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DHS Approves Emergency Recovery Regulations

From the Fall 2005 Edition of "The CANHR Advocate"

Despite numerous written comments and controversy, the OAL approved the DHS emergency recovery regulations on March 23, 2005. (Regulation Number R-32-00E)

According to an unusual statement issued by William Gausewitz, Director of the Office of Administrative Law, Welfare & Institutions Code § 14043.75 strips the OAL of authority to do anything but approve the regulations and file them with the Secretary of State. (see the OAL statement at, under the emergency regulations section.)

According to Mr. Gausewitz, "Section 14043.75 is so broad that it doesn’t just remove our authority to rule upon the existence of an emergency. It removes any authority for us to review whether or not the regulations comply with the Administrative Procedures Act." In essence, when it comes to DHS regulations, the Office of Administrative Law no longer has any power.

We assume that the regulations were filed with the Secretary of State on March 24, 2005. If so, they became effective immediately, i.e., they would apply to anyone who died on or after that date.

Problems with Recovery Regulations

There are many problems with the new recovery regulations, not the least of which is the absolute lack of clarity and consistency and a demonstrative ignorance of probate and property law. CANHR will be providing a detailed analysis of the regulations on our web site in the next week or so. Following, however, are some of the highlights:

IHSS and other Benefits: In early 2001, the Department notified stakeholders that they would no longer include IHSS benefits in the State’s claim if the recipient died after September 1, 2000. This policy was reiterated in All County Letter 02-35 issued on June 18, 2002. 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. These 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.

Life Estates: One of the key concerns in the CANHR v. Bonta case was the lack of clarity regarding recovery from life estates. As many elder law counselors and legal services attorneys will attest, sometimes recovery on a life estate would be "waived," and sometimes it would not be waived. Numerous times in public forums, state recovery officials stated that there would be no claim when the transfer and life estate was "irrevocable," but a "revocable" life estate (whatever that is) would be subject to recovery just as if no transfer had been made. These regulations shed little light on the issue other than what seems to be the intent of the recovery branch to "claim against life estate interests as part of a decedent’s estate," whether the transfer was revocable or irrevocable. The twisted language in this section is of great concern to advocates and will likely be the subject of much litigation.

Hardship Criteria: Even a cursory reading of this section indicates that the Department has narrowed the criteria to limit the circumstances under which a hardship can be asserted. The provision requiring the Department to consider factors other than those enumerated has been eliminated. It is no longer enough that an aged, blind or disabled applicant "would have difficulty" obtaining financing to pay off the claim. Now, they must be "unable" to obtain financing and they must have a denial letter from a financial institution, opening the door to predatory lenders and elder fiduciary abuse and closing the hardship waiver door for those who can’t even get the financial institution to accept a loan application.

Caregiver Criteria: While the one positive aspect of these regulations is the recognition of a caregiver criteria, the onerous burden of proof and the requirement of "medical substantiation" 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.

Voluntary Post Death Liens & Interest

Not content to assert claims and liens on the property of deceased Medi-Cal beneficiaries, while encouraging elder fiduciary abuse, the Department is apparently planning on entering a new practice of predatory lending to balance the budget and prevent "abuse."

The new regulations will force applicants to sign a "voluntary lien," make monthly payments and, to top it off, to charge 7% interest until the claim is paid off. Setting aside the argument that there is no statutory basis for charging interest under these circumstances, the interest rate itself is usurious.

These are only a few of the glaring problems with the new recovery regulations. Representatives from the DHS Estate Recovery Unit are scheduled to attend the "Ask the Experts" session of CANHR’s Elder Law Conference, so have your questions ready.

CANHR also suggests that Welfare & Institutions Code §14043.75 be amended to require mandatory review of DHS emergency regulations by the Office of Administrative Law and a showing of clear and convincing evidence of fraud and abuse before emergency regulations can be adopted. CANHR will post a detailed analysis of the new regulations by next week. Meanwhile, let your State Representatives know about this perversion of the Administrative Procedures Act.