Debbie was furious. “Darn Medi-Cal. First, they put Mom through the ringer to qualify for benefits, and then after she dies, they try to recover the money they gave her. How is that even fair? Mom had so little as it is. My God, all she left me and Cyndy was $500 and her house. They probably want that, too.”
Her best friend, Wendy, shook her head. “I went through that with my Dad. I couldn’t believe that they went after his estate when we filed for probate. Thank God Mom was still alive or they would have taken everything. They initially sent us a bill for $50,000. No way we could have paid that.”
Debbie smirked. “They sent us a questionnaire to fill out and I just threw it away. The state is so nosy about everything. I figure the less they know, the better off we are.”
Wendy frowned. “My lawyer said that by law, Medi-Cal has the right to be reimbursed for certain services. I wouldn’t ignore that questionnaire. You could get in big trouble if you don’t fill it out.”
“But what if Mom owed them money and they make us sell her house or something? We could wind up with no inheritance at all.” Debbie groaned. “How can they take our inheritance? That is so unfair. Mom was so proud that she could leave us something.”
“I know there are certain restrictions on what they can and cannot do,” said Wendy. “I also know there are certain exemptions that apply. You had better see a lawyer and figure out what you owe.”
Under California law, the state can seek repayment of Medi-Cal benefits received for nursing, home, and community-based care, as well as for expenses related to hospitalization or prescription drugs, if the recipient was 55 or older when assistance was received. In addition, repayment may be sought from residents under age 55 who were permanently institutionalized in a nursing or intermediate care facility, or other medical institution. However, a claim can be made only against assets subject to probate.
California law requires that the Medi-Cal Recovery Unit, located in Sacramento, be notified of a Medi-Cal recipient’s death. Generally, the spouse, estate attorney, executor, heir, or the person in possession of estate assets has 90 days from the date of the person’s death to make the notification and it must be accompanied by a copy of the death certificate.
Medi-Cal then sends a questionnaire to heirs requesting information on assets that remain in the estate. Once that has been reviewed, Medi-Cal will submit a recovery claim. The claim is normally reviewed by the executor or attorney for the estate, who checks it for such things as exemptions, deductibles, discrepancies, qualification for hardship waivers, non-recoverable services, and charges for non-provided services.
However, any claim is prohibited if the Medi-Cal recipient:
- Is survived by a spouse or a registered domestic partner. However, if that party also received Medi-Cal services, his or her estate may be subject to an estate claim after his or her death.
- Is survived by a minor child.
- Is survived by a disabled child of any age. There is no requirement that the child live with the Medi-Cal recipient or be an heir to the estate.
In all other cases, the state’s recovery is limited to the lesser of Medi-Cal benefits received or the value of the deceased beneficiary’s estate. Since only items distributed by will or as part of an intestate estate are subject to probate in this state, that means assets transferred under living trusts, joint tenancies, survivorship, and life estates are not subject to recovery. In addition, manufactured homes and mobile homes are also excluded, because under California law, they are not subject to probate.
State law also exempts the following from estate recovery claims:
- Property transferred prior to death and no longer in the beneficiary’s name.
- Homesteads of “modest value,” for example, a home whose fair market value is 50 percent or less of the average price of homes in the county where it is located.
- Life insurance policies that name beneficiaries other than the estate.
- Retirement accounts that name beneficiaries other than the estate.
In most cases, the Recovery Unit will work with heirs or executors to settle the claim. When funds do not exist for payment and a hardship waiver is denied, heirs may be permitted to secure a home equity loan on property or a voluntary lien, with interest.
Clearly the recovery process diminishes the value of an estate submitted to probate. The best option, then, may be to remove high-value assets from the estate through the use of trusts, joint ownership, pre-death property transfers, selective use of beneficiaries, and other estate planning techniques.