Six months after her mother died in 2014, Karen Craig opened her mailbox to find a bill for $9,530.06.
It came from Medi-Cal, California’s version of the Medicaid program for low-income people, which was seeking repayment for her mother’s medical care even though she had used her coverage just once, for a routine wellness exam. (Her mother’s medical costs were primarily covered by Medicare, the federal program for seniors, Craig says.)
“I was just shocked and panicked,” says Craig, who lives along California’s central coast.
In the ensuing months, Craig learned that Medi-Cal’s “Estate Recovery Program” could demand posthumous payback from enrollees 55 and over for a broad range of medical costs. For many people, including Craig’s mother, these costs included the monthly payments that Medi-Cal makes to managed care plans to cover its enrollees, even if they didn’t use any medical services.
“We couldn’t believe it,” Craig says. “Other than her house, my mother had no possessions. Heirs should certainly be protected.”
The federal government requires states to recoup specific medical costs — mostly related to nursing home care — from the estates of certain Medicaid beneficiaries who are 55 and older when they die. In some cases, states also can recover costs from younger Medi-Cal members who are patients in nursing homes.
Until now, California was among a minority of states that sought repayment beyond the federal mandate.
California’s policy fueled disbelief and anxiety among Medi-Cal enrollees and their families.
Now, to their relief, the program is changing: If you die on or after Jan. 1, new rules dramatically reduce what can be collected from your estate after your death.
“People who are 55 and over don’t have to worry nearly as much about Medi-Cal recovery now,” says Patricia McGinnis, executive director of California Advocates for Nursing Home Reform.
Today, I’ll explain how the new rules will affect you and your heirs. I also have a warning: An unresolved question could end up exposing hundreds of thousands of enrollees — those who use In-Home Supportive Services — to new posthumous Medi-Cal claims.
How It Works
Under the old rules, the state collected for nearly all Medi-Cal coverage you received after you turned 55.
For fiscal year 2015-2016, California’s estate recovery program collected close to $70 million, says Tony Cava, spokesman for the state Department of Health Care Services, which administers Medi-Cal. That’s up from roughly $53 million in 2011-2012.
Enrollees, legislators and advocates assert that the program unfairly targets older and poor Californians.
“It is an equity issue,” says Linda Nguy, a policy advocate for the Western Center on Law and Poverty.
Sen. Ed Hernandez, D-West Covina, points to other federally subsidized health programs, such as Covered California and Medicare, which don’t go after members’ assets posthumously.
“When Covered California enrollees get subsidies, we don’t say you have to pay it back when you die and we’re going to take your home away from you,” says Hernandez, who championed the changes in the state legislature.
The new rules adopted by lawmakers limit recovery to the federal minimum. That means the state can make claims only for costs primarily related to nursing home care and “home- and community-based services,” such as adult day health care and a pilot program testing the use of assisted living as a Medi-Cal benefit.
However, one critical question looms: The state did not previously recover costs related to In-Home Supportive Services (IHSS), which helps elderly and disabled people who are eligible for Medi-Cal receive assistance at home.
Advocates like McGinnis and Nguy don’t think that policy should change under the new rules.
However, state officials believe the federal government will require California to recover certain IHSS benefits, and they are waiting for official guidance, Cava says.
About three-quarters of the 574,000 Medi-Cal members who used IHSS in the last fiscal year were 55 or over at the time, Cava notes.
That’s a huge group of people who will be exposed to new estate recovery claims if the state changes its policy, McGinnis says.
If it does, she promises a lawsuit.
“Under the current federal guidelines and federal law, they can’t do this,” she says. “If they want to go to court, fine.”
I’ll update you after the state issues its decision.
What Is Changing?
LIMITS ON RECOVERY: As I mentioned, recovery will be limited to federal guidelines. That means Medi-Cal can no longer recover the monthly payments it makes to managed care plans on your behalf unless you’re in a nursing home, receiving home- and community-based services or related hospital and prescription drug services, Cava says. Even then, the state will only recover the portion of the monthly payment that’s related to those services, he says.
Also, the new rules protect a “homestead of modest value” from recovery, which means that a home whose fair market value is 50 percent or less of the average home price in the enrollee’s county at the time of death will be exempt.
SPOUSES: Previously, the state could not go after your assets after you died if your spouse or registered domestic partner was alive. But it could after that person died.
The new rules forbid the state to go after your assets if you have a surviving spouse or domestic partner— even after that person dies.
“Whether the Medi-Cal beneficiary died before or after Jan. 1, 2017, there’s no more recovery from surviving spouses and registered domestic partners,” McGinnis says. “That’s major.”
MORE WAYS TO PROTECT YOUR PROPERTY: The new rules also limit recovery to assets that are subject to probate, which is a legal process that takes place after someone dies.
There are ways to shield your property from probate, including the use of living trusts, joint tenancies, naming beneficiaries on retirement accounts and other legal arrangements, says Dustin MacFarlane, an elder law attorney in the Sacramento area.
Please note that wills are subject to probate, he says.
“Every account should have a named successor,” MacFarlane says. “If you don’t have that, then a court proceeding may be required and Medi-Cal may make a claim in that proceeding.”
INTEREST ON LIENS: The state may ask your heirs to sign a “voluntary lien” on your home if they can’t afford to pay the estate recovery claim. Before the recent changes, the state charged 7 percent interest on those liens, McGinnis says. Under the new rules, people in this situation will usually face a significantly lower interest rate, she says.
If you’re a Medi-Cal enrollee and want a list of medical expenses to date that may be subject to an estate recovery claim, you can submit a request once a year to the state by filling out Form 4017, which will cost $5 after Jan. 1.
And if you’re 55 or over, please talk with a lawyer who specializes in estate planning or elder law and is familiar with Medi-Cal estate recovery. Or reach out to groups like McGinnis’ for guidance (www.canhr.org or 800-474-1116).
Craig, whose mother passed away in 2014, is grateful that the rules are changing for other families. After negotiating with the state, she was able to reduce the amount she owed Medi-Cal but still had to cough up thousands of dollars.
“That completely strapped us,” she says. “We don’t have that kind of money.”