(Erik Soderstrom via Flickr)
(Erik Soderstrom via Flickr)

Catherine Jarett ran into a nasty surprise after she sent a form to Medi-Cal on behalf of her clients. An estate attorney, Jarett was hired by the sons of an elderly Vallejo woman who had died. The woman had been enrolled in Medi-Cal, the state’s insurance program for the poor, for more than 20 years.

After Jarett filed the form with Medi-Cal — a death notice as required — the state sent a bill for a hefty $76,349. Jarett was stunned. It was for the cost of “health insurance, vision insurance, dental insurance,” she said.

The bill was part of Medi-Cal’s “estate recovery program.” Under a federal law not widely known to consumers, states can seize assets of Medi-Cal beneficiaries after they die. “I was never aware of this wrinkle that they could recover for health insurance,” Jarett said.

Jarett’s clients did not want to speak to reporters, but Jarett said they insisted their mother had not been to the doctor in years and had even died at home. Jarett said the charges included a breakdown by month of the state’s payments to a managed care plan as part of Medi-Cal.

While federal law mandates that states recover for nursing home care, the law makes it optional that states recover for medical services — doctor visits, hospital stays and the like — for people 55 and over. Advocates say most states do not do this optional recovery, but California does.

“It’s an awful system, and it needs to be changed. It absolutely needs to be changed,” said Pat McGinnis, executive director of California Advocates for Nursing Home Reform. Her group is sponsoring a bill, SB33, introduced by state Sen. Ed Hernandez (D-West Covina), that would abolish this optional recovery. The bill will be heard by the Senate Health Committee on Wednesday.

Last year, a similar bill sailed through the Legislature, but was ultimately vetoed by Gov. Jerry Brown. Still, in a statement last September when he vetoed the bill, Brown left an opening. He said estate protection might be a “reasonable policy goal,” but that the cost “needs to considered alongside other worthwhile policy changes.”

Figuring out that cost is a challenge. In 2013-14, the state recovered $61 million in 3,900 cases, said Carol Sloan with the Department of Health Care Services. But the state does not break down how much of that $61 million is for nursing home care and how much of it is for medical services.

For perspective, $17.8 billion in state general fund dollars went to Medi-Cal last year. The total budget for Medi-Cal is significantly more than that after adding in federal dollars, various taxes and more — $85.7 billion.

‘Leery’ of Medi-Cal

Like the attorney Jarett, Anne-Louise Vernon, 60, of Campbell, had never heard of estate recovery. She had been “so looking forward,” she says, to signing up for insurance under the Affordable Care Act. Her income was so low that she did not qualify for subsidies to purchase insurance on the Covered California marketplace. Instead, she qualified for Medi-Cal.

Vernon said she was “leery,” and asked if there were strings attached. “I was told, ‘No, no, it’s completely free.'” She said it was some time later, when she was looking around online, that she found a reference on an FAQ page about assets being seized. She was furious.

“So you’re breaking the law if you don’t have health insurance,” Vernon said, in reference to Obamacare’s “individual mandate” that everyone have health insurance, and then she was “force(d) into Medi-Cal; they don’t tell people it’s a loan.”

Vernon held onto her home years ago after a divorce, but said she was “involuntarily retired” and has been living on savings. She knows she could shelter her home but doesn’t want to take that step. “I’m 60! I’m not going to sign my house over to my kids at this age.”

For other people, attorneys’ fees to take the legal steps to shelter a property are a big issue. “People who end up on Medi-Cal are poor people,” said McGinnis. “They usually have pretty poor houses, and they’re the ones that usually cannot afford to pay an attorney $300-400 an hour.”

‘Collection Agency for the Feds’

Estate recovery has become a much bigger issue since the rollout of Obamacare started more than a year ago. Under the expansion of Medicaid, people earning up to 138 percent of the federal poverty level are eligible (in states like California that are participating in the expansion). But for those people, 100 percent of the cost of their health coverage is borne by the federal government for the first three years, drifting down to 90 percent after that, and any recovered money would be returned to the federal government.

“What are we? A collection agency for the feds?” asked McGinnis, who also says CANHR is hearing from consumers who will disenroll from Medi-Cal if the policy has not changed. Other advocates believe the policy is a barrier to enrollment for some people.

For now, Vernon is staying on Medi-Cal. Like 80 percent of Medi-Cal beneficiaries in California, she is enrolled in a managed care plan. When she wanted to know what her Medi-Cal coverage cost, she spent “hours and hours on the phone” calling both her managed care plan and the state, she says, and got the runaround from both of them. No one could tell her what her coverage cost.

Finally, an advocate sent her a link to the exact page on a state website where she could find out how to file a request for information — with a $25 fee. She finally got an answer: $578.71 a month. If she stays on Medi-Cal for another five years until she’s 65, when she becomes eligible for Medicare, the state will have paid almost $35,000 for her managed care premium. After she dies, the state could bill her estate for that amount — or more, if she continues on Medi-Cal.

Ironically, if Vernon, and others like her, earned just a bit more money, they would qualify for heavily subsidized private insurance through the Covered California exchange. The state estimates that the “per member per month” premium for those newly eligible for Medi-Cal is $620.98, or nearly $75,000 over 10 years.

Vernon plugged her age and Zip code into the Covered California insurance calculator, but increased her income to $17,000 to see what would happen.

She found she could get a plan for as little as $31 a month, “estate recovery free,” she noted. These plans come with a $2,250 out-of-pocket limit, but even if a 55-year-old maxed that out every year, the 10-year total of deductible plus premium is $26,220 — about $50,000 less than what would be accrued on average on Medi-Cal, with no estate recovery.

Sally Schilling, a student at the UC Berkeley Graduate School of Journalism produced this piece about estate recovery which aired Tuesday on PBS NewsHour:

Update: This post has been updated to reflect the amount for the average newly-eligible person to Medi-Cal. It is $620.98 per month. 
On Medi-Cal Now, Lose Your House Later? 10 November,2015Lisa Aliferis

  • jskdn

    The reason that those who wrote the ACA didn’t allow people under the income thresholds to choose exchange insurance is because, at low incomes, it costs the federal government more than for coverage under Medicaid. It’s not just the premiums subsidies, which for a 60-year old in Campbell with a $17000 income are $8400 a year, but also the cost-sharing subsidies, which turn a Silver 70% insurance value policy, the reference plan for calculating subsidies, into something quite different. I wouldn’t be too surprised if those additional subsidies didn’t increase the cost to the government by 50% for people just over the Medicaid threshold. So it might cost the government twice as much to subsidies exchange coverage versus Medicaid coverage and yet Governor Jerry Brown wants that Medicaid coverage to be treated as a loan against their estates.

    By the way, hitting the the $2250 maximum out-of-pocket costs every year is very unlikely if you look at the terms of the policy for someone making $17000 a year. Try putting up a comparison chart of those terms between that person and some who has the same policy without cost-sharing subsidies.

    • TrueLib

      It’s not Jerry Brown. California law historically had estate recovery for Medi-Cal beneficiaries 55 and over. Before the ACA) there was an asset test for receiving Medi-Cal benefits, so if you had sigificant assets you couldn’t get it. No harm. No foul. The ACA eliminated the asset test, which now means you could be steered into Medi-Cal if your current income drops below a certain level (even if you own a house or have other assets). Eligibility is based solely on income. If your income is low enough, you can’t get a subsidy. So instead of being allowed to buy an actual affordable health insurance policy, you get Medi-Cal, and while you may think it’s a form of insurance it’s really a loan against your estate. The proposed SB 33 would eliminate California estate recovery for that coverage through Medi-Cal. That said, estate recovery will continue on Medicaid expenses for Long Term Care (nursing homes and community care).

      • jskdn

        “Last year, a similar bill sailed through the Legislature, but was ultimately vetoed by Gov. Jerry Brown.” Since there was no opposition to that bill, how is it not Jerry Brown’s doing?

        The ACA intended to get rid of the assets test, but Jerry Brown, by himself, preserved it for people in California under the poverty threshold. Why on earth anyone would defend Brown’s actions is beyond me. It that what being a “TrueLib” is these days?

        • TrueLib

          I’m not defending Jerry Brown. I blame him for vetoing the bill. I don’t blame him for the previous existence of Estate Recovery in California, which has been in place for more than 20 years.

          • jskdn

            But it’s not the previous law that’s at issue and at odds with the intent of the ACA. There wasn’t an entitlement to health coverage based only on income, without regard to assets. So a law before the ACA wasn’t a problem. Ending it as the ACA went into effect wasn’t a hard case, it is clearly the right thing to do. Other states quickly acted, and there was not opposition in the California legislature. Jerry Brown definitiely deserve blame for choosing to do the wrong thing to so many low-income people. He treated those people unfairly and there’s no excuse.

          • TrueLib

            I agree…which is why I sent him a complaint when he vetoed the earlier bill, and why I sent him another email urging him to sign SB 33, if and when it arrives on his desk.

  • Steve Mclean

    can’t comment on th ethics of it, but the “transparency is lacking, I presume so people will not dispose o
    f property before they die, leaving it out of reach of the state.

    • oski88

      The state can take the assets of anything you owned starting the date you start to take mediCal. So if you sell your house and have the assets or simply give it to your kids, they can go and take it away from your kids – you can not shelter from the clawback.

  • J

    Does anyone know what happens if you share the home on the title with an adult child?

  • lorry frey

    I admit I didn’t read the whole story, but as a nurse I have seen families clean out their Mom’s home sell everything and claim she is indigent. She was then placed in a nursing home as a Medicaid patient. The state then put liens on the person’s property and I don’t have a problem with that!

    • Veri1138

      Then the rules should be changed to reflect that.

      • TrueLib

        That’s already exactly how the current law works. Costs of long-term care (nursing homes or community care) are recovered by the state.

        • Veri1138

          Should be more about catching high income individuals trying to cheat the state.

          • TrueLib

            Like I said, that’s the way it is already. If you’re 55 or over, if you have any significant assets your estate will owe the money back to California. The repayment currently includes all costs, including health plan premiums paid on your behalf, even if you never go to doctor.

          • Veri1138

            I support ACA as far as it allows some to get cheap insurance (the rest of the premium paid for by direct transfer from The US Treasury to health insurance corporations – so it isn’t exactly affordable).

            ACA tried to stiff me with a $647 Bronze plan. Over $1700 for my family. Thanks for VA, however.

            We need single-payer and Obama started shoveling dirt into that grave. ACA hides costs. Shifts costs. And the Medicaid honeymoon is over, doctors are leaving now that the moratorium on Medicaid payment cuts has expired.

          • jskdn

            There is no choice between Medi-Cal or exchange coverage. If you don’t exceed the qualifying income threshold, you can’t buy in the exchanges and can only get a loan against your assets for Medi-Cal coverage. The reverse is also true.

          • TrueLib

            You’re correct. If you’re below the threshold there is no choice between Medi-Cal or exchange coverage, but I was responding to a point about cheating. There’s no choice, unless you lie about your income.

  • knowyourrights

    The estate attorney didn’t already know this? No mention of irrevocable trusts in this article, it is a way to protect your home should you need medi-cal.

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Lisa Aliferis

Lisa Aliferis is the founding editor of KQED's State of Health blog. Since 2011, she's been writing and editing stories for the site. Before taking up blogging, she toiled for many years (more than we can count) producing health stories for television, including Dateline NBC and San Francisco's CBS affiliate, KPIX-TV. She also wrote up a handy guide to the Affordable Care Act, especially for Californians. Her work has been honored for many awards. Most recently she was a finalist for "Best Topical Reporting" from the Online News Association. You can follow her on Twitter: @laliferis

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