MEDICAID ESTATE RECOVERY PROGRAM

INTRODUCTION

The exempt character of resources as defined in prior sections of this article pertains only to eligibility for Medicaid during the recipient's lifetime. However, these same assets will lose their exempt status if held until death, and may be liable at that time for reimbursement to the state for the covered medical assistance paid during the recipient's lifetime, even if the assistance had been correctly paid.

As of 1993 federal law has required all states to implement an estate recovery program. Pennsylvania complied in 1994 by establishing its Estate Recovery Program, which is administered by the DPW for the purpose of recouping medical assistance payments made to "covered recipients," i.e. persons who were age 55 (not age 65) or older when the assistance was received, and who were receiving assistance on or after August 15, 1994 for nursing facility services, home and community based services, and related hospital and prescription drug services.

SOURCE OF RECOVERY

The only assets subject to recovery in Pennsylvania are "estate property," i.e., the real and personal property of a decedent that is subject to administration by a decedent's personal representative, whether actually administered or not. (This type of property is also called "probate" property.)

This limitation will exclude all types of non-probate property, such as assets owned by the decedent and his or her spouse as tenants by the entireties or with others as joint tenants with right of survivorship, Totten trust ("ITF") bank accounts, "TOD" securities, and all beneficiary-designation property (e.g., life insurance, retirement benefits, and annuities) that are payable to named beneficiaries rather than to the decedent's estate.

WAIVER OF RECOVERY RULE IN UNDUE HARDSHIP CASES

DPW will waive its recovery claim in cases of undue hardship, including those involving the recipient’s:.

Recovery will also be waived if the estate has a gross value of $2,400 or less and there is an heir.

RIGHT TO POSTPONE PAYMENT OF CLAIM

DPW has attempted to resolve the issue of how the state's recovery claim will be handled if the individual dies survived by a spouse or by a minor or disabled child. Under federal law, the state's right of recovery must be postponed until after the death of the recipient's surviving spouse and until there is no child of the recipient who is disabled or under age 21. Under this rule, many years could possibly elapse between the recipient's death and the date the state's claim matures. 

DPW's position is that the personal representative has a duty to protect the state's claim during the postponement period. This duty will be deemed complied with if, after liquidating the assets as appropriate and paying all expenses of administration and superior claims of creditors against the estate, the personal representative takes one of several actions that are permitted by DPW regulations.

The effectiveness of any proposed lifetime Medicaid eligibility technique must be analyzed in light of the state's post-death recovery right.

Since probate assets will be subject to recovery, solely owned assets that are exempt during the recipient's lifetime for Medicaid eligibility purposes will likely become subject to the state's recovery right following death.

The primary example of such an asset would be the individual's solely owned principal residence, which is exempt during life but would be includable in the probate estate at death.

Certain techniques are available that can effectively remove property from the potential probate estate but will not be deemed a disqualifying lifetime transfer under the Medicaid rules. Please consult Mr. Hagan for details.

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DISCLAIMER

Martin J. Hagan is licensed to practice law in the Commonwealth of Pennsylvania. This website is intended solely for informational use and is not intended to solicit clients. Likewise, any information contained in or obtained from this web site is for informational purposes only and is not intended to be used as legal advice.

IRS CIRCULAR 230 DISCLAIMER:   Pursuant to Treasury guidelines, any tax advice contained in this website (or any link from it) does not constitute a formal opinion. Accordingly, any tax advice contained in this website (or any link from it) is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be asserted by the Internal Revenue Service. You should seek advice based on your particular circumstances from an independent tax advisor.

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Copyright © 2008 Martin J. Hagan, One Gateway Center - 8 South; Pittsburgh, PA 15222-1435

Last Updated: 05/28/08