Estate Recovery In Limbo
LANSING — Michigan’s languishing estate recovery plan — which allows the state to take possession of a Medicaid recipient’s home after death — has been put on hold, and it’s expected to stay there longer than a tech support call to India.
“It is stalled,” said Jane Church, program specialist for the state Office of Long-Term Care Supports and Services. “The feds have problems with our plan because it’s kind of weak.”
“Our law that our state Legislature passed basically said until the federal government approved our proposed program, it’s not going into effect,” added Laurie Murphy, an elder law and estate planning attorney at Miller Johnson Snell & Cummiskey. “The feds are saying ‘We don’t like your program.’ Right now, we still don’t have a program in place.”
After stalling since 1993, the state Legislature last year passed an estate recovery law last year under the threat of losing $5 billion in federal Medicaid payments.
Some states have practiced estate recovery for decades, but Michigan was the last in the nation to enact it. The state taking control of an indigent person’s house after he or she has died is so onerous that Michigan politicians have been ducking the federal demand since it was made a requirement of the Medicaid program 15 years ago.
“It’s politically unpopular to take people’s homes,” Murphy said.
Skepticism reigns in calculating the amount that could be recovered, she added. While Oregon, for example, recovers an amount equal to nearly 6 percent of Medicaid nursing home expenditures, in some states the program is, at best, a wash, she said. Typical recovery amounts are in the 0.5-percent range, she added. In Michigan, Medicaid spends about $1.7 billion on nursing home and related services.
Even some states that do practice estate recovery net little after the cost of running the program, Church said.
“It may be the way they have the program set up, it may be properties they are getting or the exemptions built into it. Many people on Medicaid don’t have estates to recover,” she said. “And it’s not popular, so states kind of don’t pursue it as much as they should. Some states do better than others.”
“Medicaid estate recovery makes good headlines but is not good policy,” Murphy contended. “States don’t make a lot of money on it.”
Plus, it could encourage blight, as family and friends become reluctant to provide upkeep for an invalid’s vacant home that is only going to be taken over by the state, she said.
The estate recovery law passed in Michigan is limited to assets that can be adjudicated in Probate Court. It provides exemptions for homes occupied by spouses, children under 21, disabled children and, in certain cases, siblings and relatives who lived there and cared for the Medicaid recipient for at least two years. Enough exemptions are included that as much as $53,000 in asset value, plus funeral costs paid by the estate, may be disregarded.
The state law puts implementation in the hands of the Michigan Department of Community Health, Church said, which has created a committee.
“There is a process that you go through as a state when working with CMS,” she said. “You submit an amendment, and they have so many days to respond. Then they come back with more questions. It takes up time, and if it doesn’t meet that 90 days, you have to start over.
“It’s really a mess, to put it lightly. It’s not moving very quickly.”
She said the quagmire means a delay in bringing long-term care insurance partnership policies to the state (see related story below).
“If the feds say the legislation is too weak, the only recourse we have is to go back to the Legislature and say you’ve got to fix it,” Church said. “They are waiting till the point where CMS says this is really bad and not acceptable. The department is trying to answer questions so we don’t have to go back to the Legislature.”
In the meantime, some elders may be reluctant to apply for help they really need, and others may become prey to unscrupulous salespersons trying to take advantage of the confusion.
Right now, you should be doing a couple things,” Murphy said. “Talk to an attorney who specializes in this. Now, it’s only probate-centered estate recovery. If you can avoid probate, you avoid estate recovery.”