Senate bill to protect patients

As an attorney specializing in estate planning, trusts and probate, Nicole Plottel knows about a provision of public health insurance that many Californians don’t—but likely will very soon.

It’s called “estate recovery.” After a Medi-Cal subscriber dies, the state can make a claim against assets bequeathed to heirs to recover money paid out for medical services. Exemptions do preclude many families from facing repayment, but the state still makes thousands of recoveries annually, generating tens of millions of dollars.

“This is a surprise for a lot of people,” Plottel, partner in the Chico law firm Harris & Plottel, said of Medi-Cal estate recovery.

Even well-versed subscribers may not realize all that’s at stake.

“A lot of people think their home is exempt—which it is for eligibility purposes—and so they have this misconception that it’s also protected from recovery,” Plottel said.

Attention on estate recovery has magnified since a reform bill—Senate Bill 1124—passed the Legislature in late August. It would scale back the practice, most notably prohibiting claims against the estates of surviving spouses and limiting the types of health care services that qualify.

Gov. Jerry Brown had a month to sign or veto SB 1124. (As of the CN&R’s press deadline, he had done neither, in the face of budget pressure for a veto.)

Estate recovery is not new. California implemented it in 1981—12 years before the federal government required states to attempt to recoup Medicaid expenditures on long-term care (that is, permanent institutionalization of patients of any age, or extended support for patients 55 and older). Extending estate recovery to other medical services is each state’s choice; California opted to in 1993.

Primarily an issue involving older-adult subscribers, estate recovery piqued the attention of state legislators with the expansion of Medi-Cal under the Affordable Care Act. Instead of considering assets along with income to determine if applicants exceed program limits, the state began using only income. So-called “expanded Medi-Cal” also has recovery rules distinct from “traditional Medi-Cal,” including an age exemption.

In the text of SB 1124, Sen. Ed Hernandez (D—West Covina) calls estate recovery “a deterrent to signing people up for Medi-Cal” and says it undercuts the notion of insurance “by essentially turning Medi-Cal coverage for basic medical services into a loan program, with collection taking place at death.”

Norman Williams, deputy director of public affairs for the California Department of Health Care Services, told the CN&R that Medi-Cal estate recovery “only affects a very, very small proportion of our members. The amount we collect is quite low compared to the amount spent on the program … and there are many opportunities for people to avoid these types of estate recoveries.”

Since 1993, California has collected $978 million through estate recovery, which DHCS says represents .15 percent of the $621 billion spent on Medi-Cal in that 20-year span. The Department of Finance’s analysis of SB 1124 cites a budget impact of $30 million for fiscal year 2014-15, including a $15 million loss from the general fund.

DHCS does not estimate how many recoveries it attempts but, rather, reports how many cases it closes. For fiscal year 2012-13, that was nearly 4,000. The average claim is $95,000, DHCS says, with the average amount collected $15,000.

“Hardship exemptions are easy to submit,” Williams said, “and we will consider that in making our determination. In many, many cases that is accepted, as you can tell by the average collection as compared to what we normally ask for.”

If a Medi-Cal member owns nothing upon death, DHCS says, the state will seek nothing. The state also will not pursue recovery from a living spouse/domestic partner or a child under 21 (any age if blind or disabled).

Otherwise, the state can make a claim—within three years of notifying the trustee—either equaling the cost of Medi-Cal services provided or the value of the estate, whichever is less.

SB 1124 aside, Plottel said Medi-Cal subscribers can use methods such as trusts and asset transfers to avoid estate recovery, but “you don’t want to revolve your estate plan around potential Medi-Cal recovery.”