State Must Formally Adopt Its Medicaid Estate Recovery Rules

JANUARY 27, 2003 VOLUME 10, NUMBER 30

In our American system of government the legislature is in charge of making law and policy, and the administrative branch’s job is to interpret and implement those laws without imposing the bureaucrats’ own ideas on the legislature’s programs. That ideal conception, however, runs afoul of the reality of government. Because it is simply impossible to anticipate every variation of a problem, much of the actual administration looks like, and is, legislative in nature.

To keep the making and implementation of administrative policies as public and responsive as possible, most states have adopted laws requiring agencies to publish their planned regulations, submit them to public comment, and consider input from citizens. The law compelling these practices is usually called the Administrative Procedures Act (APA) or some similar name. Arizona has such a law, as does California.

Medi-Cal, California’s version of Medicaid, includes a provision requiring its administrative agency to seek reimbursement for Medi-Cal payments from the estates of at least some deceased Medi-Cal recipients. California law defines “estate” to include the deceased beneficiary’s probate estate, as is true in Arizona and every other state. But California goes further, and permits its estate recovery program to pursue any property that belonged to the deceased beneficiary at the time of death, including property held in joint tenancy or “other arrangement.” The problem: “other arrangement” is not defined in the California law.

Medi-Cal administrators decided that the law should apply to annuities and life estates in at least some circumstances. It first pursued, then decided not to pursue, annuities. In the case of life estate property, Medi-Cal decided to seek recovery if the Medi-Cal beneficiary had once owned the property and transferred it to another person, reserving both a life estate (that is, the right to live on the property for life) and a right to sell the property and retain the proceeds. Neither decision was made as part of a public rule-making process.

A non-profit group, California Advocates for Nursing Home Reform (CANHR) sued to force Medi-Cal to properly publish and adopt its rules. The State objected, and a trial judge dismissed CANHR’s complaint.

The California Court of Appeals has now reversed that decision, finding that there is at least some evidence of improper rule-making. CANHR will now be given a chance in court to prove its allegation that Medi-Cal relies on “underground guidelines and criteria” in pursuing estate recovery. CANHR v. Bonta, January 8, 2003.

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