Why do we still attach poor people's estates to recoup Medicaid costs?

Our country has always had problems helping the poor without some sort of gimmick or catch. Listen to the sermon and find God, mop the soup kitchen floor after dinner is served, etc. It all plays into the suspicion that poor people are malingerers at heart, merely a firm bootstrap tug away from a McMansion and a fleet of SUVs clogging its circular driveway. And if they can't tug that bootstrap, they should all owe us something in the end.

There's a particularly insidious paradox along those lines regarding the Medicaid program.

Medicaid began in the 1960s, just as the fortunes of politicians like Ronald Reagan took off by scaring up people who drove to welfare offices in Cadillacs to pick up their checks. And that's among the reasons federal law mandates that states go after the estates of Medicaid recipients if they received nursing home care and other specialized services from the program. There's also an option to recoup the costs of basic healthcare services after the recipient dies. Ten states do so, including my home state of California. They can recoup the entire cost of providing care from the estate if there are enough assets to do so. There is no balancing what is owed against what the decedent might have paid in taxes to help fund Medicaid when they were still alive.

A decade or so ago, I might have been more willing to look the other way on this issue (full disclosure: I voted for Reagan in 1984, the first presidential election in which I was eligible to vote). But many of the same people who idolized Reagan have also pushed to repeal the estate tax, often referring to it as the "death tax." During the George W. Bush administration, the GOP-controlled Congress was able to whittle down the effective estate tax rate from 55 percent and suspend the tax altogether in 2010. It was reinstated in 2011 but its effective rate is now 40 percent--a roughly 29 percent reduction from 2001--with an exemption on the first $5.34 million if it's "gifted" to heirs in a specific fashion.

Remember New York Yankees owner George Steinbrenner? He died in 2010. His estate's heirs received between $500 million and $600 million in tax relief as a result, the Wall Street Journal reported. Dan Duncan, a Texas oil billionaire, also died in 2010, leaving an estate of some $9 billion that was untaxed, according to the New York Times. His heirs dodged a nearly $5 billion tax bullet.

If you have heard of a politician, campaign adviser or think tank wonk who has advocated for repealing Medicaid estate recoupment with the same fervor as they have for repealing the estate tax, please let me know. Like the yeti or chupacabra, they appear to be mystical creatures that do not actually exist.

That paradox may have stirred something in the Golden State, which collects a mere $17 million or so a year from the estates of people who were too poor to own anything than a clunker car and perhaps a rundown house. At its present rate of collection, it would take about 290 years to match what was not collected from the Steinbrenner and Duncan estates. And California would never match the billions saved by large estates that have enjoyed a ratcheting down of the effective tax rate over the past decade and-a-half.

That may be why the legislature just passed a bill that would rescind the state's practice of collecting on the estates of Medicaid enrollees who received basic medical care when they were age 55 or younger. It passed in both houses by a wide margin and with bipartisan support.

State Sen. Ed Hernandez, who authored the bill, said rescinding recoupment would encourage more people to enroll in Medi-Cal, the state Medicaid program. A small number of people who are eligible for Medi-Cal decline to enroll because they don't want their estates attached when they pass away. As a result, they may forego care because they have no coverage, and wind up in the hospital with an unpaid bill anyway. The last time I checked, hospital executives didn't like uncompensated care. I sense they like uncompensated care that could have been avoided even less.

Although the bill has a big list of supporters, hospitals did not take an official position. But considering Hernandez owes a lot of his current financial security to Kaiser Permanente, had hospital operators raised a stink, there likely would not be a bill now sitting on Gov. Jerry Brown's desk.

The only opponent to the bill is the California Department of Finance, which noted that the proceeds usually go back into the Medi-Cal program to cover the costs of providing healthcare. That's a valid point, but in a state with a $100 billion annual budget, $17 million might as well be $2. Brown has until the end of this month to sign the bill. I hope he does. I also hope it helps encourage the nine other states still attaching the assets of the deceased poor because they dared to seek basic medical care from their government to find more productive actions to do with their time. – Ron (@FierceHealthcare)