As of May 14, new MassHealth regulations have expanded the group of heirs who may be eligible for a hardship waiver from estate recovery. These regulations significantly expand what has been a draconianly narrow exception to estate recovery.
What is Estate Recovery?
While MassHealth provides services during the life of an individual, after the participant’s death, the agency may seek reimbursement of its costs from the probate of the deceased beneficiary through a process known as “estate recovery.” Sale of the home is frequently required to satisfy a claim against an estate. Recovery may be waived for hardship, but rules for qualification are quite limited and processes for applying for and being granted a waiver are murky.
Prior Requirements for Waiver Eligibility
Up until now, MassHealth would grant a hardship waiver if the heir:
- Lived in the home continually for at least a year prior to the deceased beneficiary becoming eligible for MassHealth;
- Received an interest in the property from the deceased beneficiary’s estate;
- Is not being forced to sell the property by other devisees or heirs; and
- Has income at or below 133% of the applicable federal-poverty-level. (In 2021, for a family of four, this was $35,245.)
A decision to waive recovery against an estate was conditional for two years and could be revoked by the agency during that period.
Under the new rules, MassHealth will stop seeking to recover from small estates of $25,000 or less. In addition, the new rules create new grounds for applying for waivers, based on care provided and income, in addition to those described above.
Waiver Based on Care Provided
The first new type of waiver is similar to the so-called “caretaker child” exemption from transfer penalties. As long as the family member applying for the waiver lived in the home for two years prior to the MassHealth participant’s admission to an institution or receiving an institutional level of care in the community, or death, they can now qualify for an estate recovery waiver. During that time, the applicant must have provided a level of care which kept the MassHealth participant from needing admission to an institution or institutional level care.
Before this, this has often been a trap for the unwary since many families believed that the caretaker child exception for transfers of the home also applied to post-death estate recovery when it did not.
Partial Waiver Based on Income
The second new type of waiver based on income can protect up to $50,000 per heir and up to $100,000 per estate. It will result in only a partial waiver in some cases, and estates may still be subject to partial recovery after the maximum allowable amount is waived. If the heirs who inherited an interest in the MassHealth member’s estate had a gross income below 400% of the federal poverty level for two years prior to MassHealth’s notice of a claim being filed ($106,000 for a family of four in 2021), MassHealth may waive recovery in an amount equal to the heir’s interest in the estate, up to a maximum of $50,000. If there is more than one heir, that maximum amount is increased to $100,000, and the personal representative of the estate must apply for this waiver separately on behalf of each heir.
How to Apply for a Waiver
MassHealth has published applications for the different types of new waivers on its website. An application and documents in support of the application must be received by MassHealth within 60 days of the agency’s notice of claim.
This 60-day timeline is the same as in the previous regulations. However, previously, there was no standardized application for a waiver. Rather, applicants were required to provide MassHealth with notice via certified mail that circumstances exist which qualify the estate for waiver of recovery, and provide supporting documentation.
MassHealth projects these changes to reduce annual estate recovery collections by $12 million – almost half the $25 million collected each year. While $12 million is merely a drop in the bucket that is MassHealth’s $18.261 billion budget (around 0.066%, for reference), it is a massive sum for low-income families and individuals who have been paying it for decades.