Fleecing the Deceased

Michigan’s Medicaid program has started estate recovery. As of July 1, 2011, on the death of a Medicaid recipient who received Medicaid benefits after age 55, the estate recovery minions will send the family a letter demanding cooperation in recouping the benefits paid by the state. The state contracted with HMS Holdings Corp. (NASDAQ: HMSY) to pursue the estates of Medicaid recipients, presumably for a piece of the estate-recovery pie.

HMS has wasted no time. My clients’ kin and I started receiving letters and questionnaires regarding deceased Medicaid recipients at the beginning of August. It is too soon to tell how aggressive HMS will be, but experience with private collection agencies suggests that they will squeeze as much as possible out families, with little concern for the legal limitations on when, from whom, and how much recovery is legally permissible.

As determined as they are to repeal the estate tax to protect the property of wealthy decedents, TEA Partiers and other conservatives are surprisingly blasé about the state grabbing the homes of poor ones. There are no millionaires on Medicaid. Millionaires do not apply for Medicaid because they do not go in nursing homes. They stay at home and hire caregivers, or they move to comfortable apartments in high-end continuing-care retirement communities.

Estate recovery grabs the homes of persons who die with nothing but their homes. Usually, the homes are very modest, but for a family on the edge of poverty a small legacy could help a son or daughter avoid homelessness or start a grandchild toward a college degree.

The new Medicaid policy was promulgated effective July 1, 2011, but it applies to all Medicaid recipients who were over 55 and received benefits after September 30, 2007. There are many grey areas regarding what estates may have Medicaid claims filed against them and what would be covered by a hardship exemption. Whether an estate that was opened and closed before July 1, 2011 is safe from the state’s Medicaid claim is unclear. It will depend on whether the courts decide that Medicaid was entitled to notice as a “known creditor” before July 1, 2011. It is also unclear whether the personal representative must fill out HMS’s questionnaire and apply for an exemption from Department of Community Health or lose the exemption. Filling out the questionnaire is “voluntary,” but it says in the fine print that failing to send in the questionnaire would cause the loss of the exemption.

There can be no estate recovery if the Medicaid recipient is survived by a spouse. There can also be no estate recovery if the estate consists of the home and a family member who meets certain technical requirements lives in the home. Any survivor of a Medicaid recipient who receives a letter and questionnaire from HMS should consult an attorney to find out whether there is an exemption that can be taken. Do not rely on the advice of HMS agents at the toll-free number on the letter.

Whether HMS will respect the legal boundaries on its collection authority is an open question. At least some HMS representatives will be like the police officer who gives Miranda warnings then says, “The law says I have to read you your rights, but if you ‘lawyer up’ I will not be able to help you.” An amazing number of persons in custody confess to crimes they did not commit because the police convince them it is in their best interests–this is not a joke! At least some HMS agents will do the same. They will say, “Yes, you can claim an exemption, but I can no longer cut you a deal if you do.”

Collection agents have a lot of practice talking people out of money, while the surviving next of kin who are being targeted for collection efforts will have little or no experience dealing with them and often will not know their rights. The agents will have only one objective–getting as much money out of the surviving family as possible, in the shortest time. They are not be paid to be fair; they are paid to bring in money. Trying to deal with HMS without an attorney is like going to a gunfight with a rubber knife.

Medicaid Estate Recovery is a new program in Michigan, with a lot of grey areas that make it difficult to know whether a given estate is vulnerable. Even in Pennsylvania, where estate recovery has been in place for nearly a decade, there are many uncertainties. It is vitally important to consult an Elder Law attorney before responding to a letter from HMS. It is also important to talk to an Elder Law attorney if you or a close relative is nearing the age where long-term care is more likely, or if you have a loved one who already needs long-term care. Nursing care is expensive, whether at home or in a nursing home. An Elder Law attorney can provide valuable advice about how the expense can best be managed.


John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
©2011 John B. Payne, Attorney

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