What is Estate Recovery?
After a State implements an Estate Recovery program, Medicaid functions more like a loan program than a benefits program. The Omnibus Budget Reconciliation Action of 1993 (OBRA '93) requires states to recover, at a minimum, all property and assets that pass from a deceased person to his or her heirs under state probate law. State law governs both property conveyed by Will and property of persons who die intestate (without a Will). A state's ability to recover from probate estates depends to some extent on Medicaid's standing as compared with that of other creditors. The order of payment of debt is established under state law. Mortgages, unpaid tax or public utility bills, child support arrears, burial costs, or other debts may be paid before the Medicaid lien and reduce the amount that is actually recovered. The State's standing is also influenced by locally determined state priorities. For example, some state laws protect the family home in an estate from some or all claims against it, including Medicaid claims.
States may use the narrow Federal definition of "estate" and limit Medicaid estate recoveries to only those assets that pass through probate. Alternatively, they may choose to define "estate" in a broader context, which enables them to recover from some or all property that bypasses probate. Property bypassing probate may include assets that pass directly to a survivor, heir or assignee through joint tenancy, rights of survivorship, life estates, living trusts, annuity remainder payments, or life insurance payouts. As is true of probate estates, most arrangements of this type operate under other, non-Medicaid laws that define rights and responsibilities in the disposition of bank accounts or other liquid investments, real estate ownership, life insurance policies, etc. For this reason, implementing Medicaid rules against a background of non-Medicaid law carries the potential for lack of legal clarity, competing claims to property of deceased Medicaid beneficiaries, and inconsistent outcomes.
The home is considered to be part of the recoverable estate unless it is protected for the spouse or certain other close relatives, or is conveyed outside of the State's definition of "estate" (e.g., through a life estate).
What this means is that if your State is collecting more than this federal minimum, then those enhanced collections are a matter of State policy rather than federal policy. As described below, Georgia has made a policy decision to collect more than federal law requires.
Several surveys that examined how individual states implement the estate recovery mandate yielded inconsistent findings when states were queried on whether they used a narrow or broad definition of estate, which shows how difficult it is to get a clear picture of this issue. Further, evidence is lacking on what types of assets are included under the broad definition of estate in those states that have elected to extend their recovery efforts beyond the probate estate. One study determined that 20 of 40 responding states using the Federal minimum definition, while the remaining 24 states used some variation of the broader option. A later study reported that 30 of 48 responding states used the minimum definition. The findings in reports on specific state policies were consistent for only about half of the states. Explanations for variations between surveys are speculative. Different state officials may have responded at different points in time, or there may not be a commonly understood dividing line between the minimum and broader definitions.
See Medicaid Estate Recovery
Medicaid Estate Recovery Collections
A Closer Look: How Does This Work?:
What exactly is an estate?
Under probate laws, an estate is usually defined as all real estate and personal property that passes from a deceased person to an heir through a will or by rules of intestate succession. Property that passes directly to joint owners or to beneficiaries under a trust is normally not considered part of the probate estate. However, OBRA '93 gives states the option to expand the definition of estate to include these types of interests and any other property that the individual has any title or interest in at the time of death. Georgia has adopted this "expanded" definition of an estate.
What is a claim against an estate?
A claim against an estate is a demand for payment from a creditor who believes the deceased person owes the creditor money. In estate recovery under OBRA '93, the request comes from the state Medicaid agency, and the amount owed is all or some of the amount of Medicaid payments spent on behalf of the deceased Medicaid beneficiary.
Do states have to recover money from the estates of everyone who receives Medicaid?
No, but states must recover money spent on behalf of the following individuals individuals who were age 55 or older when they received Medicaid. A state must recover payments made for nursing facility services, home- and community-based services provided under a Medicaid waiver, and related hospital and prescription drug services; and
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individuals in nursing facilities, intermediate care facilities for the mentally retarded, or other medical institutions who pay a share of cost as a condition of receiving Medicaid and who cannot reasonably be expected to be discharged and return home. This provision requires that the state determine, after notice and an opportunity for a hearing, that the individual cannot reasonably be expected to return home.
Are there any exceptions to estate recovery?
There are limits on a state's right to recover Medicaid benefits. Recovery cannot be made:
- before the death of a surviving spouse;
- if the individual has a surviving child who is under age 21 or who is blind or permanently disabled; and
- against one's home on which the state placed a lien, unless additional protections for siblings and adult children are satisfied.
Why Is the Claim Typically Against the Home?
When you apply for Medicaid benefits, the caseworker reviews your financial status to determine whether you are "poor enough" to qualify. However, some assets you own are exempt during this determination. The largest and most valuable of these so-called exempt assets is your home. The home remains exempt during your lifetime (and if you are married, during the lifetime of your spouse) because if you get better, then we assume you will return home. HOWEVER, when you (and your spouse) die, the State wants its money back so it will present a claim against your estate. Again, because the home is usually the only valuable asset left in your estate, the claim is usually against the home.
Estate Recovery in Georgia
Until recently, the policy of the State of Georgia was that estate recovery claims will not be pursued. On July 14, 2004, Georgia's Department of Community Health ("DCH") changed Georgia policy and adopted rules implementing an Estate Recovery program in Georgia. The rules were effective August 1, 2004, but the state did not begin the recovery process immediately. Recent information available on the DCH website indicates that Estate Recovery will begin on May 1, 2006. The Program will recover costs paid to Medicaid beneficiaries from their estates upon their death. Only individuals who pass away after the effective date of the rules (presumably May 1, 2006) and who receive notice of the Estate Recovery Program will be affected. With our clients and friends in mind, we have provided below a summary with highlights of the final rules.
Note: There is a bill currently pending in the 2006 Georgia legislature that would INCREASE the estate recovery exemption from $25,000 (described below) to $100,000. At this time, we cannot forecast whether this bill will become law. See House Bill 1498.
Scope of Recovery. Estate recovery will apply to Medicaid beneficiaries ("members") who:
At the time of death, were 55 years of age or older and an inpatient in a nursing facility, intermediate care facility for the mentally retarded, or other mental institution where a state plan paid for the costs of medical care, or where a member received medical assistance for medical services, but only for services consisting of nursing facility services, personal care services, home and community based services, and hospital and prescription drug services provided to individuals in nursing facilities or receiving home and community based services; or
At any age, were inpatients in a nursing facility, intermediate care facility for the mentally retarded, or other mental institution if the individual is required, as a condition of receiving services in the facility under the state plan, to spend for costs of medical care all but a minimal amount of their income required for personal needs.
No Recovery. Estates valued at $25,000 or less are exempt from estate recovery. DCH also will not recover costs during periods in which "exception conditions" exist. These exception conditions include situations where the member is survived by:
- A spouse
- A child under 21 years of age
- A child who is blind or permanently disabled pursuant to the eligibility requirements of Title XIX of the Social Security Act.
DCH may postpone recovery until all exception conditions are no longer present. An estate does not have to be open in order for DCH to execute its claim after all exception conditions are no longer present. Termination of recovery will occur when all real and personal property included as part of the member's estate is "no longer accessible."
Reach-Back Period for Recovery. The new estate recovery rules apply to debts to the state resulting from the payment of Medicaid benefits created on or after August 1, 2001. However, only current Medicaid beneficiaries who pass away after the effective date of the rules (again, we presume May 1, 2006) and who receive notice of the Estate Recovery Program will be affected.
Notice to DCH. If a debt is due, the administrator of the nursing facility and the personal representative of the estate (if applicable) must notify DCH when a member passes away within thirty (30) days of the death. This notice is in addition to the notice required by the member's responsible party. After receipt of notice of a member's death, DCH will file a claim against the estate, if the estate is probated, for the full value of the Medicaid benefits paid on behalf of the member.
Notice Letter from DCH. Once notified of a member's death, DCH must provide a letter to the personal representative and any known heirs to explain the terms and conditions of estate recovery. DCH must state its intent to recover the value of Medicaid benefits from the member's estate and state the amount. DCH must also explain that recovery may include filing a lien on real property and that the heirs may file an undue hardship waiver. The letter must also advise the heirs of their right to a hearing and include a statement advising that the amount of the claim may increase if there are additional Medicaid claims that have not yet been processed.
Personal Liability. The personal representative must notify DCH of the member's death before dispersing assets of the member. A personal representative is personally liable for any incorrectly paid assets, if DCH is not informed of the member's death and assets are distributed to heirs and/or creditors.
Priority of Claims. Upon filing a statement of claim in the probate proceeding, DCH's estate recovery claim has priority over all other claims except:
- Years support for the family
- Funeral expenses (not to exceed $5,000; $0 if decedent prepaid funeral expenses that were included as a resource for Medicaid eligibility)
- Necessary expenses of administration
- Reasonable expenses of the decedent's last illness
- Unpaid taxes or other debts due to the state or United States
DCH may amend the claim as a matter of right until the member's estate has been closed.
Time Restrictions for Recovery Actions. No actions by DCH to recover a debt due shall be commenced against the personal representative until after six (6) months from the date the personal representative was qualified to serve.
Recovery if No Probate Estate - Financial Institutions. If a decedent held an account with a financial institution in the decedent's name only, the administrator of the Estate Recovery Program may request that a financial institution release account proceeds to recover the cost of services. However, the administrator may do this only if no estate has been, and it is reasonable to assume that no estate will be, opened for the decedent, the decedent has no outstanding debts known by the administrator of the Estate Recovery Program, and the financial institution receives no objections or has determined that no valid objections to release proceeds have been received.
Real Property - Imposition of Liens. The state may impose a lien on a member's real property after a member is "permanently institutionalized" (i.e., residing in a nursing facility or intermediate care facility for the mentally retarded and developmentally disabled for six (6) consecutive months or more); and if there is not a reasonable expectation that the member will return home; and when none of the persons listed below are living in the home:
- A spouse
- A child under 21 years of age
- A child who is blind or permanently disabled pursuant to the eligibility requirements of Title XIX of the Social Security Act
- A sibling with an equity interest in the home who has lived in the home for at least one (1) year before the member entered a nursing home.
Notice of Liens. The use of this lien authority requires prior notification to the member or any known heirs (and personal representative, if applicable). The notice must state the determination that the member is permanently institutionalized, that the member is not reasonably expected to return home, and DCH's intent to file a lien on the member's real property. A lien may not be filed less than thirty-one (31) days from the date of the notice to the member. A member or his or her designee, within thirty (30) days after receipt of notice, may request an administrative hearing and only one (1) appeal is afforded on behalf of a member for each notice received. Prior to the member's death, notice of the lien must be filed with the recorder of the county in which the real property subject to the lien is located. Thus, even if a member's estate is not probated, the state may recover debt from the member's real property if a lien is properly imposed on the property and recorded with the county prior to the member's death.
Enforcement of a Lien. The State may not enforce a lien on a home under the following circumstances:
The member's spouse is alive, even if not living in the home
The member's child under 21 years of age is alive, even if not living in the home
The member's blind or disabled child is alive, even if not living in the home
An adult child of the member is living in the home, if that child lived in the home for at least two (2) years prior to the member's admission to the nursing home and provided care that kept the member from entering a nursing home
The member's brother or sister is living in the home, if he or she lived in the home for at least two (2) years prior to the member's admission to a nursing home.
Thus, in some instances, a lien may be imposed on a home in which a member's adult child or sibling lives in the home, but the lien cannot be enforced by the state if the adult child or sibling living in the home meets one of the above listed conditions.
Release of a Lien. DCH must release a lien within thirty (30) days after it receives notice that the member is no longer permanently institutionalized and is living in his or her home. If the real property subject to the lien is sold, the office shall release its lien at the closing and the lien shall attach to the net proceeds of the sale. A lien continues from the date of filing until the lien is satisfied, released or expires.
Hardship Waivers. In very limited circumstances, a hardship waiver may be submitted within thirty (30) days from receipt of the notice from DCH, primarily if the recovery of assets would result in the applicant becoming eligible for governmental public assistance based on need and/or medical assistance programs. Undue hardship does not exist where the recovery causes family members inconvenience, where it restricts the family's lifestyle or where heirs divest assets to qualify under the hardship provision. If hardship does exist, the state, in its sole discretion, may waive recovery or defer recovery until the death of the eligible exempt dependents.
These estate recovery rules will not apply to everyone. However, if you or any of your friends or family know someone who entered a nursing home or received medical assistance at home which was paid for by a State plan, and who retained any assets in Georgia, such as real property or personal property, these rules may apply, and that person's assets may be recovered by the State of Georgia after his or her death.
For more information, contact Georgia’s Medicaid Estate Recovery Office at 770-916-0328, or contact our office.
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