Kizer v. Hanna

• Decision Date: 21 February 1989
• Docket Number: No. S005834,S005834
• Citation: 48 Cal.3d 1,767 P.2d 679,255 Cal.Rptr. 412
• Court: California Supreme Court
• Parties: , 767 P.2d 679, Medicare & Medicaid Guide P 37,648 Kenneth W. KIZER, as Director, etc., Plaintiff and Respondent, v. Jack E. HANNA, as Executor, etc., Defendant and Appellant.

Page 412

255 Cal.Rptr. 412

48 Cal.3d 1, 767 P.2d 679, Medicare & Medicaid Guide P 37,648

Kenneth W. KIZER, as Director, etc., Plaintiff and Respondent, v. Jack E. HANNA, as Executor, etc., Defendant and Appellant.

No. S005834.

Supreme Court of California In Bank.

Feb. 21, 1989.

Thomas Trent Lewis and Rehwald, Rameson & Lewis, Van Nuys, for defendant and appellant.

William A. Quinlan and Quinlan, Kershaw, Fanucchi & Hoffman, Fresno, as amici curiae on behalf of defendant and appellant.

John K. Van de Kamp, Atty. Gen., Charlton G. Holland, Asst. Atty. Gen., and Anne S. Pressman, Deputy Atty. Gen., for plaintiff and respondent.

PANELLI, Justice.

Jack E. Hanna, as executor of the estate of Zyoud Jacob, appeals a summary judgment in favor of Kenneth W. Kizer, M.D., Director of the Department of Health Services, State of California (hereinafter Department). At issue is whether Welfare and Institutions Code section 14009.5 allows the Department to be reimbursed from a Medi-Cal recipient's estate for Medi-Cal benefits paid prior to the effective date of section 14009.5, when the recipient died after this date. We conclude that it does.

I. FACTS

The facts are not in dispute. Zyoud Jacob died on June 26, 1983. From November 1, 1974, until the time of her death, Jacob received a total of $60,372.90 in benefits from Medi-Cal. ¹ After Jacob's death, the Department filed a preferred creditor's claim against her estate, seeking reimbursement for all Medi-Cal benefits paid to Jacob. The Department acted pursuant to Welfare & Institutions Code section 14009.5, which authorizes the state to claim against the estate of a deceased Medi-Cal recipient "an amount equal to payments for health care services received." ² Section 14009.5 was enacted as an urgency measure and became effective on June 28, 1981, almost two years prior to Jacob's death.

Hanna, the executor of Jacob's estate, accepted the Department's claim to the extent that it sought reimbursement for benefits paid to Jacob after the June 28, 1981, effective date of section 14009.5. He rejected that part of the claim that sought reimbursement for Medi-Cal benefits paid prior to June 28, 1981. Hanna tendered to the Department only $15,658.93, an amount equal to the Medi-Cal benefits paid from June 28, 1981, until Jacob's death. ³ The Department rejected this tender, asserting that all of the Medi-Cal benefits paid to Jacob were subject to the mandate of section 14009.5 because she died after the statute's effective date. The Department filed suit seeking reimbursement for the full amount of benefits paid.

On December 3, 1986, the trial court granted the Department's motion for summary judgment and entered judgment against Hanna for $60,372.90, representing the full amount of benefits received by Jacob. The Court of Appeal affirmed, holding that the application of section 14009.5 to benefits received before the statute's effective date is proper when the recipient died after this date, because no vested rights are impaired. We granted review in order to resolve a conflict in the Courts of Appeal.

The issue presented here was addressed in Department of Health Services v. Fontes (1985) 169 Cal.App.3d 301, 215 Cal.Rptr. 14 and Estate of Messner (1987) 190 Cal.App.3d 818, 235 Cal.Rptr. 495. Both cases agreed that section 14009.5 applies prospectively, but they disagreed as to what that means. (Fontes, 169 Cal.App.3d at p. 304, 215 Cal.Rptr. 14; Messner, 190 Cal.App.3d at pp. 821-822, 235 Cal.Rptr. 495.) Fontes held that section 14009.5 authorizes the Department to claim reimbursement for Medi-Cal benefits received before the statute's effective date when the recipient died after this date. Messner, on the other hand, concluded that the Department was entitled to claim reimbursement only for benefits paid after the effective date of section 14009.5. The Department urges us to follow Fontes while Hanna urges us to follow Messner.

In Fontes the court concluded that "[t]he application of this statute to estates which arose after its effective date did not affect any existing rights and accordingly, had no impermissibly retroactive effect, even where the benefits had been received prior to the effective date." (Fontes, supra, 169 Cal.App.3d at p. 305, 215 Cal.Rptr. 14.) According to Fontes, the effect of section 14009.5 on the testamentary distribution of a Medi-Cal recipient's estate is proper because such distribution is a creature of statute and is controlled by the law in effect at the date of death. (Ibid.) The court further reasoned that the statute does not affect any existing rights held by the recipient's estate since the estate did not come into existence until the Medi-Cal recipient died. (Ibid.)

Messner asserted that application of section 14009.5 to Medi-Cal benefits received prior to the statute's effective date created an "after-the-fact" debt and prevented the recipient from controlling the testamentary disposition of his property. (Messner, supra, 190 Cal.App.3d at p. 823, 235 Cal.Rptr. 495.) This, the court reasoned, constituted a taking of property without notice. The court also implied that the Department's right to reimbursement arose not at the time of death but rather at the time the Medi-Cal benefits were paid. (Id. at p. 824, 235 Cal.Rptr. 495.) Consequently, the court concluded that the application of section 14009.5 to benefits received prior to the statute's effective date impermissibly affected earlier acts and transactions. (Id. at p. 822, 235 Cal.Rptr. 495.)

Having the benefit of the Messner and Fontes decisions, the Court of Appeal in this case decided to follow Fontes. The court agreed with Fontes that a Medi-Cal recipient has no vested right to control the testamentary disposition of his property because such disposition rests entirely upon legislative will. Likewise, it stated that section 14009.5 does not impair the vested rights of the deceased recipient's estate or those who take from the estate, because these rights come into existence after the recipient's death. The court added that section 14009.5 did not change the previous law which made Medi-Cal recipients immune from repayment of benefits lawfully obtained. This conclusion was based on the fact that the statute only allowed a claim against the recipient's estate and did not affect or impair the recipient's right to dispose of the property during his lifetime free of any reimbursement claim. Thus, just as in Fontes, the Court of Appeal concluded that allowing reimbursement for benefits paid prior to the enactment of section 14009.5 has no retroactive effect because such application does not affect any existing rights.

II. DISCUSSION

Preliminarily, we note that section 14009.5 carefully balances the state's interests against those of the Medi-Cal recipient's heirs. The Medi-Cal program ensures that needy persons have access to basic medical care without requiring them to sell their homes and without impairing their ability to own certain property. (See ante, fn. 3.) However, in the face of rising medical costs, the program has placed an increasing financial burden on the state. The reimbursement requirements of section 14009.5 provide an equitable and reasonable method of easing the state's financial burden while ensuring the continued viability of the Medi-Cal program. In short, section 14009.5 enables Medi-Cal to help those persons in need when they have such need, yet insures that when the need no longer exists by virtue of the recipient's death, the benefits paid can be recouped. The Medi-Cal benefits thus recouped can be used to assist others in need.

At the same time, section 14009.5 prevents the heirs of Medi-Cal recipients from unfairly benefitting from the program. This is so because, but for Medi-Cal, a recipient would probably have to sell his home in order to obtain the funds with which to pay for medical care. As a result of not having to sell his home, the estate of a deceased Medi-Cal recipient is greater than it might otherwise be. The reimbursement requirements of section 14009.5 thus seek from the estate only that which would not have existed but for the Medi-Cal program. Furthermore, as a result of Medi-Cal, the heirs are not required to bear the full burden of the recipient's medical care during the recipient's lifetime.

In drafting the statute the state recognized that allowing reimbursement from a Medi-Cal recipient's estate may be unfair in certain circumstances. Consequently, section 14009.5 prohibits claims for reimbursement where the recipient is survived by a spouse or by a blind, disabled or minor child. It also prohibits claims where the recipient was under 65 when the benefits were received. Moreover, the statute specifically authorizes the Department to waive its claim when substantial hardship to dependents of the deceased Medi-Cal recipient would result. Section 14009.5 thus strikes an equitable balance between the competing interests, measured, in part, by conditions existing on the date of the recipient's death.

With these considerations in mind, we turn to the issue before us.

Hanna argues the Court of Appeal applied section 14009.5 retroactively even though there is no legislative intent regarding such application. Citing Evangelatos v. Superior Court (1988) 44 Cal.3d 1188, 1207, 246 Cal.Rptr. 629, 753 P.2d 585 which in turn relied on Aetna Cas. & Surety Co. v. Ind. Acc. Com. (1947) 30 Cal.2d 388, 393, 182 P.2d 159, he contends this was error because a statute is not applied retroactively unless there is evidence the Legislature intended it be so applied. We have no quarrel with Evangelatos or Aetna. ⁴ Rather, Hanna's argument misses the point, for this case does not present a true question of retroactivity. It is undisputed that section 14009.5 affects only estates arising after the statute's effective date and that there is no legislative intent to the contrary. Because the statute affects only these estates, its...