Introduction
At the time when a person’s eligibility for Medicaid is being initially determined, the Department of Human services (“DHS”) will review their assets to determine if their value exceeds certain limits. As part of its analysis, DHS will exclude certain assets, such as their primary residence (subject to certain limits) and tangible personal property such as household goods. However, this exclusionary rule will apply only when assessing eligibility for Medicaid during the recipient’s lifetime. These same assets will lose their exempt status if held until death, and may become liable at that time for reimbursement to the state for the covered medical assistance that will have been paid during the recipient’s lifetime, even if the assistance had been correctly paid.
As required by federal law, Pennsylvania has adopted an Estate Recovery Program, administered by the DHS, for the purpose of recouping medical assistance payments made to “covered recipients,” defined as persons who were age 55 (not age 65) or older when the assistance was received, and who were receiving assistance for nursing facility services, home and community based services, and related hospital and prescription drug services.
Survey of Pennsylvania Estate Recovery Program
Source of Recovery
The only assets subject to estate recovery in Pennsylvania are “estate property,” i.e., the real and personal property of a decedent that is subject to administration by the personal representative of the decedent’s estate. (This type of property is also called “probate property.”)
This limitation will exclude all types of non-probate property, such as:
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- Assets jointly owned by the decedent and their spouse as tenants by the entireties or with others as joint tenants with right of survivorship
- Totten trust (“ITF”) bank accounts,
- Transfer-on-Death (“TOD”) securities, and
- All beneficiary-designation property (e.g., life insurance, retirement benefits, and annuities) that are payable to named individual beneficiaries rather than to the decedent’s estate.
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Waiver of Recovery Rule in Undue Hardship Cases
DHS will waive its recovery claim in cases of undue hardship, including those involving the recipient’s:
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- Primary residence (including expenses incurred in maintaining the residence)
- Income-producing assets
- Recovery will also be waived if the estate has a gross value of $2,400 or less and there is an heir.
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Right to Postpone Payment of Claim
How will Pennsylvania’s recovery claim be handled if the recipient dies survived by a spouse or 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 when the state’s claim matures.
DHS’s position in these situations is that the estate’s 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 DHS regulations.
Planning in Light of Medicaid Estate Recovery Program
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, it’s clear that solely owned assets that may have been exempt during the recipient’s lifetime for Medicaid eligibility purposes will become subject to the state’s recovery right if held until 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 their 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.