspicuously post on its Internet Website a description of how a request for information may be made, and requires the information to be included in DHCS’ pamphlet for the Medi-Cal Estate Recovery Program and in any other notices distributed to beneficiaries regarding estate recovery.
   
   

8. Makes numerous declarations and findings.

EXISTING LAW:

1. Establishes the Medi-Cal Program under the direction of DHCS to provide low-income qualifying individuals health care and a uniform schedule of benefits.
   
   

2. Requires DHCS to claim against the estate of a deceased Medi-Cal beneficiary, or against any recipient of the property of that beneficiary by distribution or survival, an amount equal to the payments for the health care services received or the value of the property received by any of recipient from the deceased Medi-Cal beneficiary by distribution or survival, whichever is less.
   
   

3. Prohibits DHCS from claiming against the estate of a deceased Medi-Cal beneficiary under any of the following circumstances:
   
   

   1. The deceased Medi-Cal beneficiary was under 55 when services were received, except in the case he or she had been an inpatient in a nursing facility; or,

   2. Where there is any of the following:

      1. A surviving spouse during his or her lifetime;

      2. A surviving child who is under age 21; or,

      3. A surviving child who is blind or permanently and totally disabled.
         
         

4. Requires DHCS to waive its claim, in whole or in part, if it determines that enforcement of the claim would result in substantial hardship to other dependents, heirs, or survivors of the individual against whose estate the claim exists. Requires DHCS to notify individuals of the waiver provision and the opportunity for a hearing to establish that a waiver should be granted.
   
   

EXISTING FEDERAL LAW:

1. Requires states to seek adjustment or recovery from a deceased Medicaid beneficiary's estate for medical assistance if he or she qualifies as one of the following:
   
   

   1. A permanently institutionalized individual of any age; or,

   2. An individual age 55 or older receiving nursing facility services, home and community-based services, or related hospital and prescription drug services.
      
      

2. Authorizes states to recover any amounts paid on the behalf of a deceased Medi-Cal beneficiary aged 55 or older for health care services covered under the state’s Medicaid plan.
   
   

3. Defines “estate,” with respect to a deceased Medi-Cal beneficiary as the following:
   
   

   1. All the real and personal property and other assets included within the deceased Medi-Cal beneficiary’s estate; and,

   2. At the option of a state, any other real and personal property and other assets in which the individual had any legal title or interest at the time of death (to the extent of such interest), including such assets conveyed to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement.
      
      

FISCAL EFFECT: According to the Senate Appropriations Committee, annual revenue loss up to $50 million per year in foregone claims on the estates of Medi-Cal beneficiaries who would have been eligible for Medi-Cal under the pre-Patient Protection and Affordable Care Act (ACA) expansion (50% General Fund (GF), 50% federal funds). In addition, unknown future revenue loss from foregone claims on the estates of deceased Medi-Cal beneficiaries eligible under the Medi-Cal expansion beginning in 2017 (5% to 10% GF, 95% to 90% [respectively] federal funds). Ongoing administrative costs of about three million dollars per year to provide information to Medi-Cal beneficiaries on the costs that they have incurred and would be subject to estate recovery, upon request (GF and federal funds). One-time costs likely less than $100,000 to revise regulations by DHCS (50% GF, 50% federal funds).

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, Medi-Cal estate recovery is unfair to Medi-Cal beneficiaries, is a deterrent to signing people up for Medi-Cal, and is counter to state and federal efforts to enroll people into health care coverage. The author states California currently implements several federal options to collect from Medi-Cal beneficiaries beyond what is required under federal law, and has failed to implement a federal option to establish a homestead exemption that would allow Medi-Cal beneficiaries to pass a home of modest value onto their heirs. The author contends that by recovering for health care services beyond those required by federal law, California forces low income individuals age 55 and older to choose between signing up for basic healthcare services, and passing on their home and other limited assets they possess to their children. According to the author, Oregon and Washington discontinued estate recovery collection amounts required by federal law due to the negative impact estate recovery rules were having on enrollment. The author maintains California's estate recovery program undermines the idea of Medi-Cal as a health care entitlement program by essentially turning Medi-Cal coverage for basic medical services into a loan program, with collection taking place at death; this unfairly places part of the burden on financing the cost of health care in Medi-Cal on the estates of deceased Medi-Cal beneficiaries with limited assets. The author further explains that by using a broader definition of estate than is federally required, California forces people on Medi-Cal to choose between leaving something for their heirs and surrendering their property while they are still living. The author maintains estate recovery is inequitable as it primarily applies to individuals age 55 and over, and does not apply to tax-subsidized health care coverage in Covered California or to the broadly financed federal Medicare program.

2. BACKGROUND.
   
   

   1. Medicaid Estate Recovery Program. Since the beginning of the Medicaid program in 1965, federal law has allowed states to recover from the estates of deceased Medicaid recipients who were over age 65 when they received benefits and who had no surviving spouse, minor child, or adult disabled child. The 1965 Medicaid law also gave states permission to impose liens on property in the estates of deceased Medicaid recipients. Post-death liens prevent the estate from being settled and the property distributed to the recipient’s heirs before all claims against it, including Medicaid’s, are satisfied. In response to reports claiming that estate recovery programs provide a cost effective way to offset state and federal costs, while promoting more equitable treatment of Medicaid recipients, Congress included a provision in the Omnibus Budget Reconciliation Act of 1993 (OBRA ’93) that required states to implement a Medicaid estate recovery program for individuals age 55 and older. OBRA ’93 also provided states with the option of recouping some of the money spent on Medicaid enrollees 55 and older for basic health care services after their death. As of 2014, 36 states pursued expanded recovery, 15 of which also have expanded Medicaid.
      
      

Under Medi-Cal, estate recovery claims are filed when health care services paid by the state are $750 or more, or less than $750 when the amount the state expects to recover would be greater than the cost of recovery. The average claim made by DHCS in 2013-14 was around $94,000, and the average amount recovered was $15,600.  In FY 2013-14, DHCS closed about 3,900 estate recovery cases with payment. DHCS indicates estate recovery amounts totaled $61 million in total funds fiscal year 2013-14, $59.4 million total funds in 2012-13, and $52.7 million total funds in 2011-12.  DHCS anticipates collection of $59.4 million total funds ($29.7 million GF) in 2015-16.

In 2012-13, 8,533 estate recovery cases were opened. Cases are opened when a deceased Medi-Cal beneficiary received services on or after their 55^th birthday and the beneficiary could have owned assets at the time of death. Of the cases opened, 2,441 claims were made after DHCS identified that recoverable services were received by deceased Medi-Cal beneficiaries, assets were received by a decedent, and there was no exemption from recovery. In 2012-13, DHCS closed 3,996 cases with payment. Of the 3,996 cases, 1,895 cases were closed with full payment. For the remaining 2,101 cases, the estate’s residue was accepted as satisfaction of DHCS’ claim, meaning the estate value was less than the value of the claim.

Federal regulations require states to pay the federal government a portion of the estate recovery collection amounts that is determined in accordance with the federal matching rate (known as Federal Medicaid Assistance Percentage) for the state. Under this provision, California would generally return 50% of the amounts collected, except for programs which have a higher matching rate, such as the ACA expansion population, which is entirely federally funded for the first three years of the expansion and declines to 90% by 2020 and thereafter. The state’s share of estate recovery revenue is placed in the state Health Care Deposit Fund, which funds Medi-Cal.

2. California’s Expanded Medi-Cal Estate Recovery. California currently collects for all Medi-Cal paid services received (including Medicare and managed care premiums) on or after an individual’s 55^th birthday, with certain exceptions. Services not subject to estate recovery include personal care services provided under the In-Home Supportive Services (IHSS) program and the cost of premiums, co-payments and deductibles paid on behalf of either Qualified Medicare Beneficiaries or Specified Low-Income Medicare Beneficiaries. DHCS indicates it does not track recoveries on a per beneficiary basis by whether the services are mandatory versus optional to be collected under federal law. When a Medi-Cal beneficiary is enrolled in a Medi-Cal managed care (MCMC) plan, DHCS collects based on the amount it paid to the plan, and not based on the amount of services a person received.
   
   
   

DHCS states individuals can contact DHCS’ fiscal intermediary (currently Xerox) for information on services rendered by fee-for-service providers. Denti-Cal and Medicare premium information is provided by DHCS upon request. DHCS indicates information on MCMC premium/capitation payments may not be readily available. To request information, individuals can file a form requesting a claim detail report which contains claims paid by Medi-Cal for services received. The cost of this report is $25.

3. Spousal Recovery. The federal Centers for Medicare and Medicaid Services (CMS) has stated that spousal estate recovery is optional for states, and this bill would eliminate spousal recovery. DHCS currently collects from the estates of a surviving spouse only when he or she dies, and only against what the surviving spouse received from the deceased Medi-Cal spouse. Medi-Cal beneficiaries can avoid spousal recovery through estate planning. For example, when a Medi-Cal beneficiary transfers a jointly owned home to his or her surviving spouse while the Medi-Cal beneficiary is still alive, the home is not subject to estate recovery. This effectively means the only individuals subject to estate recovery are individuals who are unaware of and/or unable to afford legal advice on how to transfer their home.
   
   

4. Post-Death Liens. Generally, a lien confers to the lien holder (creditor) an interest in the property that lasts until the property owner’s debt to the creditor is satisfied or otherwise released. The right to collect a lien and procedures for enforcing that right are established under state property laws. For real property, a lien is secured in a manner that is roughly similar in all states and is analogous to the security interest of a mortgage holder. After the creditor’s lien is approved in accordance with state property law, it is recorded against the specific property with the local property office. Title to the real property is thus encumbered and cannot be transferred without notifying the creditor, who is then given an opportunity to file a claim. Creditors do not exercise or enforce their right to collect until they actually file a claim for payment of money owed. States may file post-death liens against the real and personal property of persons who were permanently institutionalized and those who received Medicaid services after age 55, whether or not they were institutionalized. Post-death liens are often a part of the probate process.
   
   

5. Undue Hardship Exemptions. The CMS manual on Medicaid estate recovery indicates that states should waive recovery under circumstances which would create undue hardship. CMS describes as a situation in which the estate subject to recovery is one either: i) the sole income-producing asset of survivors (where such income is limited), such as a family farm or business; ii) a homestead of modest value, or, iii) any other compelling circumstance. Federal guidance defines a homestead of modest value as a home equal to 50% or less than the average price of homes in the county in which the estate is located. DHCS does not currently include the homestead exemption in current regulations; this bill would explicitly require DHCS to waive its claim to homesteads of these specified values.
   
   

1. SUPPORT. The Western Center on Law and Poverty, a cosponsor of this bill, states that the effort to enroll Californians in public and subsidized health coverage programs, as required under the ACA is being impaired by the fact that DHCS conducts estate recovery for certain Medi-Cal services; when consumers learn this fact they become fearful that if they enroll in Medi-Cal they will lose their homes to pay for services received. California Advocates for Nursing home Reform, a cosponsor of this bill, contends that Medi-Cal estate recovery disproportionately affects minority homeowners who enroll in Medi-Cal, as they are often not informed of their rights. The sponsors conclude this bill will address a major barrier to Medi-Cal enrollment and is an important component of successful implementation of health reform by restoring greater equity and transparency in the Medi-Cal estate recovery program.
   
   

Supporters of this bill state that California does not expect repayment for the services received under other low-income support programs such as California Work Opportunity and Responsibility to Kids or IHSS; yet under Medi-Cal, many of these same persons are required to pay back the state for the use of a program that was designed to serve California’s neediest citizens. Supporters further explain estate recovery discourages many people aged 55 and over from enrolling in Medi-Cal due to concerns that the state will confiscate their home to reimburse for Medi-Cal costs. Supporters maintain it is time to stop placing part of the burden of financing the cost of health care in Medi-Cal on the estates of deceased Medi-Cal beneficiaries, and conclude that no one should be forced to choose between their personal health and their ability to pass their assets along to their survivors.

4. RELATED LEGISLATION. AB 139 (Gatto) establishes, until January 1, 2021, a new, non-probate method for conveying real property upon death through a "revocable transfer upon death deed.” AB 139 is currently pending in the Senate Judiciary Committee.

5. PREVIOUS LEGISLATION.
   
   

   1. SB 1124 (Ed Hernandez), of 2014would have limited state recovery from the estate of a deceased Medi-Cal beneficiary to only those costs for health care services that the state is required to recover under federal law. SB 1124 was vetoed by the Governor, who stated “allowing more estate protection for the next generation may be a reasonable policy goal. The cost of this change, however, needs to be considered alongside other worthwhile policy changes in the budget process next year.”
      
      

   2. AB 2493 (Lieber), of 2004 would have prohibited the Department of Health Services (DHS), the predecessor of DHCS, from claiming against the surviving spouses of Medi-Cal beneficiaries, would have deleted the proportionate share recovery from a former Medi-Cal beneficiary’s estate, would have required DHS to adopt regulations defining substantial hardship exemptions from estate recovery, required DHCS to grant estate recovery waivers consistent with regulations adopted by DHS, and would exempt from estate recovery services provided through the IHSS program. AB 2493 was held on the Assembly Appropriations suspense file.
      
      

6. POLICY COMMENT. This bill requires, if a voluntary post-death lien is proposed and accepted by DHCS, the lien accrues interest at the rate equal to the monthly average received on investments in the Surplus Money Investment Fund or simple interest at seven percent per year, whichever is lower. The current interest rate for investments in the Surplus Money Investment Fund in the State Treasury is 0.254%, significantly lower than seven percent. The Committee may wish to consider whether or not seven percent is an appropriate maximum rate.
   
   

REGISTERED SUPPORT / OPPOSITION:

Support

California Advocates for Nursing Home Reform (co-sponsor)
Western Center on Law and Poverty (co-sponsor)

AARP
American Federation of State, County and Municipal Employees, AFL-CIO
The Arc and United Cerebral Palsy Collaboration (prior version)
Asian Law Alliance
Battaglia and Waltari, Attorneys at Law (prior version)
California Association of Health Plans (prior version)
California Association of Physician Groups
California Commission on Aging
California Health Advocates
California Immigrant Policy Center
California Long-Term Care Ombudsman Association (prior version)
California Pan-Ethnic Health Network
California Primary Care Association (prior version)
California Retired Teachers Association
California Rural Legal Assistance Foundation (prior version)
California School Employees Association
California State Association of Counties
California State Council of the Service Employees International Union
California Teachers Association
Camp Rousseau Montgomery, LLP
Central California Legal Services, Inc.
Community Clinic Association of Los Angeles County
Consumers Union
County Health Executives Association of California
County of Santa Clara
County Welfare Directors Association
Disability Rights Education and Defense Fund (prior version)
Evans Law Firm, Inc. (prior version)
Having Our Say (prior version)
Health Access California
Housing California
Jewish Family Service of Los Angeles (prior version)
Justice in Aging (prior version)
L.A. Care Health Plan (prior version)
Law Offices of Mark A. Kanai (prior version)
Legal Aid Society of San Mateo County
Molina Healthcare
National Association of Social Workers
National Health Law Program (prior version)
National Immigration Law Center
Pacific Islander Cancer Survivors Network (prior version)
Private Essential Access Community Hospitals

Project Inform

United Cerebral Palsy California Collaboration
Several individuals

Opposition

None on file.

Analysis Prepared by: An-Chi Tsou / HEALTH / (916) 319-2097

 THIRD READING  

Bill No: SB 33

Author: Hernandez (D)

Amended: 6/1/15

Vote: 21

SENATE HEALTH COMMITTEE: 8-0, 3/25/15

AYES: Hernandez, Nguyen, Hall, Mitchell, Monning, Pan, Roth, Wolk

NO VOTE RECORDED: Nielsen

SENATE APPROPRIATIONS COMMITTEE: 5-0, 5/28/15

AYES: Lara, Beall, Hill, Leyva, Mendoza

NO VOTE RECORDED: Bates, Nielsen

SUBJECT: Medi-Cal: estate recovery

SOURCE: California Advocates for Nursing Home Reform

Western Center on Law & Poverty

DIGEST: This bill 1) limits Medi-Cal estate recovery to only those services required to be recovered under federal Medicaid law; 2) eliminates estate recovery against the estate of a surviving spouse of a deceased Medi-Cal beneficiary; 3) requires the Department of Health Care Services (DHCS) to waive its estate recovery claim when the estate is a homestead of modest value in determining the existence of a substantial hardship; 4) narrows the definition of “estate” to mean all real and personal property and other assets that are required to be subject to a claim for recovery under federal law; and 5) limits the amount DHCS can charge a current or former beneficiary who is subject to estate recovery to up to $5 once per year.

Senate Floor Amendments of 6/1/15 allow DHCS to levy a fee of up to $5 for requests for estate-recovery related information, allow additional time for DHCS to respond to requests for estate recovery-related expenditure information from Medi-Cal beneficiaries, and delete the ability of individuals to make an “in person” request for estate recovery-related information. These amendments address DHCS concerns that the elimination of the existing $25 fee would increase the amount of requests DHCS receives, allow DHCS additional time to provide the requested information, and delete the requirement that individuals be allowed to make requests for information in person as DHCS does not currently provide this option. In addition, the amendments narrow the definition of “estate” in response to DHCS concerns that the existing definition is not consistent with the federal law.

ANALYSIS:

Existing law:

1. Requires DHCS to claim against the estate of a deceased Medi-Cal beneficiary, or against any recipient of the property of that beneficiary by distribution or survival, by an amount equal to the payments for the health care services received or the value of the property received by any recipient from the deceased Medi-Cal beneficiary by distribution or survival, whichever is less. This is referred to as “Medi-Cal estate recovery.”

2. Prohibits DHCS from claiming in any of the following circumstances:

   1. The deceased Medi-Cal beneficiary was under 55 when services were received, except in the case of an individual who had been an inpatient in a nursing facility; or,

   2. Where there is any of the following:

      1. A surviving spouse during his or her lifetime;

      2. A surviving child who is under age 21; or,

      3. A surviving child who is blind or permanently and totally disabled.

3. Requires DHCS to waive its estate recovery claim, in whole or in part, if it determines that enforcement of the claim would result in substantial hardship to other dependents, heirs, or survivors of the individual against whose estate the claim exists. Requires DHCS to notify individuals of this waiver provision and the opportunity for a hearing to establish that a waiver should be granted.

This bill:

1. Limits the health care services subject to estate recovery to only those services required to be recovered under federal law. Services required to be recovered under federal law are nursing facility services (NFS), home and community-based services (HCBS), and related hospital and prescription drug services.

2. Limits the definition of “estate” for purposes of estate recovery to mean all real and personal property and other assets that are required to be subject to a claim for recovery under federal law. Excludes from the definition of “estate” any other real and personal property or other assets in which the individual had any legal title or interest at the time of death, to the extent of that interest, consistent with federal law. Makes a conforming change to eliminate a reference to claims against a recipient of property of the decedent by survivorship.

3. Eliminates estate recovery against the estate of a surviving spouse of a deceased Medi-Cal beneficiary when the surviving spouse dies.

4. Requires DHCS, in determining the existence of a substantial hardship, to waive its claim when the estate subject to recovery is a homestead of modest value. Defines a “homestead of modest value” as a home whose fair market value is 50 percent or less of the average price of homes in the county where the homestead is located, as of the date of the decedent’s death.

5. Requires DHCS to provide a current or former beneficiary, or his or her authorized representative, with the total amount of Medi-Cal expenses that have been paid on behalf of that beneficiary that would be subject to estate recovery once per year, upon request for a reasonable fee of up to $5 if the person is a current or former Medi-Cal beneficiary subject to estate recovery. Requires DHCS to provide the information requested within 90 days after receipt of the request.

6. Requires DHCS to permit a beneficiary to request the information described in 5) above via the Internet, by telephone, by mail, or through other commonly available electronic means.

7. Requires DHCS to conspicuously post on its Internet Web site, a description of the methods by which a request may be made, including, but not limited to, DHCS’ telephone number and any addresses that may be used for this purpose. Requires DHCS to also include this information in its pamphlet for the Medi-Cal Estate Recovery Program and any other notices DHCS distributes to beneficiaries regarding estate recovery.

8. Caps the DHCS assessed voluntary post-death lien interest rate at the rate equal to the monthly average received on investments in the Surplus Money Investment Fund or simple interest at seven percent per annum, whichever is lower (the current interest rate charged is seven percent in regulation).

9. Repeals estate recovery statute struck down in court that requires “proportionate share” recovery from a former Medi-Cal beneficiary’s estate when there are decedents entitled to an exemption from recovery and decedents who are not.

Comments

1. Author’s statement. According to the author, Medi-Cal estate recovery is unfair to Medi-Cal beneficiaries, is a deterrent to signing people up for Medi-Cal, and is counter to state and federal efforts to enroll people into health coverage. California currently implements several federal options to collect from Medi-Cal beneficiaries beyond what is required under federal law, and has failed to implement a federal option to establish a “homestead exemption” that would allow Medi-Cal beneficiaries to pass a home of modest value on to their heirs. By recovering for health care services beyond those required by federal law, California forces low-income individuals age 55 and older to choose between signing up for basic health care services and passing on their home and other limited assets they possess to their children. California’s estate recovery program undermines the idea of Medi-Cal as a health care entitlement program by essentially turning Medi-Cal coverage for basic medical services into a loan program, with collection taking place at death. This unfairly places part of the burden on financing the cost of health care in Medi-Cal on the estates of deceased Medi-Cal beneficiaries with limited assets. By using a broader definition of “estate” than is federally required, California forces people on Medi-Cal to choose between leaving something for their heirs and surrendering their property while they are still living.
   
   Estate recovery is also inequitable as it primarily applies to individuals age 55 and over, and does not apply to tax-subsidized coverage in Covered California or to the broadly financed federal Medicare program. In addition, California does not adequately inform individuals on how to obtain information on the amounts that will be collected from their estate when they die. For the new 100 percent federally funded Medi-Cal expansion population, estate recovery effectively makes the state a collection agency for the federal government, as all funds collected by the state for this population are required to be returned to the federal government.

2. Scope of services subject to Medi-Cal estate recovery. Under federal law, states must seek recovery for medical assistance paid on behalf of the following individuals:

1. Permanently institutionalized individuals (of any age); and,

2. Individuals age 55 and older receiving NFS, HCBS, and related hospital and prescription drug services.

States have the option to recover from individuals age 55 and older for health care services (services beyond NFS and HCBS), including the total amount spent on a beneficiary’s behalf for any or all other items or services under the state’s Medicaid plan. This includes capitation payments paid on behalf of the beneficiary to a Medi-Cal managed care plan. 

DHCS currently collects all payments made by the Medi-Cal program on behalf of the decedent, including NFS and other long-term care services, HCBS, inpatient/outpatient services, durable medical equipment, related hospital and prescription drug services, health care and insurance premiums, and payments to managed care plans. DHCS indicates it does not track recoveries on a per beneficiary basis by whether the services are mandatory versus optional to be collected under federal law.

3. Elimination of spousal recovery. DHCS currently collects from the estates of a surviving spouse only when he or she dies, and only against what the surviving spouse received from the deceased Medi-Cal spouse "by distribution or survival." For example, if a husband who was on Medi-Cal died, and the home was in both of the husband and wife’s name when he died, DHCS can file an estate claim against his half of the property after the surviving spouse (the wife) dies. The federal Centers for Medicare and Medicaid Services has indicated spousal estate recovery is optional for states. Medi-Cal beneficiaries can currently avoid spousal recovery through estate planning. For example, when a Medi-Cal beneficiary transfers a jointly owned home to his or her surviving spouse while the Medi-Cal beneficiary is still alive, the home is not subject to estate recovery. This effectively means the only individuals subject to estate recovery are individuals who are unaware of this option, and/or unable to afford legal advice on how to transfer their home.
   
   

4. Definition of “estate.” Estate is defined under federal Medicaid law to include all real and personal property and other assets included within the individual’s estate, as defined for purposes of State probate law. At state option, “estate” can be more broadly defined to include any other real and personal property and other assets in which the individual had any legal title or interest at the time of death, including assets conveyed through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement. California adopted the broader federal definition of “estate,” and also included annuities purchased on or after September 1, 2004, a life insurance policy that names the estate as the beneficiary or reverts to the estate, or any retirement account that names the estate as the beneficiary or reverts to the estate. The practical effect of limiting the definition of estate as this bill proposes is to allow individuals to establish a living trust or own a jointly owned home so Medi-Cal beneficiaries do not have to establish an irrevocable trust or transfer their homes and assets prior to death to avoid estate recovery.

5. Hardship exemption from estate recovery. Existing state regulations require DHCS to waive an applicant's proportionate share of the claim if the applicant can demonstrate through submission of a written, completed Application for Hardship Waiver that enforcement of the DHCS’ estate recovery claim would result in substantial hardship to the applicant. Existing regulations require DHCS, in determining the existence of substantial hardship, to waive an applicant's proportionate share of the claim if one or more of six factors apply.

The federal Medicaid manual gives states the option to exempt a “homestead of modest value” from estate recovery. DHCS estate recovery regulations do not include this federal hardship exemption option, and this bill requires DHCS to waive its claim in this instance as part of a hardship exemption.

6. Individuals seeking estimates on Medi-Cal expenditures related to estate recovery. The DHCS estate recovery Web site and the current estate recovery brochure do not have guidance on how to obtain information on amounts expended by Medi-Cal that are subject to estate recovery. DHCS indicates individuals can contact DHCS’ fiscal intermediary (currently Xerox) for information on services rendered by fee-for-service providers. Denti-Cal and Medicare premium information is provided by DHCS’s Third Party Liability and Recovery Division upon request. To request information, individuals can file a form requesting a claim detail report which contains claims paid by Medi-Cal for services received. The cost of obtaining this report is $25 for each request. Under this bill, DHCS would instead be required to provide a current or former beneficiary with this information once per year, upon request for a reasonable fee of up to $5, if the person is a current or former Medi-Cal beneficiary subject to estate recovery.

Prior legislation. SB 1124 (Hernandez, 2014) would have limited Medi-Cal estate recovery to only those services required to be recovered under federal law, would have eliminated recovery against the estate of a surviving spouse of a deceased Medi-Cal beneficiary, and would have required DHCS to provide a current or former beneficiary with the total amount of Medi-Cal expenses that have been paid on behalf of that beneficiary that would be subject to estate recovery. SB 1124 was vetoed by Governor Brown. In his veto message, the Governor stated that allowing more estate protection for the next generation may be a reasonable policy goal, but the cost of this change needs to be considered alongside other worthwhile policy changes in the budget process next year.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee:

• Annual revenue loss up to $50 million per year in foregone claims on the estates of Medi-Cal beneficiaries who would have been eligible for Medi-Cal under the pre-Affordable Care Act expansion (50% General Fund, 50% federal funds).

• Unknown future revenue loss from foregone claims on the estates of deceased Medi-Cal beneficiaries eligible under the Medi-Cal expansion beginning in 2017 (5 - 10% General Fund, 95 - 90% federal funds).

• Ongoing administrative costs of about $3 million per year to provide information to Medi-Cal beneficiaries on the costs that they have incurred and would be subject to estate recovery, upon request (General Fund and federal funds).

• One-time costs likely less than $100,000 to revise regulations by DHCS (50% General Fund, 50% federal funds).

SUPPORT: (Verified 5/27/15)

California Advocates for Nursing Home Reform (co-source)

Western Center on Law & Poverty (co-source)

AARP California

American Federation of State, County and Municipal Employees, AFL-CIO

Asian Americans Advancing Justice – Los Angeles

Asian Law Alliance

California Association of Health Plans

California Association of Physician Groups

California Commission on Aging

California Health Advocates

California Immigrant Policy Center

California Long-Term Care Ombudsman Association

California Pan-Ethnic Health Network

California Primary Care Association

California Retired Teachers Association

California Rural Legal Assistance Foundation

California School Employees Association

California State Association of Counties

California State Council of the Service Employees International Union

California Teachers Association

Central California Legal Services

Consumers Union

County Health Executives Association of California

County of Santa Clara

County Welfare Directors Association

Disability Rights Education and Defense Fund

Having Our Say

Health Access California

Jewish Family Service of Los Angeles

Justice in Aging

L.A. Care Health Plan

National Health Law Program

Older Women’s League

Pacific Islander Cancer Survivors Network

Private Essential Access Community Hospitals

Several individuals

OPPOSITION: (Verified 5/27/15)

None received

ARGUMENTS IN SUPPORT: This bill is jointly sponsored by the California Advocates for Nursing Home Reform (CANHR) and the Western Center on Law & Poverty (WCLP) which argue this bill goes a long way toward fixing this enrollment barrier by eliminating the portions of estate recovery which are optional. WCLP states that, under the ACA, most individuals are required to have health coverage or they will face a financial penalty. With the expansion and streamlining of Medi-Cal and the availability of tax credits through Covered California, there is an unprecedented push to enroll Californians in public and subsidized health coverage programs. However, when consumers learn about estate recovery, they are fearful that if they enroll in Medi-Cal, they will lose their homes to pay for the care they received while on Medi-Cal, effectively turning Medi-Cal into a long-term loan and not a safety net program. WCLP states that, though some people would rather enroll in Covered California and pay a small premium rather than be subject to Medi-Cal estate recovery, it has heard of many instances of consumers simply not signing up for coverage as a result of estate recovery.

WCLP states that, while not eliminating Medi-Cal estate recovery altogether, this bill limits it as much as is federally allowable. Consumers would be assured that their estates would only be recovered against for long-term care and related services and not simply for having basic health coverage. It would also help consumers know the amount their estate may be recovered against by requiring that DHCS provide them or their representative with this information as consumers currently have no way of knowing how much the monthly capitation cost for their Medi-Cal plan is or what other costs they are responsible for and, consequently, have no way of knowing how much their estate could be recovered against.

WCLP concludes that seeking estate recovery from the new ACA adult expansion population makes little fiscal sense for the state, as the cost of Medi-Cal for this new group is 100 percent federally funded and any sums recovered against from this group must be turned over to the federal government. Consequently, recovery against this group effectively turns the Medi-Cal program into a collection agency for the federal government.

CANHR states it has received numerous emails and phone calls from low income and minority homeowners who are reluctant to enroll in Medi-Cal if they are aged 55 or older, even if they eventually go off of Medi-Cal, as the estate recovery claim stays with them all of their lives. CANHR argues Medi-Cal recovery disproportionately affects minority homeowners who enroll in Medi-Cal, as they are often not informed of their rights, they are unable to afford costly estate planning attorneys to avoid recovery in the first place, and they end up with “voluntary” liens at a seven percent interest rate on homes that have been in their families for years. CANHR concludes that this bill not only addresses a major barrier to enrollment, but it brings fairness and equity to a recovery system that has for too long preyed on the inability of low-income consumers and their spouses to assert their rights under the law.

Prepared by: Scott Bain / HEALTH /

6/2/15 21:27:59

**** END ****

 THIRD READING  

Bill No: SB 33

Author: Hernandez (D)

Amended: 4/6/15

Vote: 21

SENATE HEALTH COMMITTEE: 8-0, 3/25/15

AYES: Hernandez, Nguyen, Hall, Mitchell, Monning, Pan, Roth, Wolk

NO VOTE RECORDED: Nielsen

SENATE APPROPRIATIONS COMMITTEE: 5-0, 5/28/15

AYES: Lara, Beall, Hill, Leyva, Mendoza

NO VOTE RECORDED: Bates, Nielsen

SUBJECT: Medi-Cal: estate recovery

SOURCE: California Advocates for Nursing Home Reform

Western Center on Law & Poverty

DIGEST: This bill 1) limits Medi-Cal estate recovery to only those services required to be recovered under federal Medicaid law; 2) eliminates estate recovery against the estate of a surviving spouse of a deceased Medi-Cal beneficiary; 3) requires the Department of Health Care Services (DHCS) to waive its estate recovery claim when the estate is a homestead of modest value in determining the existence of a substantial hardship; 4) narrows the definition of “estate” to mean all real and personal property and other assets that are required to be subject to a claim for recovery under federal law; and 5) requires DHCS to provide a current or former beneficiary with the total amount of Medi-Cal expenses that have been paid on behalf of that beneficiary that would be subject to estate recovery free of charge.

ANALYSIS:

Existing law:

1. Requires DHCS to claim against the estate of a deceased Medi-Cal beneficiary, or against any recipient of the property of that beneficiary by distribution or survival, by an amount equal to the payments for the health care services received or the value of the property received by any recipient from the deceased Medi-Cal beneficiary by distribution or survival, whichever is less. This is referred to as “Medi-Cal estate recovery.”

2. Prohibits DHCS from claiming in any of the following circumstances:

   1. The deceased Medi-Cal beneficiary was under 55 when services were received, except in the case of an individual who had been an inpatient in a nursing facility; or,

   2. Where there is any of the following:

      1. A surviving spouse during his or her lifetime;

      2. A surviving child who is under age 21; or,

      3. A surviving child who is blind or permanently and totally disabled.

3. Requires DHCS to waive its estate recovery claim, in whole or in part, if it determines that enforcement of the claim would result in substantial hardship to other dependents, heirs, or survivors of the individual against whose estate the claim exists. Requires DHCS to notify individuals of this waiver provision and the opportunity for a hearing to establish that a waiver should be granted.

This bill:

1. Limits the health care services subject to estate recovery to only those services required to be recovered under federal law. Services required to be recovered under federal law are nursing facility services (NFS), home and community-based services (HCBS), and related hospital and prescription drug services.

2. Limits the definition of “estate” for purposes of estate recovery to mean all real and personal property and other assets that are required to be subject to a claim for recovery under federal law. Excludes from the definition of “estate” any other real and personal property or other assets in which the individual had any legal title or interest at the time of death, to the extent of that interest, including any assets conveyed to a survivor, heir, or assign of the decedent through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement, consistent with federal law. Makes a conforming change to eliminate a reference to claims against a recipient of property of the decedent by survivorship.

3. Eliminates estate recovery against the estate of a surviving spouse of a deceased Medi-Cal beneficiary when the surviving spouse dies.

4. Requires DHCS, in determining the existence of a substantial hardship, to waive its claim when the estate subject to recovery is a homestead of modest value. Defines a “homestead of modest value” as a home whose fair market value is 50 percent or less of the average price of homes in the county where the homestead is located, as of the date of the decedent’s death.

5. Requires DHCS to provide a current or former beneficiary, or his or her authorized representative, with the total amount of Medi-Cal expenses that have been paid on behalf of that beneficiary that would be subject to estate recovery, upon request and free of charge. Requires DHCS to provide the information requested within 30 days after receipt of the request.

6. Requires DHCS to permit a beneficiary to request the information described in 5) above via the Internet, by telephone, by mail, in person, or through other commonly available electronic means.

7. Requires DHCS to conspicuously post on its Internet Web site, a description of the methods by which a request may be made, including, but not limited to, DHCS’ telephone number and any addresses that may be used for this purpose. Requires DHCS to also include this information in its pamphlet for the Medi-Cal Estate Recovery Program and any other notices DHCS distributes to beneficiaries regarding estate recovery.

8. Caps the DHCS assessed voluntary post-death lien interest rate at the rate equal to the monthly average received on investments in the Surplus Money Investment Fund or simple interest at seven percent per annum, whichever is lower (the current interest rate charged is seven percent in regulation).

9. Repeals estate recovery statute struck down in court that requires “proportionate share” recovery from a former Medi-Cal beneficiary’s estate when there are decedents entitled to an exemption from recovery and decedents who are not.

Comments

1. Author’s statement. According to the author, Medi-Cal estate recovery is unfair to Medi-Cal beneficiaries, is a deterrent to signing people up for Medi-Cal, and is counter to state and federal efforts to enroll people into health coverage. California currently implements several federal options to collect from Medi-Cal beneficiaries beyond what is required under federal law, and has failed to implement a federal option to establish a “homestead exemption” that would allow Medi-Cal beneficiaries to pass a home of modest value on to their heirs. By recovering for health care services beyond those required by federal law, California forces low-income individuals age 55 and older to choose between signing up for basic health care services and passing on their home and other limited assets they possess to their children. California’s estate recovery program undermines the idea of Medi-Cal as a health care entitlement program by essentially turning Medi-Cal coverage for basic medical services into a loan program, with collection taking place at death. This unfairly places part of the burden on financing the cost of health care in Medi-Cal on the estates of deceased Medi-Cal beneficiaries with limited assets. By using a broader definition of “estate” than is federally required, California forces people on Medi-Cal to choose between leaving something for their heirs and surrendering their property while they are still living.
   
   Estate recovery is also inequitable as it primarily applies to individuals age 55 and over, and does not apply to tax-subsidized coverage in Covered California or to the broadly financed federal Medicare program. In addition, California does not adequately inform individuals on how to obtain information on the amounts that will be collected from their estate when they die. For the new 100 percent federally funded Medi-Cal expansion population, estate recovery effectively makes the state a collection agency for the federal government, as all funds collected by the state for this population are required to be returned to the federal government.

2. Scope of services subject to Medi-Cal estate recovery. Under federal law, states must seek recovery for medical assistance paid on behalf of the following individuals:

1. Permanently institutionalized individuals (of any age); and,

2. Individuals age 55 and older receiving NFS, HCBS, and related hospital and prescription drug services.

States have the option to recover from individuals age 55 and older for health care services (services beyond NFS and HCBS), including the total amount spent on a beneficiary’s behalf for any or all other items or services under the state’s Medicaid plan. This includes capitation payments paid on behalf of the beneficiary to a Medi-Cal managed care plan. 

DHCS currently collects all payments made by the Medi-Cal program on behalf of the decedent, including NFS and other long-term care services, HCBS, inpatient/outpatient services, durable medical equipment, related hospital and prescription drug services, health care and insurance premiums, and payments to managed care plans. DHCS indicates it does not track recoveries on a per beneficiary basis by whether the services are mandatory versus optional to be collected under federal law.

3. Elimination of spousal recovery. DHCS currently collects from the estates of a surviving spouse only when he or she dies, and only against what the surviving spouse received from the deceased Medi-Cal spouse "by distribution or survival." For example, if a husband who was on Medi-Cal died, and the home was in both of the husband and wife’s name when he died, DHCS can file an estate claim against his half of the property after the surviving spouse (the wife) dies. The federal Centers for Medicare and Medicaid Services has indicated spousal estate recovery is optional for states. Medi-Cal beneficiaries can currently avoid spousal recovery through estate planning. For example, when a Medi-Cal beneficiary transfers a jointly owned home to his or her surviving spouse while the Medi-Cal beneficiary is still alive, the home is not subject to estate recovery. This effectively means the only individuals subject to estate recovery are individuals who are unaware of this option, and/or unable to afford legal advice on how to transfer their home.
   
   

4. Definition of “estate.” Estate is defined under federal Medicaid law to include all real and personal property and other assets included within the individual’s estate, as defined for purposes of State probate law. At state option, “estate” can be more broadly defined to include any other real and personal property and other assets in which the individual had any legal title or interest at the time of death, including assets conveyed through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement. California adopted the broader federal definition of “estate,” and also included annuities purchased on or after September 1, 2004, a life insurance policy that names the estate as the beneficiary or reverts to the estate, or any retirement account that names the estate as the beneficiary or reverts to the estate. The practical effect of limiting the definition of estate as this bill proposes is to allow individuals to establish a living trust or own a jointly owned home so Medi-Cal beneficiaries do not have to establish an irrevocable trust or transfer their homes and assets prior to death to avoid estate recovery.

5. Hardship exemption from estate recovery. Existing state regulations require DHCS to waive an applicant's proportionate share of the claim if the applicant can demonstrate through submission of a written, completed Application for Hardship Waiver that enforcement of the DHCS’ estate recovery claim would result in substantial hardship to the applicant. Existing regulations require DHCS, in determining the existence of substantial hardship, to waive an applicant's proportionate share of the claim if one or more of six factors apply.

The federal Medicaid manual gives states the option to exempt a “homestead of modest value” from estate recovery. DHCS estate recovery regulations do not include this federal hardship exemption option, and this bill requires DHCS to waive its claim in this instance as part of a hardship exemption.

6. Individuals seeking estimates on Medi-Cal expenditures related to estate recovery.The DHCS estate recovery Web site and the current estate recovery brochure do not have guidance on how to obtain information on amounts expended by Medi-Cal that are subject to estate recovery. DHCS indicates individuals can contact DHCS’ fiscal intermediary (currently Xerox) for information on services rendered by fee-for-service providers. Denti-Cal and Medicare premium information is provided by DHCS’s Third Party Liability and Recovery Division upon request. To request information, individuals can file a form requesting a claim detail report which contains claims paid by Medi-Cal for services received. The cost of obtaining this report is $25 for each request. This bill requires this information be provided free of charge.

Prior legislation. SB 1124 (Hernandez, 2014) would have limited Medi-Cal estate recovery to only those services required to be recovered under federal law, would have eliminated recovery against the estate of a surviving spouse of a deceased Medi-Cal beneficiary, and would have required DHCS to provide a current or former beneficiary with the total amount of Medi-Cal expenses that have been paid on behalf of that beneficiary that would be subject to estate recovery. SB 1124 was vetoed by Governor Brown. In his veto message, the Governor stated that allowing more estate protection for the next generation may be a reasonable policy goal, but the cost of this change needs to be considered alongside other worthwhile policy changes in the budget process next year.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee:

• Annual revenue loss up to $50 million per year in foregone claims on the estates of Medi-Cal beneficiaries who would have been eligible for Medi-Cal under the pre-Affordable Care Act expansion (50% General Fund, 50% federal funds).

• Unknown future revenue loss from foregone claims on the estates of deceased Medi-Cal beneficiaries eligible under the Medi-Cal expansion beginning in 2017 (5 - 10% General Fund, 95 - 90% federal funds).

• Ongoing administrative costs of about $3 million per year to provide information to Medi-Cal beneficiaries on the costs that they have incurred and would be subject to estate recovery, upon request (General Fund and federal funds).

• One-time costs likely less than $100,000 to revise regulations by DHCS (50% General Fund, 50% federal funds).

SUPPORT: (Verified 5/27/15)

California Advocates for Nursing Home Reform (co-source)

Western Center on Law & Poverty (co-source)

AARP California

American Federation of State, County and Municipal Employees, AFL-CIO

Asian Americans Advancing Justice – Los Angeles

Asian Law Alliance

California Association of Health Plans

California Association of Physician Groups

California Commission on Aging

California Health Advocates

California Immigrant Policy Center

California Long-Term Care Ombudsman Association

California Pan-Ethnic Health Network

California Primary Care Association

California Retired Teachers Association

California Rural Legal Assistance Foundation

California School Employees Association

California State Association of Counties

California State Council of the Service Employees International Union

California Teachers Association

Central California Legal Services

Consumers Union

County Health Executives Association of California

County of Santa Clara

County Welfare Directors Association

Disability Rights Education and Defense Fund

Having Our Say

Health Access California

Jewish Family Service of Los Angeles

Justice in Aging

L.A. Care Health Plan

National Health Law Program

Older Women’s League

Pacific Islander Cancer Survivors Network

Private Essential Access Community Hospitals

Several individuals

OPPOSITION: (Verified 5/27/15)

None received

ARGUMENTS IN SUPPORT: This bill is jointly sponsored by the California Advocates for Nursing Home Reform (CANHR) and the Western Center on Law & Poverty (WCLP) which argue this bill goes a long way toward fixing this enrollment barrier by eliminating the portions of estate recovery which are optional. WCLP states that, under the ACA, most individuals are required to have health coverage or they will face a financial penalty. With the expansion and streamlining of Medi-Cal and the availability of tax credits through Covered California, there is an unprecedented push to enroll Californians in public and subsidized health coverage programs. However, when consumers learn about estate recovery, they are fearful that if they enroll in Medi-Cal, they will lose their homes to pay for the care they received while on Medi-Cal, effectively turning Medi-Cal into a long-term loan and not a safety net program. WCLP states that, though some people would rather enroll in Covered California and pay a small premium rather than be subject to Medi-Cal estate recovery, it has heard of many instances of consumers simply not signing up for coverage as a result of estate recovery.

WCLP states that, while not eliminating Medi-Cal estate recovery altogether, this bill limits it as much as is federally allowable. Consumers would be assured that their estates would only be recovered against for long-term care and related services and not simply for having basic health coverage. It would also help consumers know the amount their estate may be recovered against by requiring that DHCS provide them or their representative with this information as consumers currently have no way of knowing how much the monthly capitation cost for their Medi-Cal plan is or what other costs they are responsible for and, consequently, have no way of knowing how much their estate could be recovered against.

WCLP concludes that seeking estate recovery from the new ACA adult expansion population makes little fiscal sense for the state, as the cost of Medi-Cal for this new group is 100 percent federally funded and any sums recovered against from this group must be turned over to the federal government. Consequently, recovery against this group effectively turns the Medi-Cal program into a collection agency for the federal government.

CANHR states it has received numerous emails and phone calls from low income and minority homeowners who are reluctant to enroll in Medi-Cal if they are aged 55 or older, even if they eventually go off of Medi-Cal, as the estate recovery claim stays with them all of their lives. CANHR argues Medi-Cal recovery disproportionately affects minority homeowners who enroll in Medi-Cal, as they are often not informed of their rights, they are unable to afford costly estate planning attorneys to avoid recovery in the first place, and they end up with “voluntary” liens at a seven percent interest rate on homes that have been in their families for years. CANHR concludes that this bill not only addresses a major barrier to enrollment, but it brings fairness and equity to a recovery system that has for too long preyed on the inability of low-income consumers and their spouses to assert their rights under the law.

Prepared by: Scott Bain / HEALTH /

5/30/15 16:47:59

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 33 (Hernandez) - Medi-Cal: estate recovery

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

SB 33 would limit the authority of the state to recover funds from the estate or survivors of a deceased Medi-Cal beneficiary.

Fiscal Impact:

• Annual revenue loss up to $50 million per year in foregone claims on the estates of Medi-Cal beneficiaries who would have been eligible for Medi-Cal under the pre-Affordable Care Act expansion (50% General Fund, 50% federal funds). (See below for more detail.)

• Unknown future revenue loss from foregone claims on the estates of deceased Medi-Cal beneficiaries eligible under the Medi-Cal expansion beginning in 2017 (5 - 10% General Fund, 95 - 90% federal funds).

• Ongoing administrative costs of about $3 million per year to provide information to Medi-Cal beneficiaries on the costs that they have incurred and would be subject to estate recovery, upon request (General Fund and federal funds).

• One-time costs likely less than $100,000 to revise regulations by the Department of Health Care Services (50% General Fund, 50% federal funds).

Background:

Federal law requires state Medicaid programs (Medi-Cal in California) to make a claim against the estate of a deceased beneficiary to recover the costs of certain services provided to that beneficiary. Federal law requires states to recover the costs of health care services provided to beneficiaries of any age who are permanently institutionalized and the costs of nursing facilities, home and community based services, and related hospital and prescription drug costs for beneficiaries over 55 years of age. Federal law authorizes states to seek recovery for other health care services provided to beneficiaries over 55 years of age. Federal law allows states to define estate for the purposes of determining which assets to claim.

Current state law requires the Department of Health Care Services to seek estate recovery for all health care services provided to Medi-Cal beneficiaries over the age of 55. Estate recovery is prohibited during a surviving spouse’s lifetime, when there is a surviving child under age 21, or if there is a surviving child of any age who is blind or disabled. Current law uses a definition of estate that is broader than current federal law requires.

Proposed Law:

SB 33 would limit the authority of the state to seek to recover costs from the estate or survivors of a deceased Medi-Cal beneficiary.

Specific provisions of the bill would:

• Limit estate recovery to the costs incurred by Medi-Cal to pay for health care costs of permanently institutionalized beneficiaries of any age and the costs of providing nursing facility care, home and community based services, and related hospital and prescription drug benefits for beneficiaries over 55 years of age (i.e. the services for which federal law requires states to seek recovery);

• Prohibit estate recovery against the estate of a surviving spouse;

• Narrow the definition of estate for the purposes of asset recovery, in effect allowing assets conveyed through joint tenancy or survivorship to be exempt from estate recovery (e.g. revocable trusts);

• Require the Department to waive claims against a “homestead of modest value” as defined;

• Require the Department to provide information to Medi-Cal beneficiaries, upon request, about the actual expenditures made on their behalf (to allow beneficiaries to understand the claims against their estate the state will make upon their death).

Related Legislation:

SB 1124 (Hernandez, 2014) would have limited estate recovery in the Medi-Cal program. That bill was vetoed by Governor Brown.

Staff comments:

Over the last decade, the Department has collected between $50 million and $60 million per year from deceased beneficiaries’ estates. This bill makes a variety of changes to the statutes governing that process. The most significant change is to the definition of estate, for the purpose of estate recovery. Under the new definition, the state would no longer be authorized to recover assets from an estate if assets were protected by certain trusts (for example, a revocable trust). According to the Department, about 65% of recoveries in recent years came from estates which would be exempt from asset recovery under the bill, chiefly due to the use of revocable trusts to protect assets, such as a home. In addition, the bill eliminates recovery from the estate of a surviving spouse or recovery against a homestead of modest value. According to the Department, in combination, these provisions would exempt about $43 million in annual recoveries from future recovery.

The bill further limits asset recovery by limiting asset recovery to services for which federal law requires the state to seek recovery. Those services include services provided to individuals who are permanently institutionalized and services provided to individuals over age 55 receiving nursing facility services and/or home and community based services and related services. According to the Department, these changes (after accounting for the changes described above) would reduce asset recovery collections by about $8 million per year. This estimate of lost revenue is subject to more uncertainty, however. On average, the Department seeks recovery in amounts that greatly exceed average recoveries. The average claims is $94,000, whereas the average recovery is $15,000. In cases in which the claimed amount significantly exceeds the available assets, reducing the services for which estate recovery is allowed may not actually reduce recoveries. For example, if the state seeks $100,000 in recoveries from an estate, but the estate only has $25,000 in recoverable assets, then reducing the amount the state could seek to $50,000 would not actually reduce the amount the state actually recovers. The Department does not have enough detailed data to determine how often claims for services allowed for recovery under the bill exceed available estate resources, so it is difficult to determine what the actual impact of this provision of the bill will be.

As part of its implementation of the Affordable Care Act, the state has expanded Medi-Cal coverage to childless adults with incomes up to 138% of the federal poverty level. Under current law, in future years, health care costs for members of this population over 55 years of age would be subject to estate recovery, including health care costs for which recovery is optional. Under this bill, the state will forego some of those revenues. The size of this impact is not known, as information about the cost to insure this population and the likelihood that there will be recoverable assets is not known at this time.

It is important to note that for the Medi-Cal expansion population, the federal government will pay 100% of the cost at first, declining to 90% of costs over time. Any cost recovery made by the state from this population would largely be returned to the federal government. Therefore, the General Fund impact from eliminating some cost recovery from this population is limited.

-- END --

SENATE COMMITTEE ON HEALTH

Senator Ed Hernandez, O.D., Chair

BILL NO: SB 33

SUBJECT: Medi-Cal: estate recovery

SUMMARY:

Limits Medi-Cal estate recovery to only those services required to be recovered under federal Medicaid law. Eliminates estate recovery against the estate of a surviving spouse of a deceased Medi-Cal beneficiary. Requires the Department of Health Care Services (DHCS) to waive its estate recovery claim when the estate is a homestead of modest value in determining the existence of a substantial hardship. Narrows the definition of “estate” to mean all real and personal property and other assets that are required to be subject to a claim for recovery under federal law. Requires DHCS to provide a current or former beneficiary with the total amount of Medi-Cal expenses that have been paid on behalf of that beneficiary that would be subject to estate recovery free of charge.

Existing law:

1. Requires DHCS to claim against the estate of a deceased Medi-Cal beneficiary, or against any recipient of the property of that beneficiary by distribution or survival, by an amount equal to the payments for the health care services received or the value of the property received by any recipient from the deceased Medi-Cal beneficiary by distribution or survival, whichever is less. This is referred to as “Medi-Cal estate recovery.”

2. Prohibits DHCS from claiming in any of the following circumstances:

   1. The deceased Medi-Cal beneficiary was under 55 when services were received, except in the case of an individual who had been an inpatient in a nursing facility; or,

   2. Where there is any of the following:

      1. A surviving spouse during his or her lifetime;

      2. A surviving child who is under age 21; or,

      3. A surviving child who is blind or permanently and totally disabled.

3. Requires DHCS to waive its estate recovery claim, in whole or in part, if it determines that enforcement of the claim would result in substantial hardship to other dependents, heirs, or survivors of the individual against whose estate the claim exists. Requires DHCS to notify individuals of this waiver provision and the opportunity for a hearing to establish that a waiver should be granted.

This bill:

1. Limits the health care services subject to estate recovery to only those services required to be recovered under federal law. Services required to be recovered under federal law are nursing facility services (NFS), home and community-based services (HCBS), and related hospital and prescription drug services.

2. Limits the definition of “estate” for purposes of estate recovery to mean all real and personal property and other assets that are required to be subject to a claim for recovery under federal law. Excludes from the definition of “estate” any other real and personal property or other assets in which the individual had any legal title or interest at the time of death, to the extent of that interest, including any assets conveyed to a survivor, heir, or assign of the decedent through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement, consistent with federal law. By excluding from recovery any assets conveyed through joint tenancy and survivorship, makes a conforming change to eliminate a reference to claims against a recipient of property of the decedent by survivorship.

3. Eliminates estate recovery against the estate of a surviving spouse of a deceased Medi-Cal beneficiary when the surviving spouse dies.

4. Requires DHCS, in determining the existence of a substantial hardship, to waive its claim when the estate subject to recovery is a homestead of modest value. Defines a “homestead of modest value” as a home whose fair market value is 50 percent or less of the average price of homes in the county where the homestead is located, as of the date of the decedent’s death.

5. Requires DHCS to provide a current or former beneficiary, or his or her authorized representative, with the total amount of Medi-Cal expenses that have been paid on behalf of that beneficiary that would be subject to estate recovery, upon request and free of charge. Requires DHCS to provide the information requested within 30 days after receipt of the request.

6. Requires DHCS to permit a beneficiary to request the information described in 5) above via the Internet, by telephone, by mail, in person, or through other commonly available electronic means.

7. Requires DHCS to conspicuously post on its Internet Web site, a description of the methods by which a request may be made, including, but not limited to, DHCS’ telephone number and any addresses that may be used for this purpose. Requires DHCS to also include this information in its pamphlet for the Medi-Cal Estate Recovery Program and any other notices DHCS distributes to beneficiaries regarding estate recovery.
   
   

8. Repeals estate recovery statute struck down in court that requires “proportionate share” recovery from a former Medi-Cal beneficiary’s estate when there are decedents entitled to an exemption from recovery and decedents who are not.

FISCAL EFFECT:

This bill has not been analyzed by a fiscal committee.

COMMENTS:

1. Author’s statement. According to the author, Medi-Cal estate recovery is unfair to Medi-Cal beneficiaries, is a deterrent to signing people up for Medi-Cal, and is counter to state and federal efforts to enroll people into health coverage. California currently implements several federal options to collect from Medi-Cal beneficiaries beyond what is required under federal law, and has failed to implement a federal option to establish a “homestead exemption” that would allow Medi-Cal beneficiaries to pass a home of modest value on to their heirs. By recovering for health care services beyond those required by federal law, California forces low-income individuals age 55 and older to choose between signing up for basic health care services and passing on their home and other limited assets they possess to their children. California’s estate recovery program undermines the idea of Medi-Cal as a health care entitlement program by essentially turning Medi-Cal coverage for basic medical services into a loan program, with collection taking place at death. This unfairly places part of the burden on financing the cost of health care in Medi-Cal on the estates of deceased Medi-Cal beneficiaries with limited assets. By using a broader definition of “estate” than is federally required, California forces people on Medi-Cal to choose between leaving something for their heirs and surrendering their property while they are still living.
   
   Estate recovery is also inequitable as it primarily applies to individuals age 55 and over, and does not apply to tax-subsidized coverage in Covered California or to the broadly financed federal Medicare program. In addition, California does not adequately inform individuals on how to obtain information on the amounts that will be collected from their estate when they die. For the new 100 percent federally funded Medi-Cal expansion population, estate recovery effectively makes the state a collection agency for the federal government, as all funds collected by the state for this population are required to be returned to the federal government.

2. Background and data on estate recovery. Since the beginning of the Medicaid program in 1965, states have been permitted to recover from the estates of deceased Medicaid recipients who were over age 65 when they received benefits and who had no surviving spouse, minor child, or adult disabled child. In 1993, Congress included a provision in the Omnibus Budget Reconciliation Act of 1993 (Public Law No. 103-66) that required states to implement a Medicaid estate recovery program for individuals age 55 and older.
   
   Under California’s Medicaid State Plan, estate recovery claims are filed when health care services paid by the state are $750 or more, or less than $750 when the amount the state expects to recover would be greater than the cost of recovery. The average claim made by DHCS in 2013-14 was around $94,000, and the average amount recovered was $15,600.  In FY 2013-14, DHCS closed about 3,900 estate recovery cases with payment. DHCS indicates estate recovery amounts totaled $61 million in total funds fiscal year 2013-14, $59.4 million total funds in 2012-13, and $52.7 million total funds in 2011-12.  DHCS anticipates collection of $59.4 million total funds ($29.7 million GF) in 2015-16.
   
   Federal regulations require states to pay the federal government a portion of the estate recovery collection amounts that is determined in accordance with the federal matching rate (known as Federal Medicaid Assistance Percentage or FMAP) for the State. Under this provision, California would generally return 50 percent of the amounts collected, except for programs which have a higher matching rate, such as the Affordable Care Act expansion population, which is entirely federally funded for the first three years of the expansion and declines to 90 percent by 2020 and thereafter. The state’s share of estate recovery revenue is placed in the state Health Care Deposit Fund, which funds Medi-Cal.

3. Scope of services subject to Medi-Cal estate recovery. Under federal law, states must seek recovery for medical assistance paid on behalf of the following individuals:

1. Permanently institutionalized individuals (of any age); and,

2. Individuals age 55 and older receiving NFS, HCBS, and related hospital and prescription drug services.

States have the option to recover from individuals age 55 and older for health care services (services beyond NFS and HCBS), including the total amount spent on a beneficiary’s behalf

for any or all other items or services under the state’s Medicaid plan. This includes capitation payments paid on behalf of the beneficiary to a Medi-Cal managed care plan. 

DHCS currently collects all payments made by the Medi-Cal program on behalf of the decedent, including nursing facility and other long-term care services, home and community based services, inpatient/outpatient services, durable medical equipment, related hospital and prescription drug services, health care and insurance premiums, and payments to managed care plans. DHCS claims do not include payments made for personal care services provided under In-Home Support Services, or the cost of premiums, co-payments and deductibles paid on behalf of either Qualified Medicare Beneficiaries or Specified Low-Income Medicare Beneficiaries. Consistent with federal guidance, when a Medi-Cal beneficiary is enrolled in a Medi-Cal managed care plan, DHCS collects based on the amount it paid to the plan, and not based on the amount of services a person received. DHCS indicates it does not track recoveries on a per beneficiary basis by whether the services are mandatory versus optional to be collected under federal law.

4. Elimination of spousal recovery. DHCS currently collects from the estates of a surviving spouse only when he or she dies, and only against what the surviving spouse received from the deceased Medi-Cal spouse "by distribution or survival." For example, if a husband who was on Medi-Cal died, and the home was in both of the husband and wife’s name when he died, DHCS can file an estate claim against his half of the property after the surviving spouse (the wife) dies.
   
   The federal Centers for Medicare and Medicaid Services has indicated spousal estate recovery is optional for states. Medi-Cal beneficiaries can currently avoid spousal recovery through estate planning. For example, when a Medi-Cal beneficiary transfers a jointly owned home to his or her surviving spouse while the Medi-Cal beneficiary is still alive, the home is not subject to estate recovery. This effectively means the only individuals subject to estate recovery are individuals who are unaware of this option, and/or unable to afford legal advice on how to transfer their home.
   
   

5. Definition of “estate.” Estate is defined under federal Medicaid law to include all real and personal property and other assets included within the individual’s estate, as defined for purposes of State probate law. At state option, “estate” can be more broadly defined to include any other real and personal property and other assets in which the individual had any legal title or interest at the time of death, including assets conveyed through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement. California adopted the broader federal definition of “estate,” and also included annuities purchased on or after September 1, 2004, a life insurance policy that names the estate as the beneficiary or reverts to the estate, or any retirement account that names the estate as the beneficiary or reverts to the estate.
   
   The practical effect of limiting the definition of estate as this bill proposes is to allow individuals to establish a living trust or own a jointly owned home so Medi-Cal beneficiaries do not have establish an irrevocable trust or transfer their homes and assets prior to death to avoid estate recovery.

6. Hardship exemption from estate recovery. Existing state regulations require DHCS to waive an applicant's proportionate share of the claim if the applicant can demonstrate through submission of a written, completed Application for Hardship Waiver that enforcement of the DHCS’ estate recovery claim would result in substantial hardship to the applicant. Existing regulations require DHCS, in determining the existence of substantial hardship, to waive an applicant's proportionate share of the claim if one or more of six factors apply, as follows:
   
   

   1. Allowing the applicant to receive the inheritance from the estate would enable the applicant to discontinue eligibility for public assistance payments and/or medical assistance programs;

   2. The estate property is part of an income-producing business, including a working farm or ranch, and recovery of medical assistance expenditures would result in the applicant losing his or her primary source of income;

   3. An aged, blind, or disabled applicant has continuously lived in the decedent's home for at least one year prior to the decedent's death and continues to reside there, and is unable to obtain financing to repay the State;

   4. When the applicant provided care to the decedent for two or more years that prevented or delayed the decedent's admission to a medical or long-term care institution;

   5. When the applicant transferred the property to the decedent for no consideration; or,

   6. Equity in the real property is needed by the applicant to make the property habitable, or to acquire the necessities of life, such as food, clothing, shelter or medical care.

The federal Medicaid manual gives states the option to exempt a “homestead of modest value” from estate recovery. DHCS estate recovery regulations do not include this federal hardship exemption option, and this bill would require DHCS to waive its claim in this instance as part of a hardship exemption.

7. Individuals seeking estimates on Medi-Cal expenditures related to estate recovery. One of the questions asked of committee staff by individuals who are either on Medi-Cal, or deciding whether to apply for coverage, is how much Medi-Cal is spending (or will spend) on their behalf that is subject to estate recovery. The DHCS estate recovery website and the current estate recovery brochure do not have guidance on how to obtain this information. DHCS indicates individuals can contact DHCS’ fiscal intermediary (currently Xerox) for information on services rendered by fee-for-service providers. Denti-Cal and Medicare premium information is provided by DHCS’s Third Party Liability and Recovery Division upon request. To request information, individuals can file a form requesting a claim detail report which contains claims paid by Medi-Cal for services received. The cost of obtaining this report is $25 for each request. This bill would require this information be provided free of charge.

8. Deletion of proportionate share recovery language. This bill deletes language in existing law that has been struck down in court. That language allowed DHCS to claim against a deceased former Medi-Cal beneficiary’s estate for the “proportionate share” of the estate left to individuals who did not quality for an exemption. In Dalzin v. Belshe (1997), two separate deceased Medi-Cal beneficiaries left their estates to their children. Both Medi-Cal beneficiaries had sons who were disabled and thus entitled to an exemption from estate recovery. DHCS filed an estate claim against the non-disabled children of the families. The court granted a permanent injunction, prohibiting DHCS from claiming against the non-disabled child’s portion of a beneficiary’s estate.
   
   

9. Previous legislation. SB 1124 (Hernandez) of 2014 would have limited Medi-Cal estate recovery to only those services required to be recovered under federal law, would have eliminated recovery against the estate of a surviving spouse of a deceased Medi-Cal beneficiary, and would have required DHCS to provide a current or former beneficiary with the total amount of Medi-Cal expenses that have been paid on behalf of that beneficiary that would be subject to estate recovery. SB 1124 was vetoed by Governor Brown. In his veto message, the Governor stated that allowing more estate protection for the next generation may be a reasonable policy goal, but the cost of this change needs to be considered alongside other worthwhile policy changes in the budget process next year.

AB 2493 (Lieber) of 2004 would have prohibited the Department of Health Services (DHS was the predecessor to DHCS) from claiming against the surviving spouses of Medi-Cal beneficiaries; would have deleted the “proportionate share” recovery from a former Medi-Cal beneficiary’s estate; required DHS to adopt regulations defining “substantial hardship” exemptions from estate recovery, required DHCS to grant estate recovery waivers consistent with regulations adopted by DHS; and, would exempt from estate recovery services provided through the IHSS program. AB 2493 was held on the Assembly Appropriations suspense file.

10. Support. This bill is jointly sponsored by the California Advocates for Nursing Home Reform (CANHR) and the Western Center on Law & Poverty (WCLP) which argue this bill would go a long way toward fixing this enrollment barrier by eliminating the portions of estate recovery which are optional. WCLP states that, under the ACA, most individuals are required to have health coverage or they will face a financial penalty. With the expansion and streamlining of Medi-Cal and the availability of tax credits through Covered California, there is an unprecedented push to enroll Californians in public and subsidized health coverage programs. However, when consumers learn about estate recovery, they are fearful that if they enroll in Medi-Cal, they will lose their homes to pay for the care they received while on Medi-Cal, effectively turning Medi-Cal into a long term loan and not a safety net program. WCLP states that, though some people would rather enroll in Covered California and pay a small premium rather than be subject to Medi-Cal estate recovery, and it has heard of many instances of consumers simply not signing up for coverage as a result of estate recovery.
    
    WCLP states that, while not eliminating Medi-Cal estate recovery altogether, this bill would limit it as much as is federally allowable. Consumers would be assured that their estates would only be recovered against for long-term care and related services and not simply for having basic health coverage. It would also help consumers know the amount their estate may be recovered against by requiring that DHCS provide them or their representative with this information as consumers currently have no way of knowing how much the monthly capitation cost for their Medi-Cal plan is or what other costs they are responsible for and consequently have no way of knowing how much their estate could be recovered against.
    
    WCLP concludes that seeking estate recovery from the new ACA adult expansion population makes little fiscal sense for the state, as the cost of Medi-Cal for this new group is 100 percent federally funded and any sums recovered against from this group must be turned over to the federal government. Consequently, recovery against this group effectively turns the Medi-Cal program into a collection agency for the federal government.
    
    CANHR states it has received numerous emails and phone calls from low income and minority homeowners who are reluctant to enroll in Medi-Cal if they are aged 55 or older, even if they eventually go off of Medi-Cal, as the estate recovery claim stays with them all of their lives. CANHR argues Medi-Cal recovery disproportionately affects minority homeowners who enroll in Medi-Cal, as they are often not informed of their rights, they are unable to afford costly estate planning attorneys to avoid recovery in the first place, and they end up with “voluntary” liens at a seven percent interest rate on homes that have been in their families for years. CANHR concludes that this bill not only addresses a major barrier to enrollment, but it brings fairness and equity to a recovery system that has for too long preyed on the inability of low-income consumers and their spouses to assert their rights under the law.
    
    

11. Amendments. The author intends to amend this bill to add legislative findings and declarations and intent language.
    
    

12. Policy question. Existing estate recovery regulations require DHCS to propose a voluntary post death lien on the real property of the estate, and other real property that the dependent, heir, or survivor has an interest in, when one or more of the dependents, heirs, or survivors is:
    
    

• Living in and not willing to sell the real property;

• Unable to pay DHCS’ claim in full; or,

• Can demonstrate that he or she is unable to obtain financing.

Under existing regulations, the voluntary post death lien accrues simple interest at the rate of seven percent per annum. Given that interest rates are currently considerably below seven percent, should the seven percent per annum standard be changed?

SUPPORT AND OPPOSITION:

Support: California Advocates for Nursing Home Reform (co-sponsor)

Western Center on Law & Poverty (co-sponsor)

American Federation of State, County and Municipal Employees, AFL-CIO

Asian Americans Advancing Justice – Los Angeles

Asian Law Alliance

California Association of Health Plans

California Association of Physician Groups

California Health Advocates

California Immigrant Policy Center

California Long-Term Care Ombudsman Association

California Pan-Ethnic Health Network

California Primary Care Association

California Rural Legal Assistance Foundation

California School Employees Association

California State Association of Counties

California State Council of the Service Employees International Union

Central California Legal Services

Consumers Union

County Health Executives Association of California

County of Santa Clara

County Welfare Directors Association

Disability Rights Education and Defense Fund

Having Our Say

Justice in Aging

L.A. Care Health Plan

National Health Law Program

Older Women’s League

Pacific Islander Cancer Survivors Network

Private Essential Access Community Hospitals

An individual

Oppose: None received.

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