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Overview of the Office of Medicaid (MassHealth)—Review of Estate Recovery

This section describes the makeup and responsibilities of the Office of Medicaid (MassHealth)—Review of Estate Recovery.

Table of Contents

Overview

Under Chapter 118E of the Massachusetts General Laws, the Executive Office of Health and Human Services, through the Division of Medical Assistance, administers the state’s Medicaid program, known as MassHealth. MassHealth provides access to healthcare for approximately 1.9 million low- and moderate-income children, families, seniors, and people with disabilities annually. In fiscal year 2018, MassHealth paid healthcare providers more than $15 billion, of which approximately 50% was funded by the Commonwealth. Medicaid expenditures represented approximately 39% of the Commonwealth’s total fiscal year 2018 budget of approximately $40 billion.

Estate Recovery

According to Section 515.011(A)(2) of Title 130 of the Code of Massachusetts Regulations (CMR), an estate “includes all real and personal property or other assets in the member’s probate estate.” MassHealth recovers funds by filing claims in probate court against deceased members’ estates for Medicaid expenses paid on their behalf. This process, estate recovery, is used to supplement funds available for medical assistance programs and limit the tax burden on citizens of the Commonwealth caused by rising medical costs. Funds recouped through estate recovery are returned to state and federal medical programs to help provide assistance to those in need. There are two types of estate recovery cases: voluntary cases, which have assets less than or equal to $25,000 and do not include real estate because the decedents did not have any real estate in their names, and non-voluntary cases, which have assets greater than $25,000 or include real estate.

MassHealth contracts with the Center for Health Care Financing (CHCF) to maintain an Estate Recovery Unit (ERU). CHCF is a unit within Commonwealth Medicine, a consulting division of the University of Massachusetts Medical School. CHCF’s role is to identify deceased MassHealth members, monitor probate filings, assert recovery claims, identify estate assets, and recover the cost of all MassHealth benefits from estates.

According to 130 CMR 515.011(1),

Recovery is limited to payment for all services provided

  1. while the member was 65 years of age or older, except on or after October 1, 1993, while the member was 55 years of age or older; and
  2. on or after March 22, 1991, while the member, regardless of age, was institutionalized, and the MassHealth agency determined that the member could not reasonably be expected to return home.

Recovery takes place only after the deaths of both the recipient and the surviving spouse, if any. 

ERU records cases in the Sohema case management tracking system. This system tracks assets and recovery of MassHealth expenses from the estates of deceased former members. Cases are created when ERU receives copies of probate petitions and death certificates from estate representatives, as required by Section 32(a) of Chapter 118E of the General Laws. After creating a case, ERU obtains the related medical billing history and then tracks the case to file a claim against the estate in probate court. Once a personal representative is appointed for the deceased member’s estate, the claim amount is finalized. Claims must be filed within four months after a personal representative is appointed or, according to Section 32(i)(2) of Chapter 118E of the General Laws, a public administrator is appointed (within one year after the date of death if a personal representative is not appointed in that time). If the estate does not respond to the claim within 60 days of ERU’s presentment to the estate, it becomes allowed as a matter of law. However, within those 60 days, the personal representative may request an undue-hardship waiver, deferral, or exception, as discussed below.

Undue-Hardship Waiver

MassHealth may waive estate recovery if it determines that satisfaction of the claim would cause an undue hardship on the member’s survivors. According to 130 CMR 501.013(D), “An undue hardship does not exist solely because recovery will prevent any heir from receiving an anticipated inheritance.” For an undue-hardship waiver to be granted, all four of the following conditions must be met:

  1. the survivor has continuously lived in the real property for at least one year before the member was eligible for MassHealth and will continue to live there
  2. the survivor has inherited or received an interest in the real property from the member’s estate
  3. the survivor is not being forced to sell the real property by other heirs
  4. when MassHealth first presented its claim for recovery against the estate, the gross annual income of the family group was less than or equal to 133% of the federal poverty income level for the family size.

During our audit period, the undue-hardship waiver was conditional for two years from the date MassHealth mailed notice that the waiver requirements had been met. If, at the end of two years, all the conditions for a waiver were still met (including the income standards) and the real property had not been sold or transferred, the waiver became permanent. If, at any time during the two years, the conditions were no longer met (including the income standards), or the real property was sold or transferred, or the survivor did not use the real property as a primary residence, the claim could be payable in full.

Deferral

According to 130 CMR 515.011(C),

Recovery will not be required until after the death of a surviving spouse, if any, or while there is a surviving child who is younger than 21 years old, or a child of any age who is blind or permanently and totally disabled.

In addition, Section 31(d) of Chapter 118E of the General Laws allows estate recovery to be deferred when certain relatives, such as siblings or caretakers who are a member’s adult children, lawfully reside in real property that is part of the estate. For example, a person who has provided necessary care that allowed his/her parent to live at home before being admitted to a nursing facility or other medical institution, lives in the parent’s real property, and has lawfully and continuously lived there while the parent has been in a nursing facility or other medical institution is eligible for a deferral.

Exception

According to 130 CMR 515.011(B)(1),

No recovery for nursing facility or other long-term-care services may be made from the estate of any person who meets the following requirements.

(a)  The member was institutionalized; and

(b)  The member notified the MassHealth agency that he or she had no intent of returning home; and

(c)  On the date of admission to the long-term-care institution, the member had long-term-care insurance.

Resolution of Claims

Resolution of an allowed claim is determined by an analysis of the estate’s probate assets and allowable expenses. Both assets and expenses must be recorded and documented in Sohema. Under Section 3-805 of Chapter 190B of the General Laws, MassHealth obtains recovery from the balance of estate assets after other expenses (such as administrative costs, reasonable funeral expenses, debts, and federal and state taxes) have been paid. MassHealth closes cases after recovery. If no recovery is made in a case, MassHealth closes the case after documenting that either expenses exceeded the value of the assets or no recoverable benefits had been paid.

Estate Recovery Governance

Estate recovery is governed by a combination of federal and state laws and regulations. According to Section 1396p(b)(1) of Title 42 of the United States Code, “the State shall seek adjustment or recovery of any medical assistance correctly paid on behalf of an individual under the State plan.” The federal Omnibus Budget Reconciliation Act of 1993 requires all states to seek reimbursement of (at a minimum) long-term-care costs paid for members from all real property and assets that pass from their estates to their survivors under state probate law. At the state level, Section 31(b)(3) of Chapter 118E of the General Laws and 130 CMR 515.011 require MassHealth to recover all Medicaid costs for medical assistance.

The federal Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) allows TEFRA liens, or pre-death liens, also referred to as living liens. Under 130 CMR 515.012, living liens are placed on any real property in which a member who is receiving long-term or chronic care in a nursing facility or other medical institution has a legal interest (for example, being the sole owner of the real property, owning it jointly with another, or holding a life estate1 in it). A living lien on a real property gives MassHealth authority to recover Medicaid payments that have been made if the real property is sold. Federal law does not allow a living lien to be recorded for real property if it is inhabited by a MassHealth member’s spouse, child under 21, child of any age who is blind or has a disability, or sibling who co-owns the property and has lived there for at least a year before the member was admitted to a nursing home. If these conditions are no longer met, MassHealth may place a lien on the real property. After a member dies, MassHealth may file a claim in probate court to recover the member’s paid Medicaid costs.

1.     According to 130 CMR 515.011, a life estate exists “when all of the remainder legal interest in a property is transferred to another, while the legal interest for life rights to use, occupy, or obtain income or profits from the property is retained.”

Date published: June 28, 2021
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