Judge Restricts Medi-Cal Liens on Homes of Elderly

A U.S. District Court judge in San Francisco ruled Friday that state Medi-Cal officials have improperly placed liens on the homes of hundreds of elderly Californians to recoup the cost of medical care provided to their dead spouses by the government.

The ruling in a class-action lawsuit requires state officials to implement new procedures to ensure that elderly homeowners in the future get notice of impending liens and an opportunity to contest them.

Amitai Schwartz of San Francisco, an attorney for the plaintiffs, said the ruling effectively nullifies about 700 liens, ranging from $500 to $200,000, that state officials have placed since January on the homes of elderly people statewide.

He said the new restrictions required by the judge may prove so costly for the state that they may wipe out any money recouped through the program.

“The ruling requires the state to go back to the drawing board with this program,” Schwartz said.

Medi-Cal officials this year began systematically using property liens to recover Medi-Cal payments from homeowners after legislation providing for the program was passed by the state and federal legislation was amended.

The new lien program was designed to recoup more than $12 million a year for Medi-Cal, which provides health care to the poor and disabled. About $2.9 billion annually, or 17% of the total Medi-Cal budget, is spent on nursing home care for about 75,000 impoverished Californians.

State Deputy Atty. Gen. Beverley Meyers, who declined to comment on the judge’s ruling Friday, has defended the lien program in the past for plugging “a legal loophole” in the law that has long given favorable treatment to elderly homeowners and their heirs. She pointed out that the Medi-Cal program allows homeowners--unlike renters--to receive Medi-Cal benefits while sheltering a substantial asset--their homes.

“A lot of people are saying, ‘Here’s the state going after poor people for no good reason,’ ” Meyers said in a May interview. “But these are not necessarily poor people. They have homes. There is one house we know of that is worth about $400,000. . . . A person like that isn’t indigent.’

Schwartz argued that the nine homeowners he represented, like most of the others who have been hit by liens, are poor.

They were caught totally by surprise by the liens and given no information about how to appeal, he contended. In some cases, Schwartz said, the liens froze pending sales or property refinancing. In others, he said, the lien amount was not itemized or was miscalculated.

State officials issued about 400 liens through April, although 260 were withdrawn after officials conceded that they had been “erroneously issued.”

Schwartz said he recently learned that another 300 liens have been placed since May.

The liens, which were recorded on the homes of surviving spouses of deceased Medi-Cal beneficiaries over the age of 65, did not have to be paid immediately and did not force residents out of their homes prematurely, according to state officials. But they did unequivocally stake out the state’s claim to payment, which had to be made when the house was sold, transferred or exchanged.

In his ruling Friday, U.S. District Judge Vaughn Walker struck down the provision of the law that required payment of the lien at the time the house is sold, transferred or exchanged, but upheld provisions that payment must be made upon the death of the surviving spouse.

Deputy Atty. Gen. Meyers has opposed giving notice of liens before they are recorded because, she said, “surviving spouses and their savvy estate planners will transfer property to others in title only” to avoid payment.