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| State Sen. Ed Hernandez |
When states change their Medicaid estate recovery laws, it is almost always to expand the laws' reach. But not California this year, it seems. In what advocates are calling “the most comprehensive Medi-Cal Reform measures since 1993,”the state’s 2016-17 budget bill just passed by the legislature limits future recoveries only to the probate estate and bars recovery from surviving spouses. (“Medi-Cal” is California’s name for its Medicaid program.) California governor Edmund G. "Jerry" Brown Jr. is expected to sign the bill. [Update: Gov. Brown signed the bill June 27.]
Under current law, California's definition of "estate" includes such assets as living trusts, joint tenancies, tenancies in common, TOD accounts and POD accounts, and life estates, although claims on the remainder interest in life estates are limited to those that were revocable. The estate recovery program takes in about $59 million annually, compared to Medi-Cal’s spending of $56 billion, according to a recent Justice in Aging presentation.
For years, California Advocates for Nursing Home Reform (CANHR) and the Western Center on Law and Poverty have been pushing to eliminate recovery against homes, seeing the practice as de-stabilizing low-income communities, where residents do not have ready access to elder law attorneys and do not necessarily know how to avoid estate recovery.
The estate recovery changes in the new budget were championed in the legislature by State Sen. Ed Hernandez (D-West Covina). “Estate recovery forces people over age 55 who need Medi-Cal to choose between their own health care and passing on modest possessions to their heirs,” Sen. Hernandez said in a statement after the budget was passed. “I have been fighting for three years to limit the scope of California’s Medi-Cal estate recovery to only what is required under federal law. California’s practice is fundamentally unfair to the lowest income Californians who need Medi-Cal for basic health services.”
CANHR lists the highlights of the estate recovery changes as follows:
- No recovery on the estates of surviving spouses;
- Recovery limited to only that required by federal law, i.e., for those 55+ years of age, nursing home facility, home and community based services, etc. or any age if person “permanently institutionalized");
- Waiver of claim for homesteads of modest value;
- “Estate” limited to probate estate - thus, living trusts, JTs, TODs, etc. will not be subject to recovery
- Interest on liens will be limited (currently at 7%).
The bill defines “modest value” as “a home whose fair market value is 50 percent or less of the average price of homes in the county where the homestead is located, as of the date of the decedent’s death.”
The estate recovery changes are part of a series of “trailer bills” tacked onto the main budget bill awaiting the governor’s signature. The estate recovery provisions can be found in section 22 of SB 833.
“Both legislative representatives and representatives of the Department Healthcare Services worked out the language together, and observers therefore feel that the governor will sign the bill,” Hayward, California, ElderLawAnswers member attorney Gene Osofsky told us in an email communication.
“By my reading of the new law, I think it will involve a major change as to recovery,” Osofsky said. “In fact, as one colleague observed, since most seniors do have living trusts and/or financial account assets in TOD or POD accounts, it might in the future be the rare case where we see estate recovery.”
Once signed by the governor, the new provisions would be applicable to the estates of those who die on or after January 1, 2017.
To read the bill, click here. Section 22 begins on page 46.
Our thanks to California ElderLawAnswers member attorney Gene Osofsky for giving us the heads up that the new budget contained these significant provisions.
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