BILL ANALYSIS Ó
SB 33
Page 1
Date of Hearing: July 15, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 33
(Hernandez) - As Amended June 1, 2015
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill limits estate recovery in Medi-Cal (collection from
the estate of a deceased Medi-Cal beneficiary) to the minimum
that is federally required. Specifically, this bill:
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1)Limits the definition of "estate" to the minimum federally
allowable, which exempts from recovery all non-probated assets
(non-probated estates provision).
2)Eliminates estate recovery against the estate of a surviving
spouse of a deceased Medi-Cal beneficiary (surviving spouse
provision).
3)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, as defined (homestead
of modest value provision).
4)Requires DHCS to claim against the estate of a deceased
Medi-Cal beneficiary only for individuals permanently
institutionalized, or age 55 or older receiving specified
long-term care services and supports (LTSS) (LTSS provision).
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 (interest
rate provision).
6)Requires DHCS, upon request, to provide the amount of
recoverable MediCal expenses that have been paid on behalf of
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a beneficiary, once per year, for a reasonable fee not to
exceed five dollars if the beneficiary meets certain
conditions.
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.
FISCAL EFFECT:
1)Losses from Recovery. In 2013-14, DHCS collected $61 million
in recoveries. Given these expected reductions in recovery
amounts, annual revenues losses associated with this bill are
projected to be in the range of $40-$50 million ($20-$25
million GF). The exact revenue losses associated with each
provision are unknown, since there is an unknown amount of
overlap between the categories (i.e., they are not completely
independent of each other. One claim could fall in multiple
categories). The low end of the range assumes total overlap
of claims in other categories with claims in the non-probated
estates category, which has the largest single effect of any
provision, and the high end assumes no overlap. Based on
2013-14 DHCS collections data, percentage losses in recovery
amounts projected with each provision, and used to calculate
this range, are as follows:
a) Non-probated estates provision: 65% of collections came
from non-probated estates; thus, recoveries are expected to
be reduced by at least this amount.
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b) Surviving spouse provision: 9% of recoveries are against
the estate of a surviving spouse, and would be eliminated
by this bill.
c) Homestead of modest value provision: 9% would fall into
this category. Depending on the cost of the estate
recovery claim and the cost of the homestead, some recovery
may be possible on estates that qualify for this exemption
if there are other non-homestead assets available.
d) LTSS provision: 51% of total Medi-cal expenditures are
for services that would be non-recoverable under this bill.
However, it is unknown how many claims actually include
expenses for LTSS (which are mandatory for collection),
other health care services (for which states can opt to
collect), or some combination of the two. DHCS suggests
there is some overlap and that about 10% of the time,
expenditures for LTSS are sufficient to cover the cost of
the claim, regardless of whether there were optional
services on the claim as well. Thus, DHCS suggests
reducing the percentage by 10% is reasonable, meaning about
a 46% reduction in collections could be expected due to
this provision. This also assumes the proportion of
expenditures on LTSS versus services that are optional for
collection translates directly into the number of claims
for LTSS versus optional services, which is not apparent,
but is perhaps a reasonable assumption given the lack of
better data.
e) Interest rate provision: Losses associated with the
interest rate provision could range from none to the low
hundreds of thousands of dollars, depending how interest
rates in the Surplus Money Investment Fund compare to the
7% cap specified in the bill (the interest rate on
voluntary liens is currently 7%).
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1)Future losses from recovery. The Patient Protection and
Affordable Care Act (ACA) resulted in increased enrollment for
both "mandatory" populations (those eligible under pre-ACA
rules) and "optional" expansion populations, for which costs
are largely federally funded.
a) Mandatory population. The state shares costs with the
federal government for the "mandatory" population on a
50:50 basis. The ACA also requires the state to remove
"asset tests" for eligibility and requires every individual
to maintain health insurance or face a penalty. Therefore,
foregone revenues are likely to grow in future years
because the total population enrolled under pre-ACA
eligibility rules (and for which the state would collect
50% of the estate claim) will be larger than it was in
2013-14, and there is a somewhat greater likelihood that
beneficiaries will have assets against which the state
could submit a claim.
b) Optional expansion population. The state will incur
unknown future revenue loss, mostly federal funds, from
foregone claims on the estates of deceased Medi-Cal
beneficiaries eligible under the Medi-Cal expansion, with
minor GF losses beginning in 2017 (5% - 10% General Fund,
95% - 90% federal funds). As part of its implementation of
the federal ACA, the state has expanded Medi-Cal coverage
to childless adults with incomes up to 138% of the federal
poverty line. Under current law, in future years, health
care costs for members of this population over 55 years of
age would be subject to cost recovery, including health
care costs for which recovery is optional. Under this bill,
the state will forego some of those revenues. It is
important to note that for the Medi-Cal expansion
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population, the federal government will pay 100% of the
cost at first, declining to 90% of costs by 2020. Any cost
recovery made by the state from this population would
largely be returned to the federal government. Therefore,
the GF impact from eliminating some cost recovery from this
population is limited.
1)Administrative costs in the low hundreds of thousands (50% GF,
50% federal) to DHCS to process additional requests for the
amount of recoverable MediCal expenses that have been paid on
behalf of a beneficiary. Costs could be lower or higher
depending how robustly beneficiaries are notified of the
availability of this data, and the ease of requesting it.
2)Administrative cost savings. Based on narrower estate recovery
rules, administrative cost savings from fewer staff working on
estate recovery should be significant. The current budget for
estate recovery is approximately $4.5 million (25% GF, 75%
federal). The effect of the bill on these administrative costs
is unknown, but it appears reasonable to assume such a
significant reduction in the number of recoverable estates
should result in a nearly proportionate decrease in
administrative staff costs to pursue estate recovery claims.
COMMENTS:
1)Purpose. According to the author, Medi-Cal estate recovery is
a deterrent to signing people up for Medi-Cal, and is counter
to state and federal efforts to enroll people into health
coverage. The author argues California's estate recovery
program undermines the idea of Medi-Cal as a health care
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entitlement program by essentially turning Medi-Cal coverage
for basic medical services into a loan program, with
collection taking place at death. The author states 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. Furthermore, the author
argues estate recovery is 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
federal Medicare program.
2)Background. Federal law requires states to implement a
Medicaid estate recovery program and to collect the costs of
providing institutional and long-term care services from
beneficiary estates after their death, with some limitations
such as allowances for surviving spouses. The state can choose
to collect for the costs of other health care services for
individuals over 55 against beneficiary estates, and is
required to do so by state law. Revenues recovered from
estates are generally shared with the federal government
consistent with the ratio at which benefits were paid,
generally 50:50. The state's share of estate recovery revenue
is placed in the state Health Care Deposit Fund, which funds
Medi-Cal. DHCS indicates the average claim is for $95,000 and
the average estate recovery case that is closed with payment
yields about $15,000. Nearly 4,000 cases were closed with
payment in fiscal year 2012-13. There has been concern among
advocates for low-income individuals that estate recovery
poses a barrier to Medi-Cal enrollment. Recent survey research
also suggests that it poses particular concern for Latinos,
who are disproportionately likely to be uninsured.
This bill limits estate recovery to the minimum collection
required by federal law by including several provisions that
implement federally allowable exemptions.
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3)Support. This bill is jointly sponsored by the California
Advocates for Nursing Home Reform (CANHR) and the Western
Center on Law & Poverty (WCLP), who argue this bill would help
reduce an enrollment barrier by eliminating the optional
portions of estate recovery. WCLP states that, under the ACA,
most individuals are required to have health coverage or they
will face a financial penalty. 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. WCLP also points out for the new
100% 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. 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.
CANHR argues savvy beneficiaries can avoid estate recovery
through appropriate estate planning, so estate recovery only
affects beneficiaries who cannot afford or don't know about
these services. CANHR contends this bill brings equity to the
recovery system.
4)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." The 2015-16 Budget Act did not
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address estate recovery.
b) AB 2493 (Lieber), of 2004 also limited estate recovery
and was held on the Suspense File of this committee.
1)Staff Comment. The State Controller's Office generally
publishes a quarterly interest rates for the Surplus Money
Investment Fund, but the bill requires a lien to accrue
interest at the lower of (1) a 7% per annum interest rate or
(2) the monthly average Surplus Money Investment Fund rate.
Monthly or quarterly interest rates are usually compounded on
monthly a quarterly basis. A technical clarification to this
provision may be advisable, in order to translate the SCO's
published interest rate into an annual rate and to make this
requirement more straightforward and easier to understand and
operationalize. For example, the author may wish to reference
an annualized rate based on the Surplus Money Investment Fund
rate over the last year.
Analysis Prepared by:Lisa Murawski / APPR. / (916)
319-2081