Protect Your Home From MediCal Estate Recovery

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California adopts major reform that will greatly reduce the scope of the state’s MediCal Estate Recovery program.  The new legislation will be in effect beginning on January 1, 2017.


MediCal is a California Medicaid welfare program serving individuals with incomes below 138% of the federal poverty level.  More than 12 million Californians rely on MediCal for health care services.  But when a MediCal beneficiary dies, the state can make a claim against the estate of certain individuals to seek reimbursement for benefits paid.  Deceased beneficiaries who were 55 years of age or older at the time he or she received MediCal benefits, and beneficiaries of any age who received benefits in a nursing home are subject to the MediCal Recovery Program.

Before January 1, 2017, MediCal Estate Recovery applied to all types of estates, including living trusts, joint tenancies, tenancies in common, and life estates.  The amount of recovery is limited to the amount of benefits paid or the value of the beneficiary’s estate, whichever is less.

As you might imagine, this presents a huge obstacle for low-income Californians.  If a MediCal beneficiary owns their own home, it is likely the largest, if not only asset they have.  Most of us intend to will our valuables to family and friends, but the MediCal Estate Recovery Program offers no protection from state debt collectors.  Often heirs are forced to sell off all their inherited assets in order to satisfy MediCal reimbursement.

Fortunately, on June 27, 2016, Governor Brown signed SB 833, legislation that will greatly reduce the future scope of California’s MediCal Estate Recovery program and help to protect the estates of deceased MediCal beneficiaries.  Under the new law, for recipients who die on or after January 1, 2017, claims by MediCal Estate Recovery will be reduced to what is minimally required under federal law.  This means that MediCal will continue to seek estate reimbursement for certain specialized services like nursing home care, but not for general medical care covered by Medicaid.

Most importantly, under SB 833, MediCal will only be able to make a reimbursement claim against assets that are part of the deceased MediCal recipient’s “probate estate.”  The probate estate is limited to those assets that would be included in probate.  This is important because by avoiding probate, you may also avoid MediCal Estate Recovery claims.

Effective January 1, 2017, assets that transferred into a living trust prior to the deceased settlor’s death are, therefore, not subject to MediCal Estate Recovery claims, because assets in a living trust are not probated.  The same is true for assets held as joint tenancy and/or life estate assets; these pass automatically at death without becoming part of the decedent’s probate estate.

SB 833 includes several other important protections for MediCal recipients, their families, and estates.  Medi-Cal must waive any reimbursement claim, subject to federal approval, against an estate whose principal asset is a home “of modest value,” which is defined as a property whose market value is appraised at “50 percent or less of the average price of homes” in the surrounding county as of the date of the decedent’s death. Medi-Cal will also be prohibited from recovering against an estate where the deceased beneficiary is survived by a “registered domestic partner” (Spouses are already protected under current law). Medi-Cal must also provide beneficiary recipients with timely and accurate “information about how much their estate may owe Medi-Cal when they die.”

This legislation is great news for low-income Californian’s and their families.  That assets held in a decedent’s revocable living trust will avoid both probate and MediCal Estate Recovery is important.  Hopefully this will motivate people who receive MediCal to consider how best to keep their assets outside of their probate estate to avoid MediCal Recovery against their estate and so protect their loved ones.


Read the full legislation here

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