Estate Recovery: State's lack of timely notice a defense

By Loukas P. Kalliantasis

As of recent months, the State of Michigan, through the Department of Community Health, continues to seek recovery of long-term care benefits that were paid to Medicaid recipients from as early as July 1, 2010. In such cases, the Department will file a claim with the personal representative of a deceased recipient's estate and, if the claim is disallowed by the personal representative, the Department may commence a civil action to recoup the benefits paid. The recent case of In re Estate of Amy Grosskopf, Gratiot County Probate Court (File No. 12-138-CZ), provides that a personal representative may avail herself of a defense to the Department's claim if the state did not provide actual and timely notice of estate recovery to the Medicaid recipient.

In September 2007, Michigan enacted its Medicaid Estate Recovery Act. This state law established certain minimum requirements for a Michigan estate recovery program but, generally, required the Michigan Department of Community Health to work with other state and federal agencies to further develop such a program. Michigan's Estate Recovery Program was finally developed and received approval by the federal government on May 23, 2011, with a retroactive effective date of July 1, 2010. Through the Estate Recovery Program, the State of Michigan may recover benefits paid to Medicaid recipients for long-term care services. In Michigan, recovery is limited to the recipient's probate estate.

Section 112g(7) of Michigan's Medicaid Estate Recovery Act requires the Department of Community Health to "provide written information to individuals seeking medicaid eligibility for long-term care services describing the provisions of the Michigan medicaid estate recovery program, including, but not limited to, a statement that some or all of their estate may be recovered." In Grosskopf, the Medicaid recipient started to receive long-term care benefits in July 2008, after the effective date of Michigan's Medicaid Estate Recovery Act but before the retroactive effective date of Michigan's Estate Recovery Program. She received actual notice of estate recovery, for the first time, through a redetermination notice in April 2012 and continued to receive long-term care benefits through the time of her death in May 2012. The principal issue presented in Grosskopf was whether actual and timely notice of estate recovery was provided to the recipient. If yes, the state could recover its long-term care costs from the deceased recipient's probate estate. If actual and timely notice of estate recovery was not provided to the recipient, the issue became whether dismissal of the Department's action was an appropriate remedy for a lack of proper notice.

In Grosskopf, the personal representative successfully argued and the court agreed that Michigan's Medicaid Estate Recovery Act required, as a prerequisite to estate recovery, that the state provide actual notice in the form of written materials to individuals seeking Medicaid eligibility for long-term care services. In addition, the court determined that the April 2012 redetermination notice was not timely for the reason that it did not provide the recipient with "a meaningful opportunity to appreciate and understand the potential liability of her estate at the time of her initial application for medicaid benefits." Ultimately, the court granted relief to the estate by dismissing the Department's estate recovery action. In doing so, the court rejected the Department's arguments that the Michigan Medicaid Estate Recovery Act, itself, was sufficient notice of estate recovery and that, in the alternative, the Michigan Estate Recovery Program did not require notice to the recipient. The court noted that to allow estate recovery under the circumstances would render the notice provision of Michigan Medicaid Estate Recovery Act meaningless.

When presented with an estate recovery claim or civil action, the personal representative of a Medicaid recipient's estate should consult with experienced legal counsel to review Medicaid notices and to determine whether actual and timely notice of estate recovery was provided to the recipient. If written notice was not provided prior to or at the time of enrollment, the personal representative may have a viable defense to estate recovery. As a practical matter, this defense will likely be available to those recipients who started to receive long-term care benefits prior to October 2011. While Michigan's Estate Recovery Program was approved by the federal government in May 2011, it appears that the relevant part of the Medicaid application, specifically, form DHS-4574, was not revised to provide notice of estate recovery until October 2011. In any case, all Medicaid documents should be carefully reviewed to determine whether a defense to estate recovery premised on a lack of requisite notice is available.

Loukas P. Kalliantasis is an associate attorney with Fraser Trebilcock's Trusts and Estates Department. He may be reached at (517) 377-0893 or at lkalliantasis@fraserlawfirm.com.

Published: Thu, Jun 27, 2013