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Medi-Cal Transfer of Assets:
On Hold, But More To Come...


In early May 2004, a Los Angeles Times reporter wrote several articles about Medi-Cal "loopholes" that allow rich applicants to qualify for long term care Medi-Cal. Citing unsubstantiated statistics from the for-profit and non-profit nursing home industries and the long term care insurance industry, the article implied that wealthy seniors are impoverishing themselves in great numbers in order to become eligible for Medi-Cal when they enter a nursing home.

In typical Legislative fashion, the Assembly Budget Committee reacted to the article - not by inquiring as to the merits of the article, but by calling for legislation in reaction to the article. On May 10, 2004, the DHS legal staff submitted language to the Assembly Budget Committee that would, in their words "close the loopholes." Unfortunately, AB 2102, the Medi-Cal bill drafted by DHS, would have done far more than that. The bill would restrict nearly all transfers, regardless of whether the asset is exempt, including the family home, and allow the Department to implement the new law without any regulations or public input. By incorporating confusing and contradictory language, AB 2102 would undoubtedly have caused the greatest harm to the poorest applicants.

A coalition of legal services groups was able to educate the legislators enough that AB 2102 was dropped. However, the Department of Health Services and Department of Finance pressed forward and the language was included in budget trailer bill provisions, even though first year savings were projected at a mere $237,000. Clearly, DHS was trying to push a policy bill through as a budget bill.

Budget Trailer Bill

On Monday, June 14, 2004, after pressure from the Senate Democratic leadership, the Department of Health Services withdrew their budget trailer language proposal regarding the transfer of assets and recovery from annuities. However, there is no question that the Department will take up the issue again in a policy bill in August. Most likely it will be an Assembly bill and one can never be sure as to whom the author might be, after seeing what has happened over the past month.

What will likely happen is that language in a current bill will be dumped and the DHS transfer of asset language put in. Thus, we won’t know until August what the bill number is and what those provisions might include. We do know that the Department’s legal staff is intent on prohibiting Medi-Cal applicants from transferring the family home and on placing the OBRA ’93 restrictions on annuities and transfer of assets.

Where Are the Regulations?

For the past eleven years, the Department of Health Services has failed to promulgate regulations that would implement the federal OBRA ’93 Medicaid transfer provisions. Had they done so on a timely basis, the abuses and "loopholes" currently identified by the Department would not exist.

In September 2003, DHS issued a draft All County Letter and a package of regulations to a selected group of counties that would have implemented the OBRA ’93 provisions by May 2004 in a generally fair and equitable manner. These regulations left the current protections on transfer of the home intact. The regulations were revised and reissued again in draft form in January 2004. These revised regulations not only conflict with federal law in several areas, but also impose onerous penalties and restrictions on long term care Medi-Cal applicants and eliminate the hardship criteria for appealing transfers.

One key component that the Department wants, in addition to the prohibition of the transfer of the home, is the ability to implement the law without going through the regulatory process. The Department would also like to bypass the settlement agreement entered into with CANHR pursuant to the CANHR v. Bonta recovery case and the September 2003 injunction, which requires DHS to promulgate regulations pursuant to recovery. Both AB 2102 and the budget trailer language included provisions that would allow the Department to implement the law without regulations, and instead implement through All County Letters, provider letters, etc. with no opportunity for public comment.

To date, the Department has made no effort to release any final regulation package and is undoubtedly hoping that legislation in August will relieve them of their responsibilities under the Administrative Procedures Act, i.e., the duty to promulgate regulations subject to public comment.

Be Prepared

While we strongly support changes in the law that will deter trust mills, annuity scams, and other abusive practices, we do not support changes in the law that would make it more difficult for elders and disabled consumers who cannot afford private pay or who have the wrong disease to make minimal transfers or to retain their family homes.

Nor are we opposed to implementation of the OBRA ’93 provisions, but we want a fair and equitable law, and we want the Department to promulgate regulations and allow public comment on rules that will affect thousands of aged and disabled consumers.

In any case, we will need to be prepared in August to fight any attempts by DHS that go beyond federal law and that threaten the rights of residents to transfer the family home.

Some of you have been very active in contacting your local legislators and this has helped to clarify the issues for them. Keep it up. We’ll keep you up to date when the bill comes out in August. Meanwhile, you might want to write your legislators about the importance of retaining current law regarding the family home and to remind them that the absence of a regulatory process is, at best, undemocratic.

From the Summer 2004 Legal Network News

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