New Medi-Cal Estate Recovery Rules

June 15, 2017

New Medi-Cal Estate Recovery Rules

Beginning January 1, 2017, the laws which allow the State of California to seek repayment from the estates of Medi-Cali recipients will be severely narrowed. Please note, if the Medi-Cal recipient passes away prior to January 1st, the current recovery laws are still valid. If a recipient passes away on or after January 1, 2017, the State of California may only seek recovery from the recipient’s estate if all of the following are true:

1. recipient was 55 or older when he/she received Medi-Cal benefits for nursing facility services, certain home and community based services and related hospital and prescription drug costs for nursing home care or home and community based services;

2. recipient has no surviving spouse or domestic partner; and

3. recipient has assets subject to a California probate proceeding

The services for which payment is recoverable is limited to the items indicated in Section 1. If an individual passes away prior to January 1, the State of California is still able to recover for routine hospital visits, and other basic health services.

Currently, the recovery laws allow the State to recover, from the estate of the surviving spouse, the Medi-Cal benefits paid for the benefit of the deceased spouse. After the beginning of the year, the State of California is forever barred from seeking recovery, if the Medi-Cal recipient is survived by a spouse or domestic partner. So no matter how large the benefit received by an individual, if the deceased individual was married at death, the State cannot try and recovery the funds, ever. If the surviving spouse is also on the Medi-Cal program, the State is able to try and recover the funds used for the surviving spouse’s benefit only.

If the first two criteria are met, the State can only make a claim on assets subject to a California probate proceeding. As we all know, assets held in a revocable trust are not subject to a California probate proceeding. Therefore, if a single individual has his assets properly titled, no assets are subject to probate, and the State cannot recovery any of the benefits paid. This is a significant departure from current law. Currently, the State uses the broadest definition of estate possible, including assets held in a revocable trust, joint tenancy or assets which have a valid beneficiary attached. As of January 1st, only assets subject to probate proceeding will be subject to recovery.

If all three of the above criteria are met, the State may still be limited in its recovery efforts. If the residence is classified as a “homestead of modest value”, the State may not seek recovery against the real property. A homestead of modest value is a home whose fair market value is 50% or less than the average price of homes in the county where the homestead is located as of the date of the decedent’s death. The exact determination of values have yet to be finalized but should be finished by January 1st.

It is clear the State of California is trying a different approach to its recovery program. It would not surprise me if the State receives thirty percent of the recovery funds it received in 2016, or less. The funding must come from somewhere else or benefits will be severely curtailed. These new laws will allow trust beneficiaries to receive a much larger amount than they would have in 2016. Better to have money in the hands of the people rather than the government.