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Michigan to Appeal CMS Denial of the State’s Estate Recovery Proposal

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by Alison Hirschel, MPLP Elder Law Attorney

Under federal law, states must attempt to recoup some of the costs incurred in providing long term care to Medicaid recipients after their deaths through estate recovery programs. Michigan is the only state that has not complied with this longstanding federal mandate. Last year, after federal officials threatened to impose substantial penalties on the state for its failure to establish an estate recovery program, the legislature finally enacted Public Act 74 of 2007 (MCL 400.112g). The law was dubbed “Estate Recovery Lite” by some elder law attorneys because it appeared to permit fairly generous exemptions from estate recovery and was a far less aggressive proposal than many had feared. The law could not be implemented, however, until it received approval from the Centers for Medicare & Medicaid Services (CMS) and until the Department of Community Health promulgated regulations. In September of this year, CMS denied the state’s request for a state plan amendment on estate recovery and the state has now appealed that decision.

After receiving the state plan amendment request last year, CMS requested additional information from the state in March of this year including information about the state’s projected costs savings.. The state responded that it would have to revise its cost savings estimates since the program had not yet become operational. CMS determined that “the State’s overall submission did not provide additional detail or information for us to determine that the State has an estate recovery program that meets statutory requirements.” The state requested reconsideration of the denial and the hearing is currently scheduled for January 6, 2009. At the hearing, CMS will consider whether the state complied with the statutory mandate to implement an estate recovery program and whether the state provided sufficient information for the plan to be approved to serve as a basis for federal financial participation.

If the state is unsuccessful in its appeal, it will once again face the possibility of potentially very significant sanctions for its failure to enact an estate recovery program. Moreover, the legislature will undoubtedly be under pressure to pass a more aggressive estate recovery program to meet CMS’s demands. However, it is extremely likely that the state will have more positive and collaborative relations with CMS under an Obama administration and state officials are already greatly encouraged about the likelihood of progress and greater support from CMS on other Medicaid issues. It is therefore possible that CMS under the new administration will be more likely to approve the state’s rather lenient estate recovery program and less likely to impose draconian sanctions on the state for its failure to implement an estate recovery program to date.

If the state law is ultimately implemented, it could only affect individuals who began receiving long term care services after September 30, 2007 and it only applies to individuals who are 55 or older or who are permanently institutionalized, regardless of age. However, even if CMS approval is obtained, the law cannot be implemented before the state drafts policies and procedures and written materials that explain to applicants for Medicaid funded long term care both the estate recovery program in general and the process for seeking a hardship waiver from estate recovery. Since the legislature appears to have intended that the information be provided to applicants before they begin receiving Medicaid funded long term care, it is unlikely that the law will affect any current long term care recipients. Depending on the outcome of the state’s request for reconsideration and CMS’s approach to this issue under the new administration, implementation of any estate recovery program is unlikely to occur for months and may face even longer delays.