When Medi-Cal Benefits Revert to State

Question: I am enclosing a copy of an enclosure that came with my Medi-Cal stickers this month. It has to do with the state recovering benefits from Medi-Cal recipients after death. It is a worrisome thing to those of us who are alone and, unfortunately, have to apply for Medi-Cal. If we were not eligible, we would not be receiving it in the first place. Can you check and advise us what they mean, specifically?--I.A.

Answer: In spite of the rather forbidding language of the envelope stuffer, I wouldn’t worry unduly about it. Here’s what it says after referring to a law passed by the state Legislature in 1981: “Medi-Cal benefits received by a beneficiary after age 65 are recoverable after death under certain conditions. Recovery may be made from the estate or distributee of the Medi-Cal beneficiary if he/she does not leave a surviving spouse, minor children, or a totally disabled child.” The Medi-Cal “stickers” you refer to in your letter, according to Betty Tokunaga, an administrative support unit manager for the Los Angeles County Department of Social Services, which administers Medi-Cal here for the state, are actually labels distributed monthly to Medi-Cal recipients and serving as vouchers.

Recipients turn one of the stickers over to their doctors who, in turn, use them for billing the state. As you know, I’m sure, eligibility for Medi-Cal is based on a needs test. As a single person, you can’t have assets in excess of $1,900 (or, for two people, $2,850, or for a three-person household, more than $3,000, and so on). The “benefits received” that the enclosure refers to, according to James Weathers, the program deputy for the County Department of Social Services, actually is the difference between your non-exempt income (which could be wages, Social Security benefits or whatever) and your monthly maintenance fee.

Hypothetical Example

Here’s a hypothetical example: It’s determined that you need $500 a month for living expenses and that’s about what your income is. Your medical needs per month, we’ll say, are $800. Thus, anything over that $500 figure is called your “share of cost,” and the aggregate total is what, according to the ’81 law, the state is entitled to try to recover after your death. Well, what assets could there be if you have to be in rather dire straits before even qualifying for Medi-Cal? If there were some of any consequence, Weathers added, it would suggest that there had been fraud of some kind when the Medi-Cal application was made.

Partial Repayment

For openers, though, there are the $1,900 in assets that you are allowed to have and still qualify. The state can take these assets in partial repayment. “But primarily,” Weathers continued, “any recoverable assets are almost invariably a house--which is exempt from that asset ceiling.” Even the house is exempt from being seized by the state, however, unless you die without leaving a surviving spouse, minor child (under 21) or totally disabled child.

“It’s not a well-known law,” Weathers said, “and Los Angeles County finally persuaded the state to let us enclose these notices a couple of times a year, primarily to alert the heirs of a Medi-Cal recipient that the law requires them, at the death of the recipient, to report the disposition of any assets.”

Suppose you do own a house at the time of your death, leave no surviving spouse or minor child, and the value of the house clearly exceeds “your share of cost” to the state for the medical bills you have chalked up? Then, Weathers said, the state pockets the proceeds “only to the extent of the money paid out by the state.” So you could still leave your heirs a modest estate once the slate has been wiped clean.

Q: A friend told me that a defunct bank under FDIC (Federal Deposit Insurance Corp.) is required to return 100% of savings (up to $100,000) to depositors within 30 to 60 days with earned interest to the date of return, whereas, under FSLIC (Federal Savings & Loan Insurance Corp.) only 10% of savings in a defunct institution (an S&L;) is required to be returned to the depositor in that period and the balance may be distributed up to a year later without earned interest. Is this true?--H.S.

A: Not according to anyone contacted at either of the two agencies. The friend’s tale may have its roots in the fact that, technically, the interest on deposits covered by FSLIC accrue to the day the institution is closed . But it’s a moot point.

Both are committed to paying off depositors as soon as is humanly possible.

“And,” according to Martha Gravlee, a communications spokesperson for the FSLIC in Washington, “it’s a real rarity when a pay-out is made at all. Almost invariably the deposits in the closed institution are simply transferred to a healthy one and there’s no interruption of interest at all.”

Two Institutions Closed

Admittedly, she said, there was an FSLIC rarity in June with a capital “R”: two big institutions were closed in a single day--Costa Mesa’s North America Savings & Loan Assn. and the American Diversified Savings Bank, with combined deposits of $1.35 billion. The FSLIC reasoned that a conventional bail-out simply wouldn’t work; the pay-off would have to be in cash.

“We closed them on June 6,” Gravlee said, “and began the pay-out June 7. Mailgram claim forms were sent out and received by 80% of the depositors on that day.”