Medicaid Estate Recovery in Pennsylvania

In 1993, the federal government enacted a law requiring states to create estate recovery programs for repayment of long-term care costs covered by Medicaid (which also is known as Medical Assistance in Pennsylvania). How to do this was left to each state to decide, for the most part. As people are living longer, they often live their final days in nursing homes. Pennsylvania’s Medicaid Estate Recovery Program places an emphasis on recouping costs for nursing-home care, as well as home and community-based services that can be covered by Medicaid under a waiver authorized through the Social Security Act because these are provided to avoid having to place a person in an institution such as a nursing home. The third focus of estate recovery involves Medicaid payments for related hospital and prescription drug services that accompany the two other categories of services. The Medicaid Estate Recovery Program can be a major concern during the administration of an estate and could be an important consideration in estate-planning decisions, too.

Medicaid estate recovery targets estates of deceased individuals who received the services previously mentioned after they turned 55 and needed assistance from Medicaid to pay the bills. Pennsylvania generally requires repayment from these estates so the decedent’s personal representative (commonly known as the executor when there is a Will or the administrator when the decedent died without a Will) must be aware of this possibility.

The key here is whether or not the decedent was on Medicaid during the last five years of her or his life. If you are the personal representative and you know this was the case, then you must send a letter containing with specific information that the Department of Public Welfare (DPW) requires. Then, in general, DPW has 45 days to send you a Notice of Claim. Depending on the circumstances, the agency is not confined to making a claim regarding only the prior five years. If Medicaid paid for nursing-home services before this period, then DPW’s claim could go further back.

In addition, when you are the personal representative, you have to look at the 5-year period. You would have an ethical obligation to notify DPW if you are aware of Medicaid payments that actually occurred for the targeted services more than five years ago, as long as the individual was 55 or older period that period of time.

After DPW provide notice of its claim, you could appeal this at an administrative hearing. If the Department’s claim survives, then the recovery phase begins. It can make its claim against all property (both real and personal) that could be administered by a personal representative, even if the personal representative decides not to administer some of the estate’s property. So, if you are the personal representative, you cannot shield property that is in the estate by ignoring it.

On the other hand, most property that does not have to go through the estate process cannot be claimed by DPW. This would include property owned jointly with survivorship rights (or owned by spouses through a tenancy by the entireties). Life insurance that is paid directly to a named beneficiary also avoids the DPW claim, but the same policy – when payable to the estate – can be recovered. Assets in a testamentary trust, which is created by a Will, are subject to DPW’s claim; assets in a trust created by the decedent prior to the individual’s death escape the recovery program as long as they are not payable to the estate. This can be important to remember when an estate plan is being drafted.

Another point that you should remember if you are in charge of the estate is that DPW has a claim to estate property but does not have a lien against it through the Medicaid Estate Recovery Program. Anyone with a lien on property has priority versus DPW’s claim, which, unlike a lien, is unsecured. Among claims to payment from the estate, DPW’s claim only is in the third category, and that is limited to Medicaid payments made during the person’s last six months. Any other claims by DPW are relegated to the sixth payment class.

We have gone through some of the basics concerning Medicaid estate recovery. There are others that bear mentioning whether you are the personal representative in charge of administering an estate or you are a person setting up an estate plan that you want to provide as much to your chosen beneficiaries and as little to the government as possible. These factors raise such issues as the duty to protect DPW’s claim when the transfer of estate property is involved, the timing of transfers prior to going to a nursing home as well as prior to death, and the possibility of postponing or even waiving claims under Medicaid estate recovery when you would be an heir. I will touch on these topics next time. You should keep in mind that this can be a complex area of law so you probably should discuss them in more depth with an attorney if any of these subjects applies to a situation in which you are involved.