Uh-oh. You are the personal representative of a decedent’s estate, and the decedent was a Medi-Cal recipient over the age of 55 years. You sent the required Medi-Cal notice of death form to the California Department of Health Care Services (the “Department”), which administers California’s Medi-Cal Program (and also includes the California Medi-Cal recovery program), and now you’re waiting for the Department to file its creditor’s claim against the decedent’s estate.
How much will the Department seek to recover for Medi-Cal reimbursement? Which assets can the Department reach into for Medi-Cal estate recovery? What if during Medi-Cal recovery it is determined that estate assets are not enough to cover said claim?
Thankfully, California Welfare and Institutions Code section 14009.5 (“Section 14009.5”) provides clear guidelines on the Department’s right to recovery. However, due to a recent amendment to the statute, Medi-Cal recovery rules now vary depending on whether a decedent died before, on, or after January 1, 2017, which is the effective date of the amendment.
In this article, we will discuss the Department’s right to Medi-Cal reimbursement generally and provide a broad overview of how Medi-Cal recovery rules under Section 14009.5 have changed for individuals who died before versus on or after January 1, 2017 (the “Effective Date”).
What Is the Medi-Cal Estate Recovery Program and Why Does the Department Have a Right to Medi-Cal Repayment After Death?
Medi-Cal, as set forth under Cal. Welfare & Institutions Code section 14000, et seq., is California’s implementation of the federal Medicaid program;[1] it provides California residents who are aged, blind or disabled with affordable health care options.[2]
If an individual is over 55 years old, the Department will exclude the individual’s principal residence when determining Medi-Cal eligibility.[3] However, upon the individual recipient’s death, the Department will (and must) seek reimbursement through the Medi-Cal asset recovery program for certain health care services received while the individual was alive and over 55 years old.[4]
While this age requirement still applies to both the former and current Section 14009.5, the Medi-Cal recovery rules in many other aspects have changed significantly.
Rules for Medi-Cal Reimbursement After Death Under the Former Version of Section 14009.5 Permitted Much Broader Recovery Than the New Medi-Cal Recovery Laws
The new Medi-Cal recovery laws came into effect with the recent amendment to Section 14009.5. There have been many changes to the Department’s right to Medi-Cal recovery, with most changes limiting the Department’s right to Medi-Cal reimbursement after death to those who died on or after the Effective Date. The most notable of these changes are as follows:
1. What Health Care Services Are Subject to Medi-Cal Reimbursement?
Former Section 14009.5: The Department is required to seek Medi-Cal repayment after death for most health care services received or monthly managed care premiums paid on behalf of a Medi-Cal recipient.[5]
Current Section 14009.5: The Department may only seek Medi-Cal repayment after death for those services required to be collected under federal law.[6] Under federal law, these services are: nursing facility services, home- and community-based services, and related hospital and prescription drug services.[7]
Thus, for individuals who died on or after the Effective Date, the Department’s right to Medi-Cal reimbursement is limited to only a specific set of services received. In contrast, for individuals who died before the Effective Date, the Department will seek recovery for “most” services received.
2. What Estate Assets Are Subject to Reimbursement in the California Medi-Cal Recovery Program?
Former Section 14009.5: The Department must seek reimbursement for Medi-Cal services provided from a decedent’s “estate.” The former Section 14009.5 did not include a definition of the term “estate.”[8] As such, California used the federal definition, which defined “estate” as “all real or personal property in which the decedent had legal title to or interest in at the time of death (to the extent of such interest), including assets conveyed to a dependent, survivor, heir or assignee of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other assignment.”[9] In other words, the Department was permitted to seek Medi-Cal recovery from the living trust or other non-probate assets of a decedent.
Current Section 14009.5: With the new Medi-Cal recovery laws, the Department may seek Medi-Cal estate recovery from all of a decedent’s real or personal property and other assets in an individual’s probate estate. Since the definition of “estate” is now limited to a decedent’s probate estate only, the Department may not seek reimbursement from any non-probate assets. For example, it would not be permitted for the Department to seek Medi-Cal estate recovery from the living trust assets of a decedent.
Case Illustration: The Department’s Right to Medi-Cal Reimbursement Depends Largely on the Way “Estate” is Defined for the Purposes of Section 14009.5.
In Riverside County Public Guardian v. Snukst,[10] decedent Joseph Snukst (“Joseph”) was a Medi-Cal beneficiary and received almost $500,000 in Medi-Cal services while he was over 55 years old.[11] His primary asset was an annuity held in an inter vivos trust.[12]
Medi-Cal filed a creditor’s claim against Joseph’s estate for the entire amount of services received.[13] Since Joseph died on July 29, 2016, before the Effective Date, the Department was required to seek Medi-Cal repayment after death from Joseph’s estate, as defined by the former Section 14009.5.[14] The court ultimately held that the Department was required to carry out Medi-Cal asset recovery by reaching into Joseph’s trust assets to withdraw the amount of its claim,[15] because the “estate,” as defined by the former Section 14009.5, included Joseph’s trust assets.
To contrast, what if Joseph had died on or after the Effective Date, making the current – not the former – version of Section 14009.5 applicable? Had that been so, the result in Riverside County Public Guardian v. Snukst would have been quite different. The new Medi-Cal recovery laws under the current Section 14009.5 only define a decedent’s estate as the decedent’s probate estate. Thus, the Department would not have been permitted to reach into Joseph’s trust assets as part of Medi-Cal estate recovery because assets held in a trust are not subject to probate. Since Joseph did not have many (if any) probate assets, the Department likely would not have been able to obtain its full Medi-Cal reimbursement.
In conclusion, in comparing the former and current versions of Section 14009.5, the Department’s right to recovery is now drastically different simply because of the way the term “estate” has been redefined.
3. Can the Department Seek Medi-Cal Reimbursement When the Decedent Is Survived by a Spouse or Registered Domestic Partner?
Former Section 14009.5: If a decedent is survived by a spouse, the Department cannot make a claim against the spouse for Medi-Cal reimbursement during the surviving spouse’s lifetime (before or after distribution) for the amount of services provided to the decedent.[16] Upon the death of the surviving spouse, however, Medi-Cal had the right to seek reimbursement from the spouse’s estate for the value of services rendered to the original decedent.[17]
If the surviving spouse did not receive enough property or assets from the decedent’s estate to cover this amount, then the Department may only recover up to the value of property the surviving spouse actually received.[18]
Current Section 14009.5: If a decedent is survived by a spouse or registered domestic partner, the Department may not make a claim for Medi-Cal reimbursement at any point in time.[19] This is a drastic change from the former Section 14009.5, which required recovery upon the surviving spouse’s death. The current Section 14009.5 also requires application of this exemption to registered domestic partners, which the former Section 14009.5 did not allow.[20]
4. What Are the Exemptions and Waivers to the Right to Medi-Cal Reimbursement After Death?
Exemptions to the Right to Medi-Cal Reimbursement
Former Section 14009.5: The Department may not seek Medi-Cal estate recovery in any of the following circumstances:
- For any services received before the decedent turned 55 years of age, unless the decedent was an inpatient in a nursing facility;
- When the decedent is survived by a child who is under 21 years of age; or
- When the decedent is survived by a child who is blind or permanently and totally disabled within the meaning of the federal Social Security Act.
Current Section 14009.5: The new Medi-Cal recovery laws under the current Section 14009.5 are almost identical to the former Medi-Cal recovery laws under Section 14009.5. The only difference is that the former Section 14009.5 allowed Medi-Cal recovery for inpatient services received while a decedent was at a nursing facility regardless of the decedent’s age. The current Medi-Cal recovery rules do not allow for such recovery, however, and place a full ban on recovery for all services received while the decedent was 55 years of age or younger.
Waiver of the Right to Medi-Cal Reimbursement
Former Section 14009.5: If the Department finds that enforcement of its claim would result in substantial hardship to decedent’s dependents, heirs, or survivors, the Department must waive its claim in whole or in part.[21]
Current Section 14009.5: The Department’s right to waive its claim for substantial hardship is identical under the current Section 14009.5.[22] But the current Section 14009.5 additionally provides that the Department must find “substantial hardship” when the decedent’s estate is a homestead of modest value, as that term is defined by the statute.[23]
Key Takeaways: The Department’s Right to Medi-Cal Estate Recovery Greatly Varies Depending on a Decedent’s Date of Death
The new Medi-Cal recovery laws, which went into effect in 2017 through an amendment to Welfare and Institutions Code section 14009.5, made many notable changes to the California Department of Health Care Services’ right to Medi-Cal repayment after death for Medi-Cal services provided to decedents while over the age of 55.
Notably, none of these changes expanded the Department’s right to Medi-Cal reimbursement, but rather limited its right to the bare minimum of recovery that federal law requires.[24]
While these changes do not apply to decedents who died prior to the amendment’s Effective Date of January 1, 2017, for all other Medi-Cal recipients, the amendment to Section 14009.5 is likely a welcome one.
Have questions about Medi-Cal estate recovery? Our lawyers are here to help.
If you are the personal representative or surviving loved one of a decedent who was insured through Medi-Cal, it is natural to have questions surrounding Medi-Cal recovery rules. For instance, how can you be sure the state of California’s Medi-Cal estate recovery program is not reaching into assets it is not permitted to take? You may also be wondering about how to avoid Medi-Cal estate recovery.
Keystone’s probate attorneys are well-versed in the new Medi-Cal estate recovery laws and are standing by to answer any questions you may have about them. Call us today to request a free consultation.
- [1] See U.S.C. § 1396, et seq.
- [2] Maxwell-Jolly v. Martin (2011) 198 Cal.App.4th 347, 353.
- [3] Maxwell-Jolly v. Martin (2011) 198 Cal.App.4th 347, 353.
- [4] Maxwell-Jolly v. Martin (2011) 198 Cal.App.4th 347, 353; Welf. & Inst. Code, § 14009.5(b)(1) [former]; Welf. & Inst. Code, § 14009.5(b)(2)(A).
- [5] Welf. & Inst. Code, § 14009.5(a) [former].
- [6] Welf. & Inst. Code, § 14009.5(a)(1).
- [7] 42 U.S.C.A. § 1396p(b)(1)(B)(i).
- [8] See generally Welf. & Inst. Code, §14009.5 [former].
- [9] Bonta v. Burke (2002) 98 Cal.App.4th 788, 790-791, quoting former Cal. Code Regs., tit. 22, § 50960(b)(1).
- [10] (2022) 73 Cal.App.5th 753.
- [11] Id. at 757.
- [12] Id. at 760.
- [13] Id. at 757.
- [14] Id. at 760.
- [15] Id. at 762.
- [16] Welf. & Inst. Code, § 14009.5(b)(2)(A) [former].
- [17] Welf. & Inst. Code, § 14009.5(b)(2)(A) [former].
- [18] Welf. & Inst. Code, § 14009.5(b)(2)(A) [former].
- [19] Welf. & Inst. Code, § 14009.5(b)(2)(B)(i).
- [20] Welf. & Inst. Code, § 14009.5(b)(2)(B)(i).
- [21] Welf. & Inst. Code, § 14009.5(c)(1) [former].
- [22] See Welf. & Inst. Code, § 14009.5(c)(1).
- [23] See Welf. & Inst. Code, § 14009.5(c)(2). Section 14009.5(f)(5) defines a homestead of 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.”
- [24] See Welf. & Inst. Code, § 14009.5(a)(1) (“It is the intent of the Legislature…to…Saturdayimit Medi-Cal estate recovery for only those services required to be collected under federal law”).
