December 4, 2014

Medi-Cal Reimbursement - Douglas v. Castillo

Generally speaking, when a person receives Medi-Cal services past the age of 55, upon their demise their estate is required to reimburse the state of California for such services. See Welfare & Institutions Code §14009.5. This process is commonly known as "Medi-Cal reimbursement."

While the term "Medi-Cal reimbursement" might seem innocuous, in reality it is quite formidable. The California Department of Health Care Services ("DHCS"), the government agency tasked with the process, has collection methods and is willing to use them. This invokes the story of the late Cecelia Galaviz Garcia. Douglas v. Castillo, Los Angeles County Superior Court Case # BC484100

Ms. Garcia received $147,190.64 in Medi-Cal benefits during her lifetime. Thus, upon her death, her estate would be liable for this $147,190.64. 

Ms. Garcia was a joint tenant, along with her brother Richard Castillo Sr., for a home located in Los Angeles, CA. Due to this joint tenancy, Ms. Garcia and Mr. Castillo Sr. each owned a 50% interest in the home. 

As the surviving joint tenant, Mr. Castillo Sr. became the sole owner of the property by operation of law. However and most importantly for this blog post, through this inheritance, Mr. Castillo Sr. also became liable for his sister's Medi-Cal bill up to the value of her estate. That is, Mr. Castillo Sr. could not inherit a net deficiency from his sister's estate. So if Ms. Garcia's estate could not equal the Medi-Cal bill, Mr. Castillo Sr. would not be liable for the overage. Rather, his liability would be limited to the value of her estate.       

Mr. Castillo Sr. notified the DHCS of his sister's passing in January 2010 and DHCS in turn provided Mr. Castillo Sr. with the bill in a letter dated April 14, 2010. For reasons unknown, Mr. Castillo Sr. ignored the notice and sold the property for $230,000 on September 28, 2010. 

In the following years, the DHCS issued demand letter after demand letter to Mr. Castillo Sr. for reimbursement of his sister's Medi-Cal benefits. Eventually, the DHCS sued Mr. Castillo Sr. and obtained a judgment for $74,801.73 plus post-judgment interest. Mr. Castillo Sr. appealed the judgment and the trial court's decision was upheld in an unpublished opinion by the California Court of Appeal.

The obvious takeaway from this case is to not ignore a demand letter from the DHCS. As shown by the case, it is a creditor that will use collection efforts to satisfy its claim. Due to neglect, Mr. Castillo Sr. unfortunately now has at least a $74,801.73 judgment  against him.