BILL ANALYSIS Ó
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 33
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|AUTHOR: |Hernandez |
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|VERSION: |March 17, 2015 |
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|HEARING DATE: |March 25, 2015 | | |
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|CONSULTANT: |Scott Bain |
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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:
a. 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,
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b. Where there is any of the following:
i. A surviving spouse during his or
her lifetime;
ii. A surviving child who is under age
21; or,
iii. 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
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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.
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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.
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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:
a. Permanently institutionalized individuals (of any
age); and,
b. 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
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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
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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:
a. 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;
b. 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;
c. 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;
d. 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;
e. When the applicant transferred the property to the
decedent for no consideration; or,
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f. 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
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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
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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
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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
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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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