Loophole in healthcare law may put Medi-Cal patients’ assets at risk
Luis Rios, who lost his job at a filling station in December at the age of 56, is newly eligible for Medicaid, the healthcare program for the poor.
Following the advice of state-trained medical insurance enrollment workers, he filled out the paperwork required to get coverage — but has a nagging fear that he may have put his family’s financial assets at risk.
That’s because, in certain cases, Medi-Cal, California’s version of Medicaid, will be able to collect repayment for healthcare services from the estate after a recipient dies, including placing government liens on property.
“I don’t want to run the risk of losing my house,” Rios said. “I want to leave it for my daughter.”
Despite government assurances that the vast majority of Medi-Cal patients needn’t worry about the state trying to claim their assets, growing numbers of new enrollees under Obamacare are voicing concerns after reading warnings on healthcare notices that after their deaths the state “must seek repayment of Medi-Cal benefits” for services provided once they turn 55.
Some advocates for the elderly say the “estate recovery provisions” of Medi-Cal could threaten family finances and discourage people from signing up for health insurance.
“If you really want healthcare reform to be successful, don’t subject people to this,” said Patricia McGinnis, executive director of California Advocates for Nursing Home Reform, an advocacy organization for elders and persons with disabilities that opposes a cost recovery program for new Medi-Cal enrollees.
Established in 1993, the federal government’s estate recovery program was chiefly intended to recoup outlays for lengthy nursing home stays and skilled nursing care, which are among its biggest expenses.
But California and other states have exercised an option in limited instances to recover payment for medical services, from doctor visits and surgeries to managed care payments and drugs.
Norman Williams, a spokesman for the state Department of Health Care Services in Sacramento, says only a tiny fraction of the 9 million patients using Medi-Cal will be affected by cost recovery actions against their estates. Less than a quarter of a percent of the more than $600 billion the state spent on Medi-Cal over the past 20 years has been recovered, he said.
Only costs incurred for patients 55 to 64 years old are involved, he noted. And collection efforts will not begin while there is a living spouse, minor children or surviving dependents with disabilities. Families also may apply for hardship exemptions.
State officials are hoping those kinds of collection restrictions will allay fears about applying for medical coverage.
However, Medicaid expansion, a key part of the federal Affordable Care Act, is expected to add as many as 2 million people to Medi-Cal by the end of this year. Because eligibility under the expanded program is based on income not assets, a larger portion of new participants may own homes, cars or investments that could pass into their estates, McGinnis said.
Betsy Imholz, special projects director at Consumers Union in San Francisco, said exposing a family’s assets to government claims is an unintended consequence of healthcare reform that can be corrected with additional legislation. “People just didn’t think about it,” she said.
An informal survey in January by Consumer Reports found 10 states including California were planning to pursue claims on estates, and 11 were not.
California health officials said they are awaiting instructions from the Centers for Medicare and Medicaid Services, the federal agency that coordinates estate recovery, before making any changes to existing collection practices.
Emma Sandoe, a spokeswoman for the federal Medicaid agency, said guidance will be available soon, but states are free to modify financial recovery programs in the meantime.
Patients eligible for Medi-Cal under Obamacare do not qualify for subsidized insurance policies through the state-run Covered California marketplace. Several new Medi-Cal patients have written The Times expressing fear their assets could be seized by the state.
“Generations of family misery lay in the balance,” one man wrote, adding he would like to leave “a few dollars to nieces and nephews upon my death.”
McGinnis, the elder rights advocate, said California should follow the lead of states like Oregon and Washington, which will only seek to recover costs involving nursing home care.
To avoid potential property losses, Medi-Cal recipients or their heirs might consider setting aside money to buy private health insurance, or divest property and set up special trusts, said Terry Magady, an elder law attorney in West Los Angeles.
“No one in their right mind” would want to be vulnerable to a state collection action, he said.
But many new Medi-Cal recipients are low-income minorities who aren’t likely to seek legal advice, McGinnis said. “They’re not going to pay $300 to an estate attorney.”
Some of those promoting Obamacare fear the cost recovery rules are undermining a primary goal of the healthcare system overhaul — enrolling as many people as possible in insurance programs.
Doreena Wong, a project director for Asian Americans Advancing Justice – LA, an advocacy group, said that the estate collection program is “a barrier to our community” and discouraging many people from completing applications for coverage.
At the Chinatown branch of the Los Angeles Public Library, where Wong’s group has stationed a Chinese-speaking health educator to assist with enrollments, a quarter of potential Medi-Cal recipients are walking away instead of signing up, she said. Many, she added, cite worries about losing their estates.
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