Metropolitan News-Enterprise


Thursday, January 9, 2003


Page 1


C.A. Reinstates Challenge to Way State Enforces Medi-Cal Liens


By KENNETH OFGANG, Staff Writer/Appellate Courts


A suit challenging the way the state Department of Health Services determines which assets of deceased Medi-Cal recipients to seize as reimbursement for benefits was reinstated yesterday by the First District Court of Appeal.

Div. Two held that California Advocates for Nursing Home Reform presented sufficient evidence to justify a trial on its claim that DHS has been “demanding repayment of thousands of dollars from the modest estates” of recipients based on “underground regulations” instead of formal rules adopted in accordance with state and federal law.

Congress has, since 1993, required states to establish programs to recover Medicaid benefits from “assets conveyed to a survivor, heir, or assign of the deceased individual [recipient] through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement.” Medicaid, which pays certain health care costs for low-income individuals, is administered by the states, with federal oversight, and funded by both the state and federal governments.

Estate Recovery

The California Medical Assistance Program, better known as Medi-Cal, is the mechanism by which the state participates in Medicaid. State law establishes an estate recovery program which allows the state to collect reimbursement from beneficiary’s estates, but allows for a waiver if collection will cause “substantial hardship” for survivors.

DHS has established an Estate Recovery Unit to implement the program. CANHR claims that the unit, known as ERU, is acting in excess of properly delegated authority by seizing assets from sources such as life estates and annuities.

San Francisco Superior Court Judge David Garcia granted DHS’ motion for summary judgment, holding that the department “does not use underground regulations in administering its estate recovery program.” The state, he concluded, had not acted arbitrarily in seeking reimbursement in some situations and not others, but had followed applicable provisions of state and federal law.

Trial Necessary

But Presiding Justice J. Anthony Kline, writing for the appellate panel, said Garcia’s findings were “either based on disputed facts or legally unjustified” and that a trial was necessary to determine whether the department has relied improperly on internal guidelines instead of formal rules.

With respect to annuities and life estates, Kline cited deposition testimony by the former chief of ERU, who said that estate recovery policies were unclear and needed to be “clarified,” while acknowledging that her former superiors in the department might not agree. No regulation, she noted, specified what factors would be considered in making a determination as to whether a life estate or an annuity is subject to recovery.

Kline also noted that the assistant deputy director of DHS acknowledged that there was an issue as to whether an annuity was an “other arrangement” under the statute, that he made a decision not to collect from annuities until the matter could be resolved and to refund collections that had already been made, and that his decision to do so was conveyed to his staff by e-mail but perhaps not “written down anywhere.”

 While an agency’s decision not to exercise its discretion in a particular instance is not normally subject to judicial review, Kline said, the principle “case does not insulate from review an agency failure to promulgate regulations in the first instance where required to do so by the [Administrative Procedure Act], which is not a statute that the agency administers.”

APA rulemaking also should have been used, Kline said, to implement the exemption of disabled beneficiaries from collection.

 DHS had, he noted, changed its practices over time. At one time, he noted, a doctor’s note certifying disability sufficed. Later, the department began referring disability claims to the Department of Social Services, saying a determination of disability by DSS was “conclusive,” but not specifying whether, or how, a finding by DSS that the person was not disabled could be appealed, the presiding justice explained.

“The foregoing guidelines are or were generally applicable policies interpreting and implementing the federal statutes and regulations relating to disability exemptions, and therefore should have been the subject of rulemaking under the APA,” he wrote. “If they had been promulgated and revised in the manner prescribed by the APA, DHS’s guidelines would doubtless have been more precise and complete.”

The case is California Advocates for Nursing Home Reform v. Bonta, A097107.


Copyright 2003, Metropolitan News Company