Californians over 55 years old face Medi-Cal Estate Recovery and potential repayment of Obamacare subsidies.
The implementation of Obamacare requires it to be administered by a variety of federal, state, and local government bureaucracies. Many consumers have been caught in a swirl of seemingly conflicting and utterly confusing rules, advice, and government forms. This cauldron of Obamacare confusion is particularly acute among individuals over 55 years old who are subject to California’s Medi-Cal Estate Recovery program. The anxiety instilled in this population is compounded by conflicting IRS 1095 forms that seem to open the door to a large tax bill for the repayment of the premium subsidies they received during the year.
Medi-Cal Estate Recovery
Many consumers over 55 years old were shocked to learn that their participation in a premium free Medi-Cal health plan would subject their estate upon their death to repayment of the expense for the Medi-Cal plan. In many of the initial letters received by consumers enrolling in Medi-Cal there was no mention of the Estate Recovery provision. Later, many who had enrolled received the Estate Recovery notice.
IMPORTANT NOTICE REGARDING THE MEDI-CAL ESTATE RECOVERY PROGRAM
After a Medi-Cal beneficiary passes away, the State may collect the cost of Medi-Cal services received ON or AFTER his/her 55th birthday from his/her estate.* This includes premium payments made to a managed care plan.
Estate is defined as any real or personal property owned by the Medi-Cal beneficiary, including any assets distributed through joint tenancy, tenancy in common, survivorship, life estate, and living trust. The Department of Health Care Services (Department) may also claim against a life insurance policy or retirement account that names the estate as the beneficiary or that goes back to the estate. Annuities purchased on or after September 1, 2004 may also be recovered. The Department will never collect more than either the value of the estate property owned by the Medi-Cal beneficiary or the amount of the medical services he/she received, whichever is less.
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California limits Estate Recovery, June 17, 2016
Additional language to limit Medi-Cal Estate Recovery provisions was added to California’s state budget for the 2016 – 2017 fiscal year. According to reports, Medi-Cal will not execute Estate Recovery proceeding for either medical services or health insurance premiums on beneficiaries over 55 years old. However, those individuals who are admitted to a skilled nursing facility will still be subject to Estate Recovery provisions. KQED: California Budget Includes Limit on Medi-Cal Estate Recovery
Governor Signs Estate Recovery Law June 27, 2016
SB 833 Text
Legislation can be complicated and the actual text can refer to other penal codes making it difficult to know exactly what the bill will do. Health insurance agent Steve Schorr has graciously allowed me to share from his page on the new Medi-Cal Estate Recovery legislation. SB 833 does not eliminate all Medi-Cal Estate Recovery options. California can still seek Estate Recovery if an individual receives health care services while in a nursing facility paid for by Medi-Cal.
How much will Medi-Cal cost?
Medi-Cal eligibility confirmation and enrollment is administered individually by each of California’s fifty-eight counties. Whenever possible, Medi-Cal eligible individuals are enrolled in Medi-Cal managed care HMO health plan. The county then pays the premiums for the HMO health insurance plan on behalf of the Medi-Cal beneficiary. Monthly premiums are typically between $500 and $600 per month. See: My Medi-Cal plan costs how much? Simple math reveals that Medi-Cal beneficiaries over the age of 55 can easily have their estate be subject to $6,000 per year for their participation in the HMO health plan. There are disability and hardship waivers that the beneficiary’s survivors can apply for to avoid repaying the Medi-Cal expense under the Estate Recovery provisions.
Disability Waiver
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How to learn how much you owe to Medi-Cal
Like any good bookkeeper, Medi-Cal keeps a running account of how much money is spent on each Medi-Cal enrollee from health plan premiums to adult dental services. Unfortunately, there is less pain in having a root canal than learning how much of a Medi-Cal beneficiary’s estate may be subject to recovery. For the low of cost of $25 and the expense of a Notary Public, representatives of a deceased Medi-Cal beneficiary can learn how much of the estate is subject to recovery. The form DHCS 4017 doesn’t indicate that living Medi-Cal beneficiaries can apply to learn how much they owe.
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Conflicting 1095-A and -B information
It is the living people who may have been enrolled in Medi-Cal who are most concerned about this potential Estate Recovery liability. 2015 was the first year that Medi-Cal issued IRS 1095-B forms indicating if an individual was covered by Medi-Cal during 2015. Several people have contacted me and related that they received a 1095-B for Medi-Cal AND a 1095-A from Covered California for the same months. In other words, Medi-Cal shows that some taxpayers were eligible, and potentially enrolled, in Medi-Cal at the same time they were receiving the Advance Premium Tax Credits (APTC) from Covered California for private health insurance.
Ineligible for the Obamacare subsidy
The Affordable Care Act states that if an individual is eligible for government minimum essential coverage (Medi-Cal, Medicare, VA) they are ineligible for the Obamacare tax credits to lower their monthly private health insurance premiums. Since the 1095-A, -B, and -Cs are reported to the IRS, it is a logical step to conclude that the IRS at some point may request the repayment of the APTC for those months that the taxpayer was eligible for Medi-Cal.
The IRS did issue some guidance to tax preparers who were presented with conflicting 1095s from consumers.
Affordable Care Act – Return Preparer Best Practices
Resolving Information Form 1095 Conflicts (revised April 7, 2016)
Resolving conflicting information between Form 1095-A and Form 1095-B:
An individual who was eligible for minimum essential coverage (other than coverage in the individual market) is generally not eligible for the premium tax credit. As a result, if a client receives a Form 1095-B indicating that the client or any family members were enrolled in minimum essential coverage for one or more months, the client generally is not eligible to claim the premium tax credit for those individuals for those months. However, in certain circumstances an individual who is eligible for – or even enrolled in – other minimal essential coverage may still be eligible for the premium tax credit. Some of these situations are listed below. Accordingly, if a client’s Form 1095-B contains information that appears to indicate that the client is not eligible for the premium tax credit, the preparer will need to ask clients about their specific circumstances to determine whether the client is eligible for the premium tax credit.
Examples of situations where a Form 1095-B indicates that an individual was enrolled in other coverage, but the individual may still be eligible for the premium tax credit:
- Reporting errors: If the issuer has reported information incorrectly on Form 1095-A or 1095-B, the client should contact the issuer of the form and ask for a correction. Because the issuer also reports this information to the IRS, discrepancies should be resolved at the earliest opportunity.
- Same month changes in coverage: If a client has coverage for at least one day during a month with one provider and switches coverage to another provider that takes effect later in the same month, both providers will report coverage provided during that month. This situation does not affect the client’s potential eligibility for the premium tax credit.
- Retroactive eligibility determinations and enrollment: A client may be retroactively determined to be eligible for and retroactively enrolled in government-sponsored coverage (Medicaid, for example). The client would generally receive a Form 1095-B regarding this government-sponsored coverage showing coverage starting on the date of retroactive enrollment. If the client was enrolled in Marketplace coverage while waiting for their eligibility determination in the government-sponsored coverage, they would generally receive both a Form 1095-A and a Form 1095-B for the overlapping period. Although this may appear to be contradictory information, the client’s eligibility for the premium tax credit does not change until the first day of the first calendar month beginning after the date of the approval. See question 5 for the rule that applies to individuals enrolled in both Marketplace coverage and Medicaid for one or more of the same months of the calendar year.
- Eligibility for Medicaid or Medicare while enrolled in Marketplace coverage: In general, a client is not eligible for the premium tax credit for months in which the client is eligible for government-sponsored health coverage. However, individuals are granted a period of time to apply for and transition to government-sponsored coverage once they become eligible. In particular, any individual who fails by the last day of the third full calendar month following when he or she meets the criteria to enroll in the government-sponsored insurance becomes ineligible for the premium tax credit as of the first day of the fourth calendar month. See question 5 for the rule that applies to individuals enrolled in both Marketplace coverage and Medicaid for one or more of the same months of the calendar year.
- Dual enrollment due to determination of Medicaid or CHIP ineligibility: If a Marketplace makes a determination or assessment that an individual is ineligible for Medicaid or CHIP and eligible for APTC when the individual enrolls in a qualified health plan, the individual is treated as not eligible for Medicaid or CHIP for purposes of the premium tax credit for the duration of the period of coverage under the qualified health plan (generally, the rest of the plan year). Accordingly, if your client was enrolled in both Medicaid coverage and in a qualified health plan for which advance credit payments were made for one or more months of the year following a Marketplace determination or assessment that your client was ineligible for Medicaid, your client can claim the premium tax credit for these months, if the client is otherwise eligible. The Marketplace may periodically check state Medicaid data to identify consumers who may be dual-enrolled, and direct them to return to the Marketplace to discontinue their APTC. If you believe that your client may currently be enrolled in both Medicaid and a qualified health plan with advance credit payments, you should advise your client to contact the Marketplace immediately.
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Or visit https://www.irs.gov/PUP/taxpros/best-_practices_resolving_1095_conflicts.pdf
Can anyone make a decision?
This IRS guidance seems to indicate that a Marketplace (Covered California) eligibility determination for the APTC supersedes a Medi-Cal eligibility determination. (It’s interesting that in California, Medi-Cal has primacy over Covered California and can strip eligibility away from consumers if they don’t like the stated estimated household income.) It’s possible that taxpayers will dodge the APTC repayment bullet even if there are conflicting 1095’s.
Will Medi-Cal be audited for Fraud, Waste, and Abuse?
But what about Estate Recovery? If a 55 year old plus consumer was enrolled in a Covered California plan and their local county also enrolled them in a Medi-Cal health plan, are they still on the hook for their estate to repay the premiums paid on their behalf? I’ve spoken to lots of people who were enrolled in both Medi-Cal and Covered California. That means their local county was paying health insurance premiums to Medi-Cal plans while the household was receiving premium assistance for private plans. Consequently, many “for profit” Medi-Cal health plans (Molina, Health Net, Anthem Blue Cross) were collecting premiums on individuals that never used the health plan and didn’t need it.
Medi-Cal dysfunction generates tremendous anxiety and stress
The sad part of all this conflicting information and confusion is that no government agency is willing to assistance consumers who are over 55 with answering their questions. Several people have told me that Medi-Cal has not designed a way to correct erroneous 1095-B enrollment information. The stress and anxiety consumers experience because no one will give them a straight answer is tremendous. People are rightly concerned that they owe Medi-Cal and they will have to repay tax credits with money they don’t have. For all the good Obamacare has done for millions of people, thousands of people are suffering under financial uncertainty because of a lack of communication and proper integration of the law among all the different agencies tasked with its implementation.
Federal and State Laws Governing Estate Recovery
Medi-Cal Estate Recovery Page
Medi-Cal Estate Recovery Brochure
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The middle class rises up!
The Medi-Cal Estate Recovery Brochure was published in 2015 and marks a marketing departure for the Department of Health Care Services. Since the beginning of Obamacare DHCS and Medi-Cal officials have had to answer to middle class Americans. Before so many middle class individuals and families became eligible for Medi-Cal, the marketing, information, and website was mostly a bureaucratic jumble. Now there are intelligent, college educated individuals that are trying to get information out of Medi-Cal. They don’t take No for answer. They know and understand the rules, and have little tolerance for ignorance on the part of bureaucrats.
I know this to be true because I have lots of super sharp people contact me with Medi-Cal and IRS questions. These folks have worked in the corporate world for years and now are faced with a bureaucracy that wasn’t built to be responsive to the an educated public. Many people have told me stories where they have interrogated and cross examined Medi-Cal workers to find the bureaucrats don’t know the rules they are suppose to be administering. I know one gentleman who asks a series of questions of the bureaucrats, some of which are solely to test the knowledge of the person with whom he was speaking, before he asks his real questions.
While people over 55 are suffering under much stress caused by Medi-Cal, their questioning and perseverance to get answers is having an impact on DHCS and Medi-Cal.