Longstanding federal regulations, which predate the ACA, require states to “seek recovery of payments from the individual’s estate for nursing facility services, home and community-based services, and related hospital and prescription drug services” for any Medicaid enrollee over the age of 55. But states can choose to go further, using estate recovery to recoup any Medicaid costs.
This has become more of a problem since the ACA Medicaid expansion took effect in 2014, as people are now funneled into California’s Medicaid system in much greater numbers than they used to be (this is the case in every state that has expanded Medicaid). Covered California enrollees under age 65 with income up to 138% of the poverty level are directed to Medi-Cal, regardless of the value of their assets (there’s no asset test for subsidy eligibility or Medicaid coverage under the ACA). As a result, some families began receiving bills from California’s Medicaid program after their loved ones passed away, including bills to cover the cost of payments that the state made to managed care plans, even if the deceased didn’t use any medical services.
California S.B.826, the Budget Act of 2016, included a provision to bring Medi-Cal estate recovery into line with federal rules. For people who pass away January 1, 2017 or later, the state only uses estate recovery to recoup long-term care costs that were incurred by Medi-Cal. But that includes In-Home Supportive Services, which the state did not previously recoup through estate recovery.
In addition, estate recovery is now limited to assets that were owned by the deceased at the time of death and are subject to probate. For people who passed away prior to 2017, the state could seek to recoup costs from any assets owned by the deceased at the time of death.
Minnesota implemented similar legislation in 2016, but unlike California, they made their limits on estate recovery retroactive back to January 2014.