BILL ANALYSIS Ó SB 33 Page 1 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. SB 33 Page 2 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 SB 33 Page 3 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. SB 33 Page 4 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 SB 33 Page 5 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 SB 33 Page 6 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 SB 33 Page 7 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 SB 33 Page 8 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. SB 33 Page 9 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 SB 33 Page 10 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 SB 33 Page 11 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. SB 33 Page 12 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 SB 33 Page 13 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 SB 33 Page 14 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. SB 33 Page 15 Analysis Prepared by:An-Chi Tsou / HEALTH / (916) 319-2097