RFG Background Brief #10: "What's the latest on Medicaid Estate Recovery in Massachusetts?" Ma
[March 5, 2005]
Donald N. Freedman

Under federal and state law, Massachusetts has the right, after the death of a MassHealth recipient, to seek reimbursement, within limits, for services provided.

As of July 2004, Massachusetts returned to the class of states that bring estate recovery claims against probate assets only; that is, assets owned by the individual alone and outright -- not jointly or in trust, for example. It was a year of turmoil, however, as the legislature first passed, then delayed and finally repealed expanded estate recovery legislation.

Massachusetts enacted expanded estate recovery legislation effective July 1, 2003, as part of the FY04 state budget. The amendment expanded estate recovery to assets beyond the probate estate and took effect for estates of individuals dying on or after July 1, 2003. The legislation was very expansive in the class of property to which it applied, referencing life estates, joint tenancy, tenancy by the entirety, annuities, life insurance, etc.

After the expanded estate recovery provisions began to be implemented, the legislature had some second thoughts. It passed legislation to postpone such collections until July 1, 2004. The Division of Medical Assistance (DMA) then had to return funds it had collected and issue releases for expanded estate claims it had made. Finally, in July 2004 provisions of the FY05 state budget repealed the expanded estate recovery law and reinstated the former “probate assets only” language. In a final twist, the Governor vetoed the repeal, but the legislature overrode the Governor’s veto. The DMA obediently amended its regulations to once again restrict estate recovery to the probate estate (see 130 CMR 501.013(A) and 515.011(A), amended July 2, 2004).

After a year full of sound and fury, the law has returned to its state as of July 2003.


Undue Hardship Waivers

Effective November 15, 2003, the DMA made changes to the estate recovery regulations governing undue hardship waivers (see 130 CMR 501.013 and 515.011). These changes remain in effect, notwithstanding the repeal of the expanded estate definition.

The previous rule was that a waiver would be granted if the income of the individual residing in the family home was below 200% of the federal poverty level. The November 15, 2003 rule imposed an income limit of 133% of the federal poverty level and also provided that “family group” income, and not just the income of the person applying for the waiver, would count for purposes of the limit.

The new rule also made the grant of a waiver conditional for a two-year waiting period. For two years following the conditional grant, the applicant’s income must remain below the limit and the real property must remain unsold, not transferred and be used as the applicant’s principal residence. Only if the applicant successfully fulfills these conditions will the waiver “become permanent and binding.”

The new undue hardship standards apply to claims presented on or after November 15, 2003. The previous standards remain in effect for claims presented between April 1, 1995 and November 15, 2003.

The November 15, 2003 regulations also required executors to provide fair market value appraisals for property, in addition to tax assessment information, where the Medicaid claim exceeded the property’s value. These regulations are also unaffected by the repeal of the expanded estate law and remain fully in effect.


Long-term Care Insurance Exemption: Proposed Legislation

Under Massachusetts law, estate recovery is waived for purchasers of long-term care insurance policies meeting certain minimum requirements (see M.G.L.A. c. 118E, Section 33). The DMA’s policy, however, has been to grant the exemption only where the coverage remaining on the policy at the time of nursing home admission meets the minimum requirements. In other words, at the time of nursing home admission the policyholder must have at least two years at $125.00 per day of coverage left to qualify for the exemption.

The problem is that this policy penalizes the use of home care benefits under long-term care insurance policies. Many policies permit policyholders to use the benefit amount either for assistance at home or for nursing home care. Elders naturally prefer to make liberal use of the home care benefit and put off the dreaded day of nursing home placement. The DMA’s narrow interpretation of the exemption constitutes a perverse incentive to early institutionalization.

The Massachusetts Chapter of the National Academy of Elder Law Attorneys (NAELA) has therefore sponsored an amendment to the statute that would reverse the policy, as follows.


Draft Legislation re Long Term Care Insurance
And MassHealth Estate Recovery

Section 33 of Chapter 118E of the General Laws is hereby amended by striking it and inserting the following new section 33:

Section 33. No claim for costs of a nursing facility and other long term care services may be made by the division under section 31 or 32 if the individual receiving medical assistance was permanently institutionalized, had notified the division that he had no intent on returning home, and had on the date of admission to the nursing facility or other medical institution long term care insurance that when purchased met the requirements of 211 C.M.R. 65.00.

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