Medicaid estate recovery is the obligation of the state Medicaid programs (MassHealth in Massachusetts) to recover their costs from the estates of deceased beneficiaries. We’ve long argued for its repeal since it victimizes those least able to pay.
Until that happens, those inheriting from estates subject to estate recovery should be aware that they can seek a waiver under certain circumstances. In Massachusetts, the grounds for such waivers were significantly expanded in 2021 and the process for seeking was made less draconian, though the rules are still strict.
Here’s how it works.
Context
We should start by discussing which estates are subject to estate recovery and which are not. First, in almost all cases estate recovery claims are only made against real estate since MassHealth beneficiaries must generally spend down their other assets in before they become eligible for benefits.
Second, in Massachusetts, MassHealth only seeks recovery against the probate estates of deceased beneficiaries. They do not seek recovery against property that passes to heirs without going through probate, such as property in joint names, in trust, or in life estates. Long-term care planning often involves changing ownership into one of these forms to avoid estate recovery.
Third, estate recovery is only made for MassHealth expenses paid after the beneficiary reached age 55 or for nursing home care at any age.
Fourth, estates under $25,000 are not subject to estate recovery.
Process
When a probate case is filed for anyone, whether or not they are believed to have received MassHealth benefits, they must report the filing to MassHealth. It then checks its records to determine whether the deceased individual received benefits and, if so, it files a notice of claim with the probate court.
This starts the clock ticking. The estate then has 60 days to file a hardship waiver request form and accompanying documentation by mailing it to the MassHealth Estate Recovery Unit by certified mail. The form is available here.
The deadline can be problematic both because life is busy but also because heirs may not be aware of when MassHealth has filed its claim, especially if they are not also the personal representative of the estate.
Grounds for Waiver
There are three possible grounds for waiver:
Residence and Financial Hardship
To qualify for this waiver, an heir must (a) have lived in the property for at least two years prior to the beneficiary having moved to a nursing home or their death if they did not move to a nursing home, (b) continue to live there, (c) not be forced by other heirs to sell the property, and (d) have income less than 133% of the federal poverty level.
Care Provided
To qualify for this waiver, an heir must (a) have lived in the property for at least two years prior to the beneficiary having moved to a nursing home or their death if they did not move to a nursing home, (b) during that time have provided sufficient care so the beneficiary did not have to move to a nursing home, (c) continue to live there, (d) not be forced by other heirs to sell the property, and (e) would have to sell the property to satisfy the estate recovery claim.
Income-Based
This waiver, unlike the others, may only be partial. It exempts up to $50,000 of the estate recovery claim for each heir whose income is below 400% of the federal poverty level, but only up to a total of $100,000. So, in practice just two heirs may qualify.
The waiver request form lists the documentation required to be submitted for each type of waiver. Given the short period of time allotted to submit a waiver request, when a MassHealth claim is expected and those involved believe they may be eligible for a waiver, they need to be proactive in gathering the necessary documentation.
Just Wait
If you believe that an estate may be subject to estate recovery and no heirs qualify for a waiver, it’s possible to avoid the state’s claim by waiting to file for probate. In the case of In the Matter of the Estate of Jacqueline Kendall (486 Mass. 522, 2020), the Supreme Judicial Court ruled that MassHealth has three years from the date of death of a beneficiary to file its estate recovery claim. It has the right to file for probate if no one else takes the initiative, but to date we are unaware of it taking this step.
So, if you can wait to file for probate, that can be the best way to avoid an estate recovery claim, at least until MassHealth becomes proactive in doing so itself.