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Michigan Enacts a Modest Estate Recovery Law but Many Questions Remain

MPLP Winter 2008 Elder Law Section Newsletter Article

Issue 35, Winter 2008

Michigan Enacts  a Modest Estate Recovery Law but Many Questions Remain

On September 30, 2007, Governor Granholm signed into law estate recovery legislation making Michigan the last state in the nation to comply with a 14 year old federal mandate. See MCL 400.112g and 42 U.S.C. 1396p. Pursuant to the state law, the Michigan Department of Community Health will attempt to recoup from the estates of Medicaid funded long term care recipients some of the costs the state incurred in paying for their care. 


Michigan’s estate recovery program will affect only recipients of Medicaid funded nursing home care or home and community based waiver (MiChoice) services. Moreover, estate recovery is limited by federal law to individuals who are 55 or older or to younger people who the state determines, after notice and the opportunity for a hearing, require permanent institutionalization.  Moreover, the law will only apply to individuals who begin receiving Medicaid funded  long term care services after September 30, 2007 and it may not apply to anyone who begins receiving services for a period of time after that date because the state still has a number of hoops to jump through before it can formally initiate its program.  


The Michigan law also includes both exemptions in the federal law and a number of additional provisions that make it far less aggressive than federal law permits. For example:


·                 If a Medicaid recipient is single, no recovery may occur until after his or her death.

·                 If a Medicaid recipient is married, no recovery may occur during the lifetime of the surviving spouse.

·                 No recovery will take place if the Medicaid recipient has a surviving child under the age of 21 or a child who is blind or permanently disabled as determined by the Social Security Administration.

·                 The state may attempt to recover only from the recipient’s probate estate; thus anything that does not pass through probate is not subject to estate recovery.

·                 The state may not attempt to recover costs from the home of a deceased recipient if  any of the following relatives reside in the home: a spouse, a child under the age of 21, a blind or permanently disabled child of any age, a caretaker relative who lived with the recipient for at least 2 years immediately bprior to his or her institutionalization and whose care of him or her delayed nursing home placement, or a sibling with an equity interest in the property who resided there at least a year immediately before the recipient entered the nursing home.

·                 The law contains general language that “heirs of persons subject to the Michigan medicaid estate recovery program will not be unreasonably harmed by the provisions of this program”  and that “any settlements shall take into account the best interests of the state and the spouse and heirs.”


Michigan law also limits the amounts of assets that can be recovered and permits the state to avoid engaging in recovery at all in specific circumstances.  For example, the law protects from recovery  50% of the average value of  a homestead in the county in which the homestead is located on the date of the recipient’s death  as well as the part of an estate that is the primary income-producing asset of survivors, including, but not limited to, a family farm or business.  In addition, the state may forego recovery if the costs of recovery exceed the value of the estate that could be recovered or if recovery is not “in the best economic interests of the state.”


Before Michigan can implement the new law, it must propose amendments to the Medicaid state plan and receive approval from the Centers for Medicare & Medicaid Services for its program, establish mechanisms to track Medicaid recipients’ assets and services, develop policy, and create written materials for Medicaid applicants that explain both the estate recovery program and the process for applying for a hardship waiver to exempt the recipient from recovery.


In the meantime, many uncertainties remain regarding exactly how and when the program will be implemented.  It is important, however, to advise clients who are anxious about the impact of the new law that it is not a particularly aggressive law and  that techniques exist to protect assets from recovery (by, for example, ensuring the assets are not part of the individual’s probate estate).  Finally, clients should be warned to avoid scam artists who may try to prey on their fears about estate recovery by selling them financial planning services or products that are unnecessary or inappropriate.

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