Estate Recovery One Year Later
As noted previously in the newsletter, the federal government has long required states to enact an Estate Recovery Program through which the state must collect money from the estates of certain deceased Medicaid beneficiaries who received long term care to reimburse the Medicaid program for the services they received.1 Michigan’s Estate Recovery program became effective on July 1, 2011.
Estate recovery applies only to Medicaid beneficiaries who are age 55 or older and began receiving long-term care services after September 30, 2007.2 The Michigan Department of Community Health determined that beneficiaries who received MI Choice home and community based waiver services, home health, home help, or hospitals and prescription drug services on or after July 1, 2010 may be subject to estate recovery upon their death.3 As discussed below, however, representatives of the estates of deceased beneficiaries who died without receiving proper notice regarding estate recovery may be able to object to the state’s attempt to recover.4
The Michigan statute and State Plan allow the state to recover any property that is subject to probate court administration including cars, homes, and insurance money.5 Estate recovery can be avoided in situations in which recovery would cause an “undue hardship.” An “undue hardship” exists when the estate is the only source of income for the survivors, the estate is a home of modest value (at or below 50% of the average prices of homes in the county where the home is located), or the survivor would become or remain eligible for Medicaid if recovery occurred.6 The state may not recover when the beneficiary’s spouse; the beneficiary’s child who is under the age of 21, blind, or permanently disabled; or a sibling who has an equity interest in the home and was living in the home for at least one year before the death of the beneficiary is lawfully residing in the beneficiary’s home at the time of the beneficiary’s death.7 Finally, exemptions from recovery are also granted when a survivor was living in the beneficiary’s home at least two years immediately before the beneficiary went into a medical facility and provided care that enabled the beneficiary to remain in his or her home during the two year period.8
After the death of a Medicaid beneficiary, the personal representative of the estate must notify the state of the existence of the probate estate within 91 days of their appointment as personal representative.9 If the state intends to file a claim against the assets in a deceased beneficiary’s estate, Heath Management Systems (HMS), the company that holds a contract with the State of Michigan to handle estate recovery claims, will notify the personal representative. The personal representative or any other beneficiary of the estate may then request an Undue Hardship Application from HMS, which must be returned within 60 days of receipt of the application.10 If a request for a Hardship waiver is denied, the decision can be appealed within 60 days of receiving notice of the denial.11 The statute cautions that “There is a presumption that no hardship exists if the hardship resulted from estate planning methods under which assets were diverted in order to avoid estate recovery.”12
There may be another important way to avoid estate recovery for deceased beneficiaries who began receiving Medicaid long term care services before November, 2011. Pursuant to state law, when an individual enrolls in Medicaid, the Department of Community Health (DCH) must provide a description of the provisions of the Michigan Medicaid Estate Recovery Program and inform beneficiaries that some of their estate assets may be recovered.13 However, before November, 2011 when DCH changed its Medicaid application notify recipients of the possibility of estate recovery, no such notice was provided.
In a recent case, Michigan Department of Community Health v. Estate of Katheryn M. Salemka-Shire (available at: http://mielderlaw.com/estate-recovery-opinion-estate-of-salemka-shire-april-30-2012 ), a Clinton County Probate Court judge found that estate recovery could not be permitted where an individual had not received proper notice of the possibility of estate recovery before receiving Medicaid benefits. The probate judge found that because the DCH did not comply with the State Plan, as is explicitly required by the underlying federal statute (42 USC 1369p, Sec. 1917(b)(1)), recovery from the beneficiary was barred by federal law.14 The judge also addressed the state’s argument that existence of the statute satisfied notice obligations under MCL 400.112g(7), but determined that because the provisions were not available to the defendant when she enrolled in Medicaid around October 2010, the notice requirements for recovery under the state statute were not met.15 This case suggests that any individual who applied for benefits before the state changed its Medicaid application in November 2011 to give recipients notice of the possibility of estate recovery cannot be subject to recovery. Although other probate judges are not bound by the Clinton County decision, litigants in cases in which the beneficiary received Medicaid funded long term care services should raise the issue.
The current estate recovery law also permits several avenues to avoid recovery through various estate planning techniques including
- Titling assets jointly with right of survivorship to a family member
- Using a Lady Bird Deed
- Executing Payable Upon Death or Transfer of Death designations on accounts16
However, last year, legislation was introduced to restrict the exemptions and defenses available to Medicaid beneficiaries and to make Michigan’s estate recovery effort considerably more aggressive. While no progress has been made on this legislation, practitioners should caution clients that changes in the law could diminish the effectiveness of estate planning techniques and reduce existing exemptions.
For more information on the estate recovery process or to find out if a beneficiary is subject to estate recovery individuals may e-mail firstname.lastname@example.org or call HMS at (877) 791-0435. For more information on estate recovery in Michigan, including instructions on how to request a Hardship Waiver and forms for appealing an agency decision regarding undue hardship visit http://www.michigan.gov/mdch/0,1607,7 -132-2943_4860_56113_58553---,00.html.
- 42 USC 1396p.
- Michigan Department of Human Services Bridges Eligibility Manual (BEM), Section 400 at 7-8, available at www.mfia.state.mi.us/olmweb/ex/be,/bem.pdf; see also 42 USC 1369p Sec. 1917(3)(B).
- Michigan Department of Community Health, Medical Services Administration Bulletin Number 11-12, Mar. 2011, available at http://www.michigan.gov/documents/mdch/MSA_11-12_346835_7.pdf.
- MCL 400.112g(5)
- MCL 400.112h(a)-(b); see also Michigan State Plan at 595.
- MCL 400.112g(3)(e)(i-iii); see also BEM 400 at 7-8.
- MCL 400.112g(6); see also BEM 400 at 8.
- MCL 400.112g(6)(c).
- MCL 700.3706; see also Michigan State Plan at 598.
- Michigan Estate Recovery FAQ, available at http://www.michigan.gov/mdch/0,1607,7-132-2943_4860_56113_58553---,00.html); see also Michelyn E. Pasteur & Katie Lynwood, Estate Recovery is Now in Play, Michigan Probate and Estate Planning Journal, Vol. 31 Winter 2011, at 17.
- MCL 400.112g(3)(e)(iii).
- MCL 400.112(g)(7).
- Michigan Department of Community Health v. Estate of Katherine M. Salekma-Shire, Clinton County Prob. Ct, April 20, 2012.
- Michelyn E. Pasteur & Katie Lynwood, Estate Recovery is Now in Play, Michigan Probate and Estate Planning Journal, Vol. 31 Winter 2011, at 17.