Resolving a Medicaid Claim in a Decedent's Probate Estate - February 2008 - Trust and Estate Law & Elder Law

• Jurisdiction: Colorado,United States
• Citation: Vol. 37 No. 2 Pg. 31
• Pages: 31
• Publication year: 2008

37 Colo.Law. 31 Colorado Lawyer 2008.

2008, February, Pg. 31. Resolving a Medicaid Claim in a Decedent's Probate Estate - February 2008 - Trust and Estate Law & Elder Law

The Colorado Lawyer
February 2008
Vol. 37, No. 2 [Page 31]

Articles
Trust and Estate Law & Elder Law
Resolving a Medicaid Claim in a Decedent's Probate Estate
by Katrina S. Jones, Marco D. Chayet

Trust and Estate articles are sponsored by the CBA Trust and Estate Section. Topics include trust and estate planning and administration, probate litigation guardianships and conservatorships, and tax planning. Elder Law articles are sponsored by the CBA Elder Law Section. They focus on areas of interest to elder law attorneys practicing in Colorado.

Article Editors

Trust and Estate Law: David W. Kirch, of David W. Kirch P.C., Aurora - (303) 671-7726, dkirch@qwest.net; Constance D Smith, of Rothgerber Johnson & Lyons LLP - (303) 623-9000, csmith@rothgerber.com

Elder Law: Jennifer S. Gormley, Centennial, of the Law Office of Jennifer S. Gormley, P.C. - (303) 783-9600, jsg3366@aol.com; John J. Campbell, Denver, of the Law Offices of John J. Campbell, P.C. - (303) 290-7497,jcampbell@jjcelderlaw.com

About the Authors

Katrina S. Jones is a senior associate with Chayet, Dawson & Danzo, LLC, where she specializes in elder law, estate planning, and probate administration - (303) 355-8500, katrina@coloradoelderlaw.com.

Marco D. Chayet is a founding partner of Chayet, Dawson & Danzo, LLC, and focuses his practice on probate litigation, conservatorships, guardianships, elder law, and estate planning - (303) 355-8500,marco@coloradoelderlaw.com, www.coloradoelderlaw.com.

The purpose of this article is to assist probate attorneys in administering a decedent's probate estate where the Colorado Medicaid program files a claim for reimbursement of services. Medicaid claims are common for long-term care, such as nursing home services, and less common for other medical assistance.

Many probate practitioners spot Medicaid claim issues at the initial client appointment. During the initial intake, an estate for a decedent who resided in a nursing home where there is a house and virtually no other property, certainly raises a red flag. However, there may be an estate recovery claim for an individual who was residing in the community. Practitioners may spot Medicaid claim issues by looking for common indicators, such as a decedent who received Supplemental Security Income (SSI) benefits, food stamps, or LEAP (Low income Energy Assistance Payments).

Overview of Estate Recovery

Before 1965, each state was free to establish an estate recovery system. The Social Security Amendments of 1935 provided for one-half of any recovery by a state to be delivered to the U.S. Treasury.(fn1) The Social Security Amendments of 1965 established Medicare Part A, Medicare Part B, Medicaid, and a more uniform system of estate recovery.(fn2) After the Social Security Amendments of 1965, states could not place a lien on the property of any individual prior to death, and could collect from a decedent's estate only if the individual was 65 years of age or older.(fn3) The 1965 Amendments also created exceptions to estate recovery when there was a surviving spouse, a child under the age of 21, or a child who is blind or disabled.(fn4)

The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA 1982) changed estate recovery law to permit liens.(fn5) Liens(fn6) under TEFRA are permissible for Medicaid recipients who are institutionalized (in a nursing home) and not reasonably expected to return home.(fn7) As in post-death estate recovery, foreclosure on a lien is not allowed when there is a surviving spouse, a child under 21, or a child who is blind or disabled.(fn8) The age minimum for estate recovery for non-institutionalized Medicaid recipients remained at 65.(fn9)

In 1993, states were required by the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) to institute estate recovery programs.(fn10) In addition to mandating estate recovery, OBRA 1993 reduced the age minimum from 65 to 55 for non-institutionalized Medicaid recipients.(fn11) It is not clear whether the change from 65 to 55 years of age was intentional or merely a typographical error.(fn12)

In a May 2007 study conducted by the American Bar Association Commission on Law and Aging, twenty states tracked administrative costs such as staff, facilities, information systems, legal, and other support.(fn13) According to the study, the average long-term care expenditure per state is $1,852,933,603, and the average revenue from estate recovery is $8,061,451. This results in an average of 0.61 percent of the total Medicaid long-term care budget coming from estate recovery.(fn14) These totals do not account for the administrative costs of estate recovery. For example, if one-third of the dollars recovered are paid to a collection agency, and the state had $100,000 in other expenditures related to its program, the state actually would be recovering only $5,274,300, or 0.28 percent of its total long-term care expenditures.

Medicaid Estate Recovery in Colorado

In a 1991 special session, the Colorado Legislature passed House Bill 91S2-1030.(fn15) That statute authorized, but did not require, estate recovery. The Legislature stated merely that "assistance may be recovered."(fn16)

Shortly before the enactment of OBRA 1993, the Colorado Legislature called for a study directing the State Department of Social Services to advise the legislature of the possibility of a public-private partnership for financing long-term care by December 1, 1993.(fn17) In 1994, Colorado created the Medical Services Board, but the permissive language, "assistance may be recovered," remained in the statute.(fn18)

In Colorado, 0.82 percent ($7,380,270) of the overall funding for long-term care ($898,631,322) comes from estate recovery.(fn19) These figures do not include the costs of maintaining the estate recovery program, including the contractual percentage paid to the collection agency and legal, training, staff, and technology expenses.

Claims Versus Liens

Claims in a decedent's estate are different from liens. Generally, it is unnecessary for a creditor to file a claim in the estate if a lien was in place during the decedent's lifetime. However, a creditor may file a claim even when a lien is in place. For example, a decedent may have benefits from term life insurance, an exempt asset under Medicaid eligibility rules, made payable to the estate, and the creditor may be willing to receive a portion of those proceeds and then release its lien. In that instance, the creditor would not have to wait until the property is sold to have its lien satisfied.

Liens under the federal statutes(fn20) are a common tool to recover the costs of medical assistance during the lifetime of the Medicaid recipient. The federal statute(fn21) bars all liens during the lifetime of the individual, but also creates exceptions to the rule. The first exception allows for a lien to enforce a judgment for incorrectly paid benefits.(fn22) The second exception allows for a lien on the real property of an institutionalized individual who cannot reasonably be expected to return home.(fn23)

Other liens are also used by states to collect after a Medicaid recipient has died. These generally are used by states that collect against all property in which the decedent had an ownership interest, not just the decedent's probate estate. As of 2005, the federal government identified twenty-seven states that use liens, other than pre-death TEFRA liens, in their post death estate recovery programs.(fn24) Colorado currently does not use post-death liens in estate recovery, so this article focuses on claims only.

Opening an Estate

In most situations, the attorney will advise the prospective personal representative to open the estate and resolve the Medicaid claim with the Medicaid creditor.(fn25) If the client does not open the estate, any creditor has the right to open the estate after forty-five days.(fn26) All claims will be barred after one year from the date of the decedent's death.(fn27)

If the primary asset of the estate is a home, the client likely will prefer to be the personal representative, rather than risk appointment of the creditor as personal representative. However, if the only reason to open the estate is to claim an...