End Medi-Cal Estate Recoupments
A bill recently arrived on Gov. Jerry Brown's desk that would limit California’s ability to recoup spending on traditional Medi-Cal services from the estates of deceased former program enrollees. He should sign it into law immediately.
SB 1124, which was authored by Sen. Ed Hernandez, D-West Covina, is one of those rare pieces of legislation that not only would have an enormous impact on the people it intends to serve but is also all but devoid of controversy. At a time when California and much of the nation is divided as to how far the Medicaid program should be stretched, the bill passed through both houses of the Legislature without a single dissenting vote.
California recoups about $17 million a year from the estates of former enrollees for basic medical services. It is among 10 states that do so (federal law requires all states try and recoup the costs for nursing home and other speciality services).
That practice is one that should be frowned upon for a variety of reasons. One of the biggest is that there is no equation that balances the amount of recoupment versus what a Medi-Cal enrollee may have paid in taxes toward the funding of the program in the first place. It is entirely possible that an enrollee who was a productive worker for decades but fell on hard times during the Great Recession or another period of their lives and turned to Medi-Cal could wind up having more taken out of their estate to settle their bill than what they had paid into the program in the first place. If you can think of a greater distortion of both the American safety net and the American Dream, I am all ears.
Actually, there is one: the recent campaign to repeal the federal estate tax. That tax is still around, but the effective estate tax rate has been cut by nearly a third over the last decade. It was also temporarily suspended in 2010.
As a result, the families of two prominent Americans who died that year – New York Yankees owner George Steinbrenner and Texas oil magnate Dan Duncan – avoided a collective $5 billion in federal estate taxes. It would take nearly three centuries for California to match that by collecting on the estates of poor people who merely asked for healthcare services from their government.
And even if the estate tax is pared back, there is still a cap on what can be collected. In theory, California could clean out an entire estate to settle a Medi-Cal bill.
Meanwhile, if anyone can produce a single champion of repealing the estate tax who is also for eliminating Medicaid estate recoupments, let me know. I have yet to meet them.
Meanwhile, estate recoupments have also been encouraging a small but vocal number of Californians who qualify for Medi-Cal coverage under the Affordable Care Act from signing up out of fear they will leave their families nothing when they pass, according to recent reporting by Capitol Public Radio and Kaiser Health News.
Although such a stance is understandable and even sadly admirable, it can leave hospitals and other providers on the hook for millions of dollars for uncompensated care for no rational reason at all.
Hospitals have not taken an official stance on SB 1124, but it has the support of a variety of healthcare advocacy groups. The bill’s only official opponent is the California Department of Finance, which argues that the recoupments help continue to fund the Medi-Cal program. However, that agency does not mention in its argument the perverse incentives and disincentives currently at work that punish poor people for being sick while assuring the wealthy that they will be able to leave more of their worldly possessions to their families. And let's face it: $17 million is a pittance to the $25 billion Medi-Cal program.
Gov. Brown should ignore the entreaties of his bean counters, take note of the 112 lawmakers who voted to approve SB 1124 and do the right thing himself.
Ron Shinkman is the Publisher of Payers & Providers.
