Estate Recovery in Michigan
On September 30, 2007, Michigan’s Estate Recovery Law went into effect but it has not been approved by the federal government until recently. Estate Recovery refers to the Michigan Department of Community Health’s policy to seek reimbursement from people who have received Medicaid long-term care benefits while in a nursing home or at home through the Medicaid Waiver Program. The state is seeking to recover what it has paid out in benefits by filing a claim against the probate estate of the deceased Medicaid benefit recipient.
The new Medicaid policy was effective July 1, 2011, and applies to all Medicaid recipients who were 55 or older and received long term care services after September 30, 2007.
Relatives, heirs, Personal Representatives and even family attorneys are beginning to receive Estate Recovery Notices from a private company called Health Management Systems, Inc. (HMS), which the state of Michigan has contracted with to begin collection. The notices are in the form of a letter, about a page and half long, entitled Notice of Intent to File Claim Against Estate, together with a two-sided, one page document called a Michigan Estate Recovery Questionnaire. Callers to the Legal Hotline have reported confusion and fear upon receipt of the notice.
One of the most important things to remember if you receive one of these notices is that estate recovery only applies to the probate estate of the deceased Medicaid benefit recipient. An estate includes all property and assets that pass through probate court e.g. homes, cars, stock, bank accounts. Thus assets the deceased person may have owned jointly with a spouse, family member or other person are not subject to any claim of the State. Since a person is allowed only few assets in order to be eligible to receive Medicaid, there is not likely to be much in the probate estate that is subject to a State claim. For most people, it will probably only apply to their home, if they have been fortunate enough to be able to hold on to it while receiving Medicaid. (Current Medicaid rules treat a person’s homestead as an exempt asset if it is valued at $500,000 or less.)
There are exceptions to estate recovery. The state may decide not to recover money if it creates an “Undue Hardship” or if any of the following people lawfully live in the beneficiary’s home:
- Beneficiary’s spouse
- Beneficiary’s child who is under the age of 21, blind, or permanently disabled
- Beneficiary’s sibling who has an equity interest in the home and was living in the home for at least 1 year immediately before the beneficiary’s death.
- A survivor who:
- was living in the beneficiary’s home for at least 2 years immediately before the beneficiary went into a medical facility: and
- provided care so the beneficiary could stay at home during that period.
An undue hardship exists when:
- The estate is the sole source of income for the survivors, such as a family farm or business; or
- The estate is a home of modest value (“an exemption is allowed for the portion of the value of the medical assistance recipient’s homestead that is equal to or less than 50% of the average price of a home in the county in which the Medicaid recipient’s homestead is located as of the date of the medical assistance recipient’s death. Example: Value of average home in X County: $100,000. Value of benefit recipient’s home: $50,000. Exemption amount: ½ of average = $50,000. Therefore: Homestead is modest value and NOT subject to estate recovery); or
- A survivor would become or remain eligible for Medicaid if recovery occurred.
To apply for an undue hardship, an application must be completed. Applications are available from the following sources:
- online at www.michigan.gov/estaterecovery
- by email to firstname.lastname@example.org
- by calling, toll free,1-877-791-0435
- by sending a letter to:
1500 Abbott Road
East Lansing, MI 48823
The completed application must be received no later than 60 days from the date of the estate recovery notice. Send copies of any documents the notice specified. The state will determine if a waiver is warranted.
If you receive a Notice, and you have questions, you should contact an attorney. The Notice requires that the person signing it do so stating that the information is “true and complete” under penalty of perjury. Since responding to the Notice is voluntary, you may wish to not respond. If you are a Personal Representative of an estate and there are assets in it, you need to respond if you intend to claim an “undue hardship."
As with all of the laws and rules connected with Medicaid, changes are frequent. There are bills now in the legislature that would make significant changes to the current estate recovery scheme. Taking appropriate actions to minimize the effect of laws requires consultation with an Elder Law attorney to properly advise you.