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CANHR Sues Governor to Stop "Emergency" Implementation


In a victory for California’s elder and disabled consumers, the Schwarzenegger Administration signed a stipulated settlement in which they agreed to cease application of the recently filed “emergency” Medi-Cal recovery regulations until they have complied with the requirements of the Administrative Procedures Act’s advance public hearing, comment and filing provisions.

California Advocates for Nursing Home Reform (CANHR), filed suit against Governor Arnold Schwarzenegger and other members of his administration in San Francisco Superior Court on April 7, 2005 challenging the adoption of “emergency regulations” by the California Department of Health Services concerning the Department’s Medi-Cal Estate Recovery Program.

CANHR charged the Governor and his Department of Health Services with abusing their discretion in implementing these regulations without the opportunity for advance public comment or hearing and in violation of the Administrative Procedures Act, as no “emergency” exists. The lawsuit also charged that, because of the premature adoption of these illegal regulations, California consumers would suffer irreparable harm.

The stipulation and settlement agreement was approved by the San Francisco Superior Court on April 25, and means that the Department of Health Services’ Estate Recovery Regulations approved on an “emergency” basis on March 23, 2005 will not be effective until all of the provisions of California’s Administrative Procedures Act governing the submission and approval of regulations have been satisfied.

Key Points of the CANHR lawsuit:

  • While the state Department of Health Services is permitted to pursue claims against the estates of deceased Medi-Cal beneficiaries, who are 55 years or older or who reside in nursing homes, for recoupment of Medi-Cal monies spent on care, it is also required to publish regulations consistent with state and federal laws.
  • For the past twelve years, the Department of Health Services has failed to promulgate adequate regulations regarding Medi-Cal recovery. To now allow the Department to bypass the requirements of advance notice and public comment to address a problem created by their own failures would be irresponsible and inequitable to the citizens of California.
  • The lack of public notice and hearing pursuant to the Administrative Procedures Act will impose irreparable harm on thousands of California’s long-term care consumers and their family members and will, in the case of one regulatory provision, foster elder fiduciary abuse.

CANHR was represented in the lawsuit by the Law Offices of Amitai Schwartz in Emeryville, with assistance from Gregory Wilcox, Esq., Berkeley.

Temporary Victory for California Consumers

The Schwartzenegger Administration has used the emergency process numerous times over the past year to avoid the advance public comment and open hearing process. Stopping the immediate implementation of these regulations is only a temporary remedy, however. The proposed recovery regulations will have an onerous impact on many aged, blind and disabled consumers and their families, while promoting predatory lending. The deadline for comment on the regulations was May 27, 2005, after which the Department can amend them and resubmit them for additional public comment, or ignore the comments and submit them again for implementation.

Following are just a few of the problems with the regulations:

Homestead of Modest Value: The regulations do not include an exemption for a “homestead of modest value,” despite the fact that this exemption was recommended by Congress in the legislative history of § 1917, which established the federal recovery provisions and despite the recommendations of the federal Medicaid agency.

Although the Department seems to rely on the myth of “millionaires on Medi-Cal” to push a punitive agenda against Medi-Cal beneficiaries, the fact remains that the bulk of Medi-Cal estate claims are filed against low and middle income beneficiaries with homesteads of modest value. If the Department were truly interested in a fair and equitable recovery process, this exemption would be included.

Life Estates: (Section 50961(i)) Under current California law, institutionalized Medi-Cal beneficiaries are permitted to transfer their principal residences so long as the residence is exempt at the time of the transfer. Because of the serious financial and psychological effects of nursing home placement, many institutionalized elders prefer to retain a life estate rather than transfer the home outright and lose control of their homes. For the past thirteen years, it has been the Department’s policy that life estates retained with an irrevocable transfer would not be subject to recovery, but that transfers with a retained life estate subject to revocation would be subject to recovery. Representatives from the Estate Recovery Unit have reiterated this policy at numerous public meetings and at the Estate Recovery Stakeholders Advisory Group meetings. Since 1993, thousands of elder and disabled Medi-Cal beneficiaries have relied on this policy to plan their estates in the event they might have to enter a nursing home and rely on Medi-Cal to supplement their care.

Retroactive or Prospective Application: The regulations do not specify that they will only apply to those beneficiaries who die on or after the date the regulations become effective.

In Home Supportive Services: (Section 50961(c)(l)) Of the thousands of consumers that CANHR serves, many are non-institutionalized elders living at home and relying on In Home Supportive Services (IHSS) for incidental and personal care, often provided by a family member. IHSS has long been one of the few alternatives to more expensive institutionalization, and enables many consumers who would otherwise end up in a nursing home to remain at home. IHSS, it should be noted, is an optional recovery under federal law, and the fear of recovery was discouraging elders from signing up for the program.

The Department of Health Services’ Recovery Unit also recognized these problems. In an October 2000 letter to an Estate Recovery “Stakeholders” Group, Joan Allison, then Chief of the Third Party Liability Branch, wrote:

“Working together, the ultimate goal is to develop and implement fair and equitable ER program policies and procedures. Along these lines, the Third Party Liability Branch recognizes the benefit the In Home Supportive Services (IHSS) workers provide to those persons they assist as well as reducing the burden on the taxpayers. As a result, a recommendation to departmental management and the Administration has been adopted to discontinue collection of IHSS in estate recovery claims effective September 2000.”

This policy was reiterated in All County Letter 02-35 issued on June 18, 2002. The Department’s new regulations not only include benefits paid for IHSS, but also a number of other benefits not previously included in estate claims. The result is that a child of a deceased beneficiary who provided care to his/her parent for meager wages under the IHSS program would face an estate claim for those very wages after the parent dies. In addition, thousands of beneficiaries who applied for IHSS while relying on the Department’s policy are not aware that their estates might now be vulnerable.

Encouraging Elder Fiduciary Abuse: In Section 50963(a)(3), the regulations severely restrict the ability of aged, blind or disabled applicants to prove hardship, while encouraging elder fiduciary abuse. It is no longer enough that an aged, blind or disabled applicant “would have difficulty” obtaining financing to pay off a claim, as the previous regulations stated. Now, they must be “unable” to obtain financing. They must apply to a financial institution to obtain financing, and they must provide a denial letter from a financial institution. This regulation opens the door to predatory lenders and elder fiduciary abuse, and closes the hardship waiver door for those who cannot even get a reputable financial institution to accept a loan application.

Burden on Caregivers: Section 50963(a)(4) adds a new “caregiver” hardship criteria, i.e., if someone lives in the deceased beneficiary’s home and provided care which enabled them to stay at home rather than enter a nursing home, which was previously informally recognized by the Department. However, the onerous burden of proof and the requirement of “medical substantiation” to prove the type and level of care provided by the caregiver renders this criteria somewhat meaningless. Given the stringent confidentiality requirements of HIPAA, and the difficulty of accessing medical records years after care is provided, it will be almost impossible for some applicants to provide such documentation.

These are some of the highlights of the problems with the new regulations. For more detailed information, see CANHR’s web site for the comments that were submitted.

Stop the Assault

It’s about time to stop the assault on the homes of low income and middle class consumers, whose only crime is that they become ill and do not have (and never will have) enough money to pay for the inflated costs of medical care.

It’s about time to let your legislators know how the Department of Health Services is trying to balance their budget by claiming the homes of deceased Medi-Cal beneficiaries. We cannot do this alone. If we do not act now, the only grandchildren who will play in the backyards of their grandparents’ homes are the children of the wealthy.