Obamacare Fine Print: Beware the Medicaid and Medi-Cal Clawbacks and Liens

Obamacare greatly expanded Medicaid coverage, but there is a hidden gotcha that may come back and haunt your heirs for benefits you receive from age 55-64.

This is not new news, but few read and understand the "fine print".

In a warning about the "fine print" and in response to Moral Dilemma: Should a Libertarian Who Does Not Need Food Stamps, but Qualifies for Them, Take Them? reader "TL" writes ...

Hello Mish,

Your friend Steven may want to carefully research taking Medi-Cal benefits.

Medi-Cal, and many other state Medicaid programs include a ‘claw-back’ provision for recovery of costs incurred by the state to provide medical care.  While there is much variation in particulars from one state to another, the bottom line is these costs include a monthly ‘administrative fee’

The ‘claw-back’ mechanism functions via the state placing ‘liens’ on individual assets at the point the Medicaid recipient reaches age 55, then recovers the money at the point the Medicaid recipient dies by ‘seizing’ the money from the estate.

When first put into effect, these ‘claw-back’ provisions were primarily intended to recover costs to the state of providing long term nursing home care for older recipients. 

ObamaCare’s expanded Medicaid has, of course, now waived the assets portion of the ‘means test’.  But under current law, those assets are subject to ‘claw-back’. 

At the moment, the monthly ‘administrative fee’ amount for Medi-Cal is $611.  Those who sign up for Medicaid may not be doing themselves any favors.

Medi-Cal estate recovery refers to state action to reclaim certain Medi-Cal costs from the estates of beneficiaries after their death. This program, which has been in place for decades, has received renewed attention from policymakers because of reports that some individuals newly eligible for Medi-Cal as expanded under the Affordable Care Act (ACA) may not enroll for fear that their house and assets could later be seized.

... States also have the option to take a more expansive approach and seek recovery of costs for other covered services, not just LTSS, provided to beneficiaries age 55 and older. California has chosen this option and seeks recovery of Medi-Cal costs for all covered services provided to beneficiaries age 55 and over, with the exception of personal care services provided through the state’s In-Home Supportive Services (IHSS) program.  California has elected to use property liens to protect its claim in cases where the beneficiary was permanently institutionalized and not expected to return home. Medi-Cal places a lien against the beneficiary’s property while the beneficiary is still alive so it can seek recovery when the individual passes away or when the property is sold. 

With an estimated 223,000 adults seeking health insurance headed toward Washington’s expanded Medicaid program over the next three years, the state’s estate-recovery rules, which allow collection of nearly all medical expenses, have come under fire.

Medicaid, in keeping with federal policy, has long tapped into estates. But because most low-income adults without disabilities could not qualify for typical medical coverage through Medicaid, recovery primarily involved expenses for nursing homes and other long-term care.

The federal Affordable Care Act (ACA) changed that. Now many more low-income residents will qualify for Medicaid, called Apple Health in Washington state.

But if they qualify for Medicaid, they’re not eligible for tax credits to subsidize a private health plan under the ACA, which requires all adults to have health insurance by March 31.

Unclear rules

One reason this snafu has become so troublesome is that ACA rules appear to give those who qualify for Medicaid little choice but to accept the coverage.

People cannot receive a tax credit to subsidize their purchase of a private health plan if their income qualifies them for Medicaid, said Bethany Frey, spokeswoman for the Washington Health Benefit Exchange.