Estate Strategies: Michigan's Medicaid Estate Recovery Program

Estate Recovery is the program through which the State of Michigan is paid back for Medicaid benefits provided to certain recipients upon the recipient's death by allowing the state to ''recover'' property from the recipient's ''estate.'' In light of Estate Recovery, Medicaid recipients and their families should contact experienced legal counsel to help them plan ahead by implementing the tools that are currently available to avoid, or limit, Estate Recovery if possible. Additionally, representatives and heirs of deceased Medicaid recipients should use extreme care in completing any questionnaire received by the state or its agent, timing of submission of any Application for Hardship Waiver, and determining whether all or any portion of the state's claim for recovery should be disallowed. Michigan's Medicaid Estate Recovery law (''State Law'') became effective on September 30, 2007, and the Michigan Medicaid Estate Recovery Program (''Estate Recovery'') was approved by the federal government on May 23, 2011, with a retroactive effective date of July 1, 2010. Rules for implementation of Estate Recovery were published by the state on July 1, 2011 (''Rules''). There is some discrepancy between State Law and the Rules with regard to who is subject to Estate Recovery. The Rules state that Medicaid beneficiaries age 55 or older who have received long-term care services after September 30, 2007 are subject to Estate Recovery. However, State Law is more limited; it clearly states that Estate Recovery only applies to medical assistance recipients who began receiving Medicaid long-term care services after September 30, 2007. State Law also requires that written information be provided to individuals seeking Medicaid eligibility for long-term care services describing Estate Recovery, and at a minimum, a statement that some or all of their estate may be recovered. Estate Recovery is currently limited to assets that pass through probate. Therefore, advance estate planning should be done in an effort to avoid probate. Before the state can collect anything from probate assets, certain other claims must be paid, including, but not limited to, administrative and court fees, mortgages, funeral and burial costs, and other allowances permitted by law that currently can total as much as $58,000. Of the probate assets subject to Estate Recovery, there are still other exceptions to what, or when, the state can collect. The state cannot recover assets from the Medicaid recipient's home if the recipient's spouse, minor or disabled child, or, under certain circumstances, certain other relatives are living there. However, the state can place a lien on the home after the Medicaid recipient's death to secure its claim. State Law also provides an exemption from Estate Recovery for undue hardship. However, in order to seek an undue hardship waiver, an Application for Hardship Waiver must be submitted within the appropriate deadline. An undue hardship exemption may exist when a probate asset is the primary source of income for the survivors, such as a family farm or business, or if the recovery would cause a survivor to become or remain eligible for Medicaid. An undue hardship exemption also exists under State Law for the portion of the home that is equal to or less than 50% of the average price of a home in the county where the home is located; however, the Rules limit this exemption to homes that are valued at 50% or less of the average price of homes in the county where the home is located. This discrepancy between State Law and the Rules could result in significant differences in the amount recovered by the state versus the amount retained by the Medicaid recipient's estate. When a Medicaid long-term care recipient age 55 or older dies, the state (through its agent, Health Management Systems, Inc.) will send an Estate Recovery notice to the estate's representative or heirs with a questionnaire to complete and return. If no exceptions apply, the state will then file its claim against the estate. Extreme care should be taken in completing the questionnaire and the timing of submission of any Application for Hardship Waiver. Further, careful consideration should be given to whether all or any portion of the state's claim for recovery should be disallowed by the estate's personal representative based on whether applicable State Law was properly followed. For more information, contact Melisa Mysliwiec at Fraser Trebilcock, 40 Pearl Street NW, Suite 910, Grand Rapids, Michigan 49503, (616) 301-0800, or e-mail her at mmysliwiec@ fraserlawfirm.com. Published: Thu, Jan 26, 2012