BILL ANALYSIS Ó
SB 33
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Date of Hearing: July 7, 2015
ASSEMBLY COMMITTEE ON HEALTH
Rob Bonta, Chair
SB
33 (Hernandez) - As Amended 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:
a) A permanently institutionalized individual of any age;
or,
b) An individual age 55 or older receiving nursing facility
services (NFS), home and community-based services (HCBS),
or related hospital and prescription drug services.
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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
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five dollars if the beneficiary meets either of the following
conditions:
a) 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,
b) 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.
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3)Prohibits DHCS from claiming against the estate of a deceased
Medi-Cal beneficiary under any of the following circumstances:
a) 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,
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.
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:
a) A permanently institutionalized individual of any age;
or,
b) An individual age 55 or older receiving nursing facility
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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:
a) All the real and personal property and other assets
included within the deceased Medi-Cal beneficiary's estate;
and,
b) 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
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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
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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.
a) 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
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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 55th 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.
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b) 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 55th 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.
c) 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
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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.
d) 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.
e) 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
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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.
3)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.
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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.
a) 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."
b) 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
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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
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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.
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Analysis Prepared by:An-Chi Tsou / HEALTH / (916)
319-2097