New California Law- Medi CAL Will Dramatically Scale Back Estate Recovery

As California’s answer to Medicaid, Medi-Cal is funded by both the federal and state government. It was created to provide low or no-cost medical care for low income/low resource CA residents. Eligibility is determined by such factors as income, assets, age and disability.

In January of 2017, new rules were set in place regarding Medi-Cal. Some of these changes will have a direct effect on estate recovery. In the following article, we will discuss these changes and how they apply to estate recovery.

Prior to 2017, the state of CA allowed claims on the estates of those Medi-Cal recipients aged 55 or older. For the past 20 or so years, these claims were eligible regardless of whether or not the recipients dwelt in a nursing facility. Upon their death, the state sent the heir of the estate an “estate recovery claim.” This claim was for the amount of the benefit paid to the decreased party.

New Changes To The Medi-Cal Law Effective For Those Who Died On Or After January 1, 2017

As of January 1, 2017, the following provisions were made regarding Medi-Cal and estate recovery:

  • Recovery is limited for those 55 or older solely to Home and Community Based services and nursing home residents
  • Prohibit claims for surviving registered domestic partners and spouses
  • Recovery is limited to only those cases that are subject to CA probate.
  • The state is required to waive a claim due to a substantial hardship if the estate recovery is of modest value.
  • The state is required to provide the current beneficiary and their liaison with a copy of the expenses that are subject to recovery.
  • The amount which a state can charge on liens is restricted.

The new changes effective on January 1st, limited Medi-Cal recovery to those who died on or after January 1, 2017 and were 55 or older at the time that they received their benefits for hospital visits, prescription drugs, community based services and nursing facility care. Those under the age of 55 are subject to recovery if they were “permanently institutionalized” in a medical institution or facility, and were not expected to be able to return home.

In accordance with the new law, the following services are now subject to recovery:

  • Doctor’s appointments
  • Prescription medications
  • Managed care reimbursements
  • Nursing home care
  • Intermediate care for developmentally disabled individuals
  • Home care
  • Community based services
  • Related hospital and prescription services given to an individual while residing in a long term nursing facility or receiving community or home-based services.

Those who are exempt from estate recovery include the following:

Minors/Disabled Children: If the recipient is survived by a child under the age of 21, the state cannot recover the estate. This renders the claim null and void. As well this applies to disabled children of any age. The child in question does not have to be the heir to the state nor do they have to be living with the recipient of Medi-Cal.

Spouse/Registered Domestic Partner: If the deceased is survived by either a registered domestic parent or spouse, the claim for estate recovery is then null and void. In the case that the spouse or domestic partner also is a recipient MediCal benefits, they will then be subject to estate recovery at the time of their death.

Estate Recovery is limited to probate estate. This means that the state can only make a claim against an estate for the amount of the Medi-Cal benefits paid at the time of death, or equal to the value of the state, whichever is less. Effective under the new law, however, recovery is now limited to those estates which are subject to probate under CA law. A living trust is not eligible for recovery, however a will is subject to probate and is therefore due for recovery at the time of death.

The following property items are exempt from estate recovery claims:

  • Retirement accounts
  • Life insurance policies
  • Homesteads of “modest value” (in which the fair market value is less than 50% of the average home price in which the property is located)
  • Those items which are not subject to probate
    • Living trusts
    • Life estates
    • Mobile homes
    • Joint tenancies
    • And so forth
  • Any property which was transferred prior to the death of the Medi-Cal recipient

All of this may sound overheating. The best way to protect your home is to ensure that nothing remains in your estate after your death. Another safeguard is to execute a durable power of attorney that includes both real estate transfer and gifting clauses.

At Titanium Asset Protection, we know that the changes to Medi-Cal and estate recovery can be quite overwhelming. If you have any questions regarding these changes and how they will affect your estate, please contact us at (714)-827-9955 for a confidential and free consultation. A member of our knowledge and expert staff will gladly assist you with any concerns you may have pertaining the above changes for Medi-Cal recipients.