BILL ANALYSIS �
SB 1124
Page 1
Date of Hearing: July 2, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 1124 (Hernandez) - As Amended: March 26, 2014
Policy Committee: HealthVote:18-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill limits recovery from the estate of a deceased Medi-Cal
beneficiary, to those costs for health care services the state
is required to recover under federal law. It also:
1)Requires the Department of Health Care Service (DHCS) to adopt
emergency regulations.
2)Requires DHCS to only collect amounts identified as being
spent by either the department or a Medi-Cal managed care plan
for health care services actually received by the decedent, or
the per member per month payment, whichever is less in that
month.
3)Requires DHCS to provide a current or former beneficiary, upon
request and free of charge, the total amount of Medi-Cal
expenses that would be recoverable from that beneficiary, and
specifies how DHCS must make information regarding these
requests accessible.
4)Applies this bill to deaths on or after January 1, 2015.
FISCAL EFFECT
1)One-time costs to DHCS, likely less than $100,000, to revise
regulations (50% GF/ 50% federal).
2)One-time administrative costs in the range of $50,000 to DHCS
to develop procedures and make Information Technology system
changes necessary to provide personalized information to
beneficiaries upon request. There will also be some level of
ongoing administrative costs to provide such information. If
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5,000 people per year request such information, at a cost of
$25, annual costs will be $125,000 (25% GF/ 75% federal).
3)Based on narrower estate recovery rules, potential
administrative cost savings from fewer staff working on estate
recovery. 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
could result in a significant reduction in the need for estate
recovery staff.
4)Annual revenue loss estimated at $17 million per year (50% GF/
50% federal). By limiting the categories of services 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
estates. This analysis assumes most estate claims include
costs for both optional and mandatory services. Since average
claim amounts are much greater than average settlement amounts
given many estates are fairly small, this analysis also
assumes settlement amounts will remain similar for the
majority of estate claims because the state is federally
required to recover for long-term care services, and most
claims will include significant costs for such services. Most
of the revenue loss is associated with individuals who only
incurred medical costs but who did not incur any long-term
care costs, for whom recovery is currently done at state
option and who would be exempt from recovery under this bill.
This revenue loss would likely grow in future years, due to
foregone claims on the estates of additional Medi-Cal
beneficiaries who would have been eligible for Medi-Cal under
the pre-Affordable Care Act (ACA) expansion. 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 will be larger than it has been over
the previous decade, and there is a somewhat greater
likelihood that beneficiaries will have assets against which
the state could submit a claim.
5)Unknown future revenue loss from foregone claims on the
estates of deceased Medi-Cal beneficiaries eligible under the
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Medi-Cal expansion 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. 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 by 200. 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.
6)Potential additional future revenue loss, to the extent
federal recovery requirements are changed (GF/federal). In
addition to specifically eliminating cost recovery for certain
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. For the existing
Medi-Cal population, the maximum foregone revenue could be up
to $30 million per year (50% GF/ 50% federal) if the federal
government authorized the state to eliminate all estate
recovery.
7)The provision limiting recoverable costs to the amounts
identified as being spent by on services, or the per member
per month payment, whichever is less in that month, will also
independently decrease estate recovery revenues by some
unknown amount (GF/federal).
COMMENTS
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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
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.
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,
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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 a recovery
system that has preyed on the inability of low-income
consumers and their spouses to assert their rights under the
law.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081