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