Q. Mother recently died after spending two years in a nursing home on Medi-Cal. Medi-Cal just sent us a bill for about $150,000 and says it will file a claim against her home. Yikes! We thought her home was an exempt asset. What do we do about the bill?
A. Unfortunately, your situation is all too common: families often confuse the Medi-Cal “eligibility” rules with the “recovery” rules. Her home was, indeed, exempt for eligibility purposes, but that exemption expired upon your mother’s death. Her home and most other exempt assets then became exposed to a Medi-Cal “payback” claim. This is called “estate recovery”. Let’s review the basic rules to see if any might apply and give you some relief:
1) You and your siblings do not have a personal obligation to pay back Medi-Cal from your own assets. Only your mother’s assets, including her home, are subject to recovery, whether held in her own name, in her Living Trust, or in joint tenancy. However, you cannot transfer her home or other assets to her beneficiaries until the recovery claim is satisfied. Exception: her IRA, if left to named persons, is not subject to recovery.
2) If your mother were survived by a spouse, then her Medi-Cal recovery claim would be deferred until the death of her surviving spouse.
3) Medi-Cal will withdraw its claim entirely upon proof that your mother was survived by a blind, minor or disabled child, usually established by proof that the child is receiving Social Security disability benefits. Here, it does not matter whether the disabled child is an adult, nor whether he/she lived in your mother’s home or even relied upon her for support.
4) Medi-Cal will waive its claim if the surviving family members can prove “hardship”, based on any of six specific grounds. One ground is a showing that a child lived in the parent’s home and provided care for at least two years, thereby delaying the parent’s entry into a nursing home; it helps to think of this ground as recognition that the caregiver child saved Medi-Cal money. Another is a claim that allowing the surviving child or other beneficiary to receive his inheritance would enable him to go off public benefits and be self-supporting. Unfortunately, Medi-Cal construes the hardship claims strictly and has turned down most of them. Still, it is an option to pursue and, upon a timely request, you do have a right to a hearing to make your case before an Administrative Law Judge.
(5) If there is no basis to seek waiver or deferment of the claim, you might seek a “Voluntary Post-Death Lien”. This lien allows the survivors to continue to reside in the home while paying an agreed monthly installment against the amount of the Medi-Cal claim, which accrues interest at 7% per year. The balance of the claim would be paid when the home is sold. To qualify, the survivors must be residing in the home, be unable to pay the claim in full, and be unable to obtain financing to do so.
Unfortunately, all of the above exceptions and limits to Medi-Cal recovery require specific fact patterns, and many families will not qualify. However, if these same families had taken steps during the parent’s lifetime, in many cases lawful steps could have then been taken to protect the parent’s entire estate from Medi-Cal recovery. Once the parent dies, it is often too late and the survivors must rely upon the limited options discussed above.
For families with a loved one currently on Medi-Cal, we urge seeking the advice of an elder law attorney to determine whether steps can be taken now to avoid a later Medi-Cal recovery claim and thereby preserve assets for the benefit of surviving family members. An ounce of prevention is worth a pound of cure.