BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 1124
AUTHOR: Hernandez
INTRODUCED: March 26, 2014
HEARING DATE: April 9, 2014
CONSULTANT: Bain
SUBJECT : Medi-Cal: estate recovery.
SUMMARY : Limits Medi-Cal estate recovery to only those services
required to be recovered under federal law. Exempts from estate
recovery any health care services that federal law or guidance
authorizes the state to eliminate from recovery. Eliminates
estate recovery against the estate of a surviving spouse of a
deceased Medi-Cal beneficiary. Requires the Department of Health
Care Services (DHCS) to only collect for health care services
actually received by the deceased beneficiary. Requires DHCS to
provide a current or former beneficiary with the total amount of
Medi-Cal expenses that have been paid on behalf of that
beneficiary that would be subject to estate recovery.
Existing law:
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 or survival, by 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 or survival,
whichever is less. This is referred to as "Medi-Cal estate
recovery."
2.Prohibits DHCS from claiming in any of the following
circumstances:
a. The deceased Medi-Cal beneficiary was under 55
when services were received, except in the case of an
individual who 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;
Continued---
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ii. A surviving child who is under age
21; or,
iii. A surviving child who is blind or
permanently and totally disabled.
3.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 this waiver provision
and the opportunity for a hearing to establish that a waiver
should be granted.
This bill:
1.Limits the health care services subject to estate recovery to
only those services required to be recovered under federal
law, and excludes services provided to the deceased Medi-Cal
beneficiary through the In-Home Supportive Services program.
Services required to be recovered under federal law are
nursing facility services (NFS), home and community-based
services (HCBS), and related hospital and prescription drug
services.
2.Exempts from estate recovery any health care services that
federal law or guidance authorizes the state to eliminate from
recovery. Requires DHCS to adopt emergency regulations as
necessary to implement this requirement.
3.Eliminates estate recovery against the estate of a surviving
spouse of a deceased Medi-Cal beneficiary when the surviving
spouse dies.
4.Requires DHCS to only collect amounts identified as being
spent by either DHCS or a Medi-Cal managed care plan for
health care services actually received by the decedent, or the
per member per month payment made to the Medi-Cal managed care
plan, whichever is less in that month.
5.Requires DHCS to provide a current or former beneficiary, or
his or her authorized representative, with the total amount of
Medi-Cal expenses that have been paid on behalf of that
beneficiary that would be subject to estate recovery, upon
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request and free of charge.
6.Requires DHCS to permit a beneficiary to request the
information described in 5) above via the Internet, by
telephone, by mail, in person, or through other commonly
available electronic means.
7.Requires DHCS to conspicuously post on its Internet Web site,
a description of the methods by which a request may be made,
including, but not limited to, DHCS' telephone number and any
addresses that may be used for this purpose. Requires DHCS to
also include this information in its pamphlet for the Medi-Cal
Estate Recovery Program and any other notices DHCS distributes
to beneficiaries regarding estate recovery.
8.Repeals estate recovery statute struck down in court that
requires "proportionate share" recovery from a former Medi-Cal
beneficiary's estate when there are decedents entitled to an
exemption from recovery and decedents who are not.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1.Author's statement. 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. 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 health care services and passing on their home and other
limited assets they possess to their children. 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. Estate recovery also discourages
enrolling in Medi-Cal when healthy, and maintaining continuous
Medi-Cal coverage. This is because Medi-Cal estate recovery
collection amounts are based on the state payments made to
Medi-Cal managed care plans, irrespective of the health care
services the Medi-Cal beneficiary actually received from the
health plan. By encouraging beneficiaries to forgo enrollment
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until they have a need for expensive care, estate recovery may
lead to higher program costs in the long run. Estate recovery
is also 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 broadly financed federal Medicare
program. In addition, California does not adequately inform
individuals on how to obtain information on the amounts that
will be collected from their estate when they die. For the new
100 percent 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.
2.Background and data on estate recovery. Since the beginning of
the Medicaid program in 1965, states have been permitted 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. In
1993, Congress included a provision in the Omnibus Budget
Reconciliation Act of 1993 (Public Law No. 103-66) that
required states to implement a Medicaid estate recovery
program.
The DHCS estate recovery unit has 52 staff and a total funds
budget of $60.5 million ($28.9 million GF). Per the state's
Medicaid State Plan, 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. In 2013, Medi-Cal
estate recovery collected $59.4 million in total funds. Total
fund Medi-Cal expenditures in 2012-13 were $55.8 billion in
that year, so estate recovery revenue offset .001 percent of
Medi-Cal expenditures. In 2012-13, the average estate recovery
claim amount was $95,000 and the average recovery amount was
$15,000.
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 there was some indication
of assets owned 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
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cases, 1,895 cases were closed with full payment. For the
remaining 2,101 cases, the residue of the estate was accepted
as satisfaction of DHCS' claim (meaning the estate value was
less than the value of the claim).
Federal regulations requires 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 or FMAP)
for the State. Under this provision, California would
generally return 50 percent 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
percent 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.
The chart below indicates how much the state has collected in
revenue from estate recovery in total funds:
---------------------------------
| State FY |Estate Recovery TF* |
|------------+--------------------|
| 1993-1994 | $ 22,131,985 |
|------------+--------------------|
| 1994-1995 | $ 26,244,448 |
|------------+--------------------|
| 1995-1996 | $ 30,311,142 |
|------------+--------------------|
| 1996-1997 | $ 33,424,443 |
|------------+--------------------|
| 1997-1998 | $ 35,194,875 |
|------------+--------------------|
| 1998-1999 | $ 37,596,307 |
|------------+--------------------|
| 1999-2000 | $ 41,691,851 |
|------------+--------------------|
| 2000-2001 | $ 43,166,786 |
|------------+--------------------|
| 2001-2002 | $ 46,160,107 |
|------------+--------------------|
| 2002-2003 | $ 48,653,473 |
|------------+--------------------|
| 2003-2004 | $ 53,929,926 |
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|------------+--------------------|
| 2004-2005 | $ 64,586,918 |
|------------+--------------------|
| 2005-2006 | $ 74,037,153 |
|------------+--------------------|
| 2006-2007 | $ 79,456,736 |
|------------+--------------------|
| 2007-2008 | $ 63,372,595 |
|------------+--------------------|
| 2008-2009 | $ 56,215,286 |
|------------+--------------------|
| 2009-2010 | $ 57,361,034 |
|------------+--------------------|
| 2010-2011 | $ 52,911,028 |
|------------+--------------------|
| 2011-2012 | $ 52,652,284 |
|------------+--------------------|
| 2012-2013 |$ |
| |59,426,032 |
---------------------------------
* Generally, recoveries are split 50 percent General Fund /50
percent Federal Funds.
3.Scope of services subject to Medi-Cal estate recovery. Under
federal law, states must seek recovery for medical assistance
paid on behalf of the following individuals:
a. Permanently institutionalized individuals (of any
age); and,
b. Individuals age 55 and older receiving NFS, HCBS,
and related hospital and prescription drug services.
States have the option to recover from individuals age 55 and
older for health care services (services beyond NFS and HCBS),
including the total amount spent on a beneficiary's behalf for
any or all other items or services under the state's Medicaid
plan. This includes capitation payments paid on behalf of the
beneficiary to a Medi-Cal managed care plan.
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.
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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.
4.Tracking estate recovery expenditure amounts by mandatory vs.
optional services. 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 plan, DHCS collects based on the amount it paid to the
plan, and not based on the amount of services a person
received.
Under the assumption that estate recovery collections
correlate to the total Medi-Cal expenditures for beneficiaries
over the age of 55, a policy change (such as proposed by this
bill) to remove the optional recovery would result in a
decrease in recoveries of 51 percent or $30 million total
funds (roughly half this amount in General Fund revenue),
based on 2012-13 estate recovery collection of $59 million.
One of the questions asked of committee staff by individuals
who are either on Medi-Cal, or deciding whether to apply for
coverage, is how much Medi-Cal is spending or will spend on
their behalf that is subject to estate recovery. The DHCS
estate recovery website and the current estate recovery
brochure do not have guidance on how to obtain this
information.
DHCS indicates 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's Third Party
Liability and Recovery Division upon request. DHCS indicates
information on Medi-Cal managed care premium/capitation
payments may not be readily available from the DHCS Medi-Cal
Managed Care Division. 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
obtaining this report is $25.
5.ACA Medicaid changes and federal guidance on application of
estate recovery. The federal Affordable Care Act (ACA) expands
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Medicaid coverage to previously ineligible adults under age 65
with incomes under 138 percent of the federal poverty level.
In addition, the ACA also changes income counting and asset
eligibility rules for parents, children, and pregnant women,
who were already eligible for Medicaid. Eligibility for these
categories of recipients is now calculated based on "modified
adjusted gross income," or MAGI, and there is no asset test
for persons who become eligible for Medicaid under MAGI rules.
Estate recovery is more likely to affect more individuals
because the number of people eligible under Medi-Cal has
increased, but also because some of the new beneficiaries may
have some assets, such as a home or a savings account, but who
are now Medi-Cal eligible if their income has declined from
some reason, such as because of job loss.
States, advocates, and members of Congress began raising the
issue as to whether existing estate recovery requirements
apply to persons eligible for Medicaid based on MAGI. On
February 6, 2014, the Democratic Congressional leadership
wrote to Department of Health and Human Services Secretary
Kathleen Sebelius stating that Congress did not intend for
estate recovery to apply to working-age uninsured individuals
for whom Medicaid provides basic health insurance coverage.
On February 21, 2014, the federal Centers for Medicare and
Medicaid Services (CMS) issued a State Medicaid Director
Letter that indicated estate recovery applies to individuals
whose income is determined based on MAGI who were 55 years old
or older when they received Medicaid. However, CMS also stated
that "(D)ue to the potential barrier to enrollment that future
estate recovery may create for some individuals, CMS intends
to thoroughly explore options and to use any available
authorities to eliminate recovery of Medicaid benefits
consisting of items or services other than long term care and
related services in the case of individuals who are determined
eligible for Medicaid benefits using the MAGI methodology."
6.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 "by distribution or survival." For example, if a
husband who was on Medi-Cal died, and the home was in both of
the husband and wife's name when he died, DHCS can file an
estate claim against his half of the property after the
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surviving spouse (the wife) dies.
CMS has indicated spousal estate recovery is optional for
states, and this bill would eliminate spousal recovery.
Medi-Cal beneficiaries can avoid spousal recovery through
estate planning. For example, when a Medi-Cal beneficiary
transfers a jointly 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.
7.Deletion of proportionate share recovery language. This bill
deletes language in existing law that has been struck down in
court. That language allowed DHCS to claim against a deceased
former Medi-Cal beneficiary's estate for the "proportionate
share" of the estate left to individuals who did not quality
for an exemption. In Dalzin v. Belshe (1997), two separate
deceased Medi-Cal beneficiaries left their estates to their
children. Both Medi-Cal beneficiaries had sons who were
disabled and thus entitled to an exemption from estate
recovery. DHCS filed an estate claim against the non-disabled
children of the families. The court granted a permanent
injunction, prohibiting DHCS from claiming against the
non-disabled child's portion of a beneficiary's estate.
8.Previous legislation. AB 2493 (Lieber) of 2004 would have
prohibited the Department of Health Services (DHS was the
predecessor to 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, 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.
9.Support. This bill is jointly sponsored by the California
Advocates for Nursing Home Reform (CANHR) and the Western
Center on Law & Poverty (WCLP) which argue this bill would go
a long way toward fixing this enrollment barrier by
eliminating the portions of estate recovery which are
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optional. WCLP states that, under the ACA, most individuals
are required to have health coverage or they will face a
financial penalty. With the expansion and streamlining of
Medi-Cal and the availability of tax credits through Covered
California, there is an unprecedented push to enroll
Californians in public and subsidized health coverage
programs. 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, effectively turning Medi-Cal into a long term loan
and not a safety net program. WCLP states that, though some
people would rather enroll in Covered California and pay a
small premium rather than be subject to Medi-Cal estate
recovery. WCLP states it has heard of many instances of
consumers simply not signing up for coverage as a result of
estate recovery.
WCLP states that, while not eliminating Medi-Cal estate recovery
altogether, this bill would limit it as much as is federally
allowable. Consumers would be assured that their estates would
only be recovered against for long-term care and related
services and not simply for having basic health coverage. It
would also help consumers know the amount their estate may be
recovered against by requiring that DHCS provide them or their
representative with this information as consumers currently
have no way of knowing how much the monthly capitation cost
for their Medi-Cal plan is or what other costs they are
responsible for and consequently have no way of knowing how
much their estate could be recovered against.
WCLP concludes that seeking estate recovery from the new ACA
adult expansion population makes little fiscal sense for the
state, as the cost of Medi-Cal for this new group is 100
percent federally funded and any sums recovered against from
this group must be turned over to the federal government.
Consequently, recovery against this group effectively turns
the Medi-Cal program into a collection agency for 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, even if they
eventually go off of Medi-Cal, as the estate recovery claim
stays with them all of their lives. CANHR argues Medi-Cal
recovery disproportionately affects minority homeowners who
enroll in Medi-Cal, as they are often not informed of their
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rights, they are unable to afford costly estate planning
attorneys to avoid recovery in the first place, and they end
up with "voluntary" liens at a 7 percent interest rate on
homes that have been in their families for years. CANHR
concludes that this bill not only addresses a major barrier to
enrollment, but it brings fairness and equity to a recovery
system that has for too long preyed on the inability of
low-income consumers and their spouses to assert their rights
under the law.
10.Policy issues:
a) Pro and con arguments for estate recovery. Proponents of
Medicaid estate recoveries argue that Medicaid is a
chronically strapped program for the poor, and that estate
recovery shifts some of the burden of paying for long-term
care from the taxpayer to the estates of deceased
recipients. States can then spend their share of recovered
funds to preserve or expand their Medicaid coverage of
services for needy populations, although they are not
required to do so.
Opponents of Medicaid recoveries argue that the practice is
unfair in that it mainly affects people of very modest
means, while sparing those who are able to access advice on
estate planning techniques that shelter assets. Further,
estate recovery clashes with broadly held cultural values
on the sanctity of intergenerational legacies. Others argue
that the threat of estate recovery causes people to forego
Medicaid funded services when they need them or discourages
adult children from seeking Medicaid for an ill parent,
whose health or functional abilities may deteriorate as a
result. This avoidable decline in health status may lead to
higher medical costs later on.
b) Can the state only collect for services rendered for
Medi-Cal managed care enrollees? The CMS State Medicaid
Manual addressing estate recovery indicates states that
recover for all Medicaid services must recover from the
individual's estate the total capitation rate for the
period the beneficiary was enrolled in the managed care
organization. For states that recover for some services but
not all services, states must recover from the individual's
estate that portion of the capitation payment that is
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attributable to the recoverable services, based on the most
appropriate actuarial analysis determined by the State. It
is unclear if CMS will grant approval for only collecting
the lower of the amount spent by the plan on health care
services for each beneficiary or the monthly capitated
basis, as this bill proposes, versus the monthly amount
paid to the managed care plan.
SUPPORT AND OPPOSITION :
Support: California Advocates for Nursing Home Reform
(co-sponsor)
Western Center on Law and Poverty (co-sponsor)
American Federation of State, County and Municipal
Employees, AFL-CIO
Asian Americans Advancing Justice
Asian Law Alliance
Bet Tzedek Legal Services
California Association of Physician Groups
California Health Advocates
California Pan-Ethnic Health Network
Consumers Union
Disability Rights California
Disability Rights Education and Defense Fund
Legal Aid Society of Orange County
Legal Aid Society of San Mateo County
Long Term Care Ombudsman Services of San Luis Obispo
County
Health Consumer Alliance
National Health Law Program
National Senior Citizens Law Center
Private Essential Access Community Hospitals
SEIU California
31 Individuals
Oppose: None received
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