BILL ANALYSIS �
SB 1124
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Date of Hearing: June 17, 2014
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
SB 1124 (Ed Hernandez) - As Amended: March 26, 2014
SENATE VOTE : 30-5
SUBJECT : Medi-Cal: estate recovery.
SUMMARY : Limits 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. Specifically, 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 of Health Care Services (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 collect only amounts identified as being
spent by either DHCS or a Medi-Cal managed care (MCMC) plan
for health care services actually received by the decedent, or
the per member per month payment made to the MCMC 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
request and free of charge. Requires DHCS to permit a
beneficiary to request the information on expenses by the
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Internet, telephone, mail, or in person, to post on its
Internet Website directions for requesting the information,
and to include this information in its pamphlet for the
Medi-Cal Estate Recovery Program and any other notices DHCS
distributes to beneficiaries regarding estate recovery.
6)Repeals the estate recovery statute struck down in court that
requires "proportionate share" recovery from a former Medi-Cal
beneficiary's estate when there are both decedents entitled to
an exemption from recovery and decedents who are not.
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.
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 a surviving spouse during his or her
lifetime, a surviving child who is under age 21, or, 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.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1)One-time costs likely less than $100,000 to revise regulations by
DHCS (50% General Fund, 50% federal funds).
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2)Annual revenue loss up to $30 million per year (50% General Fund,
50% federal funds) in foregone claims on the estates of
Medi-Cal beneficiaries who would have been eligible for
Medi-Cal under the pre-Affordable Care Act expansion.
By limiting the categories of services that DHCS can claim
from deceased beneficiaries' estates, the bill will reduce
future collections. Over the last decade, DHCS has collected
between $50 million and $60 million per year from deceased
beneficiaries' estates. DHCS does not track claims based on
the types of services that were provided, thus, there is
uncertainty about the loss of claims revenue that would occur
under the bill. Based on the share of current Medi-Cal
expenditures on behalf of beneficiaries over 55 years of age
for services that would no longer be subject to estate claims,
DHCS indicates that roughly half of current claims would no
longer be allowed under the bill.
3)Unknown future revenue loss from foregone claims on the estates
of deceased Medi-Cal beneficiaries eligible under the Medi-Cal
expansion beginning in 2017 (5-10% General Fund, 95-90%
federal funds). As part of its implementation of the Federal
Patient Protection and Affordable Care Act (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. The size of this impact is not known, as
information about the cost to insure this population and the
likelihood that there will be recoverable assets is not known
at this time.
It is important to note that for the Medi-Cal expansion
population, the federal government will pay 100% of the cost
at first, declining to 90% of costs over time. Any cost
recovery made by the state from this population would largely
be returned to the federal government. Therefore, the General
Fund impact from eliminating some cost recovery from this
population is limited.
4)Unknown future revenue loss, to the extent federal recovery
requirements are changed (General Fund and federal funds). In
addition to specifically eliminating cost recovery for certain
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services, the bill also prohibits DHCS from making cost
recovery for any Medi-Cal costs for which the federal
government authorizes the state to eliminate from cost
recovery. The fiscal impact of this provision is unknown, as
it would depend on future federal action.
COMMENTS :
1)PURPOSE OF THIS BILL . 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. The author argues 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. 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. 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 MCMC plans, irrespective of the health
care services the Medi-Cal beneficiary actually received from
the health plan. By encouraging beneficiaries to forgo
enrollment until they have a need for expensive care, estate
recovery may lead to higher program costs in the long run,
according to the author.
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
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% 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.
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2)BACKGROUND . 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 state's estate recovery is governed by the state's Medicaid
State Plan. Estate recovery claims are filed when the state
pays more than $750 for health care services. Claims can also
be filed for amounts less than $750 when the state expects to
recover more 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% 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 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
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state Health Care Deposit Fund, which funds Medi-Cal.
3)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 MCMC plan.
California 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
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's Third Party Liability and
Recovery Division upon request. DHCS indicates information on
MCMC premium/capitation payments may not be readily available
from the DHCS MCMC 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 this report is $25.
4)EMERGING FEDERAL POLICIES . The ACA expands Medicaid coverage
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for adults under age 65 with incomes under 138% of the federal
poverty level, a group not eligible before the ACA was
enacted. The ACA also changes income calculation 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 for
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 21, 2014, the federal Centers for Medicare and
Medicaid Services (CMS) issued a State Medicaid Director
Letter stating that 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
acknowledged this policy may create potential barriers to
enrollment for some individuals. As a result, 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.
5)SPOUSAL RECOVERY. 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 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.
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6)PREVIOUS LEGISLATION . AB 2493 (Lieber) of 2004 would have
prohibited DHCS of Health Services (DHS was the predecessor to
DHCS) from claiming against the surviving spouses of Medi-Cal
beneficiaries, 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
exempted from estate recovery services provided through the
IHSS program. AB 2493 was held on the Assembly Appropriations
suspense file.
7)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
help reduce this 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. 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. WCLP states some people report they 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 this bill ensures consumers 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 of estate recovery
by requiring that DHCS provide them or their representative
with this information. 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% federally funded and any sums recovered
against from this group must be turned over to the federal
government.
CANHR states it has received numerous emails and phone calls
from low income and minority homeowners who are reluctant to
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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. CANHR argues Medi-Cal recovery
disproportionately affects minority homeowners who enroll in
Medi-Cal, as they are often not informed of their rights, they
are unable to afford costly estate planning attorneys to avoid
recovery in the first place, and they end up with liens at a
7% 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.
REGISTERED SUPPORT / OPPOSITION :
Support
Western Center on Law and Poverty (sponsor)
AARP
American Federation of State, County and Municipal Employees,
AFL-CIO
Asian Law Alliance
California Advocates for Nursing Home Reform
California Pan-Ethnic Health Network
California School Employees Association
California State Council of the Service Employees International
Union
Consumers Union
Executive Committee of the Trusts and Estate Section of the
State Bar of California
Legal Aid Society of San Mateo County
National Health Law Program
National Senior Citizens Law Center
Opposition
None on file.
Analysis Prepared by : Roger Dunstan / HEALTH / (916) 319-2097