BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 33 (Hernandez) - Medi-Cal: estate recovery
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|Version: April 6, 2015 |Policy Vote: HEALTH 8 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: May 11, 2015 |Consultant: Brendan McCarthy |
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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
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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
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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.
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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
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limited.
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