New Medi-Cal recovery rules effective 2017

New Medi-Cal recovery rules are in effect for Medi-Cal beneficiaries dying after January 1, 2017

We at Drobny Law Offices, Inc. frequently receive questions about Medi-Cal from clients who wish to receive Medi-Cal benefits to cover long term care costs for themselves, their parents, or loved ones. In answering questions about how to qualify for Medi-Cal, an important issue to address is Medi-Cal estate recovery.

By law, the California Department of Health Care Services must be notified whenever a person dies in California, regardless of whether that person received Medi-Cal benefits during their lifetime. If a person received Medi-Cal benefits during their lifetime, the California Department of Health Care Services (“DHCS”) will seek repayment from the beneficiary’s estate after the Medi-Cal beneficiary dies, subject to several important limitations. This is known as Medi-Cal recovery. These claims often run from tens of thousands to hundreds of thousands of dollars.

A recent change in California law represents a seismic shift in the Medi-Cal recovery rules. The new law, which applies to Medi-Cal recipients who die on or after January 1, 2017, greatly expands the assets exempt from Medi-Cal recovery and reduces the medical services provided by Medi-Cal for which DHCS may seek recovery.

When is Medi-cal recovery triggered?

DHCS will pursue Medi-Cal recovery in two circumstances. First, if a beneficiary was 55 or older when he or she received Medi-Cal benefits for nursing home care, intermediate care for developmentally disabled, home and community based services (including Waiver programs established under section 1915(c) of the Social Security Act such as: Developmentally Disabled Waiver, HIV/AIDS Waiver, Pediatric Palliative Care Waiver, Assisted Living Waiver, Multipurpose Senior Services Program, Nursing Facility/Acute Hospital Waiver, and San Francisco Community-Living Support Benefit Waiver) and related hospital and prescription drug services provided while a beneficiary received nursing facility services and home and community based services.

Second, recovery will be pursued if a beneficiary of any age is permanently institutionalized in a nursing facility, intermediate care facility, or other medical institution, who (after notice and opportunity for a hearing) the State of California has determined cannot reasonably be expected to be discharged and return home. Under these circumstances however, recovery is limited to real property owned by the beneficiary and any recovery lien imposed must be dissolved if the individual subject to this provision is discharged and returns home.

When is Medi-Cal recovery prohibited?

Medi-Cal recovery is prohibited if the beneficiary who received services subject to recovery dies and leaves a surviving spouse or surviving registered domestic partner, or leaves a surviving child under 21 years of age, or a surviving child of any age who is blind or disabled as defined in Section 1614 of the Social Security Act.

What assets are exempt from Medi-Cal recovery?

Property transferred before death is exempt. Property not subject to probate is exempt – this includes as property held in a trust, property held jointly, and property that has named pay on death beneficiaries (to include life insurance and retirement accounts, so long as the decedent’s estate is not named as the beneficiary). A homestead of “modest value” is exempt; this is a home whose fair market value is 50% 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.

How do I find out if I am subject to a Medi-Cal recovery claim?

If a Medi-Cal beneficiary or authorized representative fills out and submits DHCS Form 4017, along with a $5 processing fee, the Department of Health Care Services will provide a record of Medi-Cal payments that are subject to a recovery claim.

What is the bottom line?

People who have a revocable living trust already know that a properly funded trust removes assets from your probate estate. Under the new Medi-Cal recovery rules, assets placed under the umbrella of a revocable living trust are not subject to probate and are now also exempt from recovery for Medi-Cal. For those who have placed assets in their revocable living trust, those assets are now also not subject to Medi-Cal recovery. This is a significant added advantage to having a revocable living trust. Now, not only does your revocable living trust protect your estate from probate and ensure your assets are distributed according to your wishes, but your assets will also be protected from MediCal recovery, should you ever be entitled to and receive said benefits. If you or your loved ones are considering the possibility of receiving Medi-Cal benefits at some point in the future and do not already have a revocable living trust, we urge you to schedule an appointment with our office. If you already have a living trust and are considering the possibility of receiving Medi-Cal benefits in the future, now is a good time to review your trust to ensure it is properly funded. Remember, the new law only concerns Medi-Cal recovery; qualifying for Medi-Cal is a separate issue and the look-back period still exists. Drobny Law Offices, Inc. has experience with MediCal planning and will be happy to assist you.

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