1725 Estate Recovery Program - "See Policy Memo # 02-10-02 re: "Prepaid Funeral Agreements"

 

The estate recovery program has been established as a means to recover medical care costs from the estates and property of certain medical assistance recipients. The administration of the Estate Recovery program is the responsibility of the Estate Recovery Unit (ERU) in KDHE-DHCF.    ERU handles all post-death recovery actions, court action, lien imposition, negotiations and other related activities. KDHE-DHCF has delegated some legal and administrative   responsibilities to a private contractor, currently Health Management Systems. ERU is responsible for oversight of the contractor. Neither ERU nor the contractor provide eligibility determinations. Eligibility staff in DCF and the KanCare Clearinghouse are responsible for the determination as well as basic education regarding the Estate Recovery program.    

 

1725.1 Recoveries through Court - Beginning July 1, 1992, the agency is allowed to establish a legal claim for medical assistance provided after June 30, 1992 to persons who, prior to their death:
 

The claim would normally be filed against the client's decedent's, conservatorship's and guardianship's estate. These estates consist of the property owned solely by the deceased medical assistance recipient.
 

  1. Expanded Estate - For medical assistance provided on or before June 30, 2004 the agency's claim applies to the aforementioned estate. However, for medical assistance provided after June 30, 2004, the agency may establish a claim on any property interest owned by the deceased medical assistance recipient. The agency’s claim will apply to the deceased recipient’s 'medical assistance estate' (K.S.A. 39-709). This estate will include all real and personal property in which the deceased individual had any legal title or interest immediately before or at the time of death to the extent of that interest or title. The medical assistance estate includes, without limitation, assets conveyed to a survivor, heir or assign of the deceased recipient through joint tenancy, tenancy-in-common, survivorship, transfer-on-death deed, pay-on-death contract, life estate, trust, annuity, life insurance policy (whole or term life) or similar arrangement. The medical assistance estate is limited to the recipient’s interest in the property. The expanded definition also applies to the surviving spouse of a recipient.

    Example:     A medical assistance recipient has an interest in a house valued at $100,000. He added his daughter’s name to the deed 7 years earlier when his wife died. The deed is a joint tenancy deed with rights of survivorship. He received medical assistance for the period of July 2003 through June 2005 with a total claim amount of $60,000. He received $30,000 in benefits in the period of July 1, 2004 to June 30, 2005 when he died. The house is the only asset. The state has a claim for $30,000 (July 1, 2004 - June 30, 2005) against his half - interest ($50,000) in his house. Assistance provided prior to July 1, 2004 cannot be used as a claim against his interest in the house.
     
  2. Exceptions to Claims through Courts - If there is a surviving spouse, no probate would be started and no claim would be filed at the time of the individual’s death. A claim will not be established if the surviving children are under the age of 21 years or are blind or permanently disabled according to Social Security criteria. No claim will be established for those who solely received coverage under QMB, LMB, or QWD.
     
  3. Priority of Claims in Courts - In cases involving a decedent’s estate, the claim will be a first class claim against the estate of the deceased person. Payment of reasonable funeral expenses will be the only allowable claim prior to a medical assistance claim. In cases involving a guardianship or conservatorship, the claim is discretionary with the court and is payable in the amount determined by the court.

     

1725.2 Liens - In cases where a medical assistance recipient has received inpatient care from a nursing home or other medical institution and the recipient is not reasonably expected to return home, the agency may impose a lien on the recipient’s real property. A lien is only imposed on persons who have received funded care in a Medicaid approved facility (see 8112 and 8172), including those receiving institutional care under a PACE plan for at least 6 months. Liens are NOT applicable to persons in independent living (including QMB, LMB and Working Healthy), receiving HCBS, PACE services in the community or to NF residents where payments are not being made to the facility.
 

  1. Medical Verification - For individuals who have ownership interest in real property, the agency must establish the recipient, who has received at least six months of compensated institutional care, is not reasonably expected to be discharged and return home, prior to initiating the lien process. The agency shall obtain a statement from a physician attesting to the expectation of the individual to return home. The ES-3152, Medical Assistance Lien Physical Verification, shall be used to obtain the information. The form shall be completed by the individual's attending physician. The eligibility worker is responsible for obtaining the ES-3152 at the time payment for NF care is approved. All ES-3152 shall be retained in the case file until requested by estate recovery staff.

    The following action is required:
     
    1. If the physician indicated the individual is expected to return home, an estimated return date is required. A new ES-3152 shall be obtained at the end of this period. An HCBS referral is recommended.
       
    2. If the physician indicated the individual is not expected to return home, the eligibility worker shall provide the name, case number, and other relevant information to the estate recovery. ERU will track the client and request a copy of the ES-3152 if a lien is pursued 
     
    It is not necessary to obtain an ES-3152 for a person entering a facility for temporary stay as per 8113 unless the stay ultimately exceeds the temporary period.

    NOTE:     The subjective statement made by the recipient concerning his or her intent to return has no impact on the agency's authority to impose a lien. In addition, medical evidence obtained to support the imposition of a lien shall not impact the status of the home for eligibility purposes. (See 5331.2)
     
  2. Notice to Recipient of Agency’s Intent to Impose Lien - If the agency determines the recipient is not reasonably expected to return home, the ERU will send a notice to the recipient or the recipient’s representative of the agency’s determination and the agency’s intent to impose a medical assistance lien on real property owned by the recipient.
     
  3. Administrative Hearing - The agency’s notice will advise the recipient or representative of their right to request an administrative hearing. The notice will specify the method and time limits for requesting such hearing. The issue at the hearing will be whether the recipient can reasonably be expected to be discharged and returned home. If no hearing is requested within the time period for requesting a hearing outlined in 1611.1, the agency may file a lien on the real property of the recipient. If a hearing has been requested, no lien may be imposed until administrative and judicial matters have been completed.
     
  4. Imposition of Lien - To impose a lien, the agency will file a written lien with the Register of Deeds of the county where the real property is located.
     
  5. Restrictions on Imposition of Lien - The medical assistance lien may not be imposed on the home of the recipient when any of the following individuals are residing in the home:
     
    1. spouse of such recipient, (lien may be imposed if spouse is not living in the home);
       
    2. recipient’s child who :
       
      1. under the age of 21;
         
      2. blind; or
         
      3. permanently disabled;
         
    3. recipient’s sibling who has equity interest in recipient’s home and who has continuously resided in the home for at least one year immediately prior to the recipient’s admission into a medical facility for long-term care and continues to reside therein.  
       
  6. Content and Value of Lien - The lien shall state the nature and amount of the lien at the time of imposition, the legal description of the property affected and the recipient’s interest in the property. Lien value will be based on the amount of assistance paid on behalf of the recipient beginning 6 months from the date the recipient became eligible for compensated inpatient care until the filing of the lien plus any amount paid thereafter by the agency on behalf of the recipient.
     
  7. Priority of Lien - The medical assistance lien is junior and subject to all prior liens of record.
     
  8. Foreclosure of Lien - The agency may foreclose a medical assistance lien by filing an action in a Kansas district court for the county where the property is located. This action may be filed before or after the death of the recipient and may be filed in a civil action or as part of a probate proceeding. Such foreclosure are limited by the restrictions in (9).
     
  9. Restrictions on Enforcement of Liens - The medical assistance lien may not be enforced after the death of the recipient and his or her spouse. A lien on the home may not be enforced when any of following are residing in the home:
     
    1. a recipient's child who
       
      1. is under the age of 21; or
         
      2. is blind or permanently and totally disabled; or
         
      3. provided care to the recipient, allowing him or her to remain in the home and defer NF entry for at least 2 years
         
    2. a sibling who had resided in the home for one or more years immediately before the recipient’s admission to the nursing home or medical facility and has resided there continuously since that time.
       
  10. Release of Liens - The medical assistance lien generally remains on the property unless:
     
    1. the lien is satisfied;
       
    2. the lien is terminated by foreclosure of a prior lien of record or settlement action taken in lieu of foreclosure;
       
    3. the lien is foreclosed by the agency;
       
    4. a waiver of estate recovery action has been granted (see 1725.3); or
       
    5. the recipient leaves the nursing home or medical facility and returns to and resides on the property subject to the medical assistance lien for a continuous period of 90 days.
       
  11. Lien Dormancy - If the medical assistance lien has not been foreclosed within 10 years from the date of filing the lien, the lien will become dormant and cease to operate as a lien on the real estate. Such dormant lien may be revived under the provisions of K.S.A. 60-2403 et seq.
     

1725.3 Waiver of Estate Recovery Action - A recipient, a recipients spouse or a member of recipients surviving family may request a waiver of estate recovery action including liens when there will an undue hardship. This waiver could apply to either or both court claims and lien imposition. Each case will be examined on its own merits and circumstances. The factors for evaluating a waiver are:
 

  1. Type of assets involved in the case;
     
  2. Availability of alternative means for satisfying the claim;
     
  3. Actions of the family in helping decedent; particularly when such actions helped avoid or reduce medical costs which would have otherwise been incurred by the Medicaid program;
     
  4. Impact of recovery action on the financial circumstances of the surviving family;
     
  5. Impact of recovery action on business in which the decedent owned an interest; and
     
  6. Any other relevant factors.
     

1725.4 Determining Recovery Action - The determination of recovery action, if any, is a three step process: Notification of death, resource assessment, and determining the value of the claim based on the amount of medical assistance paid by the agency. since 7-1-92.

 

  1. Notification of Death - The Estate Recovery Unit (ERU) shall be responsible for coordinating and obtaining all information concerning the death of any medical recipient. Such information may be obtained from newspaper obituaries, eligibility staff, legal notice from representatives of a recipient's estate, other governmental agencies, or other reliable sources. Upon receipt of notification of death of an individual, the ERU will attempt to match the deceased with case information in KAECSES. The eligibility worker will confirm any match and other family and/or resource information prior to any ERU recovery activity. If there is a surviving spouse, recovery action will be pended until the death of the surviving spouse.
     
  2. Resource Assessment - In cases where the deceased has no surviving spouse or dependent children, the ERU will begin a preliminary assessment of the individual's resources. Assessment will consist of determining the type of property, value, and title or ownership. All assets can be considered for recovery including real property, financial accounts, and other personal property (e.g., other liquid assets, cars, furniture, and jewelry).
     
  3. Determining Value of Claim - ERU will research and determine the cost of medical assistance paid after June 30, 1992 on behalf of a recipient who is 55 years of age or older or who was receiving institutional PACE or HCBS services. Assistance provided to a recipient before the recipient's 55th birthday will not be considered in valuing the claim unless that person was in long term care. The value of assistance received after June 30, 2004 will also be determined and used is handling claims against the expanded estate as per 1725.1 (1). The estate recovery claim will be reduced by the amount of payments made by a long term care insurance policy on behalf of the recipient.
     

 

1725.5 Recovery Actions by Estate Recovery Unit - The ERU will determine the appropriate action to be taken in regard to filing claims. This may occur through one of several avenues including, but not limited to, agreements with heirs, claims against financial accounts, and filing of probate action.

 

In some circumstances the heirs of the deceased may choose not to initiate probate proceedings. In these instances ERU will determine whether to proceed with probate based on the nature of the agency's claim, value of estate assets, presence of other creditors and any other relevant information.

 

ERU may file a claim against accounts of a deceased recipient held at financial institutions. Notice of claim will be in writing. The notice of claim will be forwarded to any financial institution identified by ERU as a holder of a recipient's account. After notification of the claim, the financial institution is barred from distributing the account to a beneficiary until the claim of the agency is satisfied.

 

ERU will also file a claim for monies held in a personal needs account for a recipient at a nursing home. Nursing homes are required to forward the personal needs accounts to the agency upon the death of a recipient of medical assistance. The funds in the personal needs accounts will be used in satisfying the claim. In addition, ERU will advise the appropriate court, if probate proceedings are initiated, of any amounts received by ERU. ERU will also assume responsibility for distribution of the funds in these accounts to funeral homes to cover the unmet expenses of funeral services.

 

In accordance with Kansas law, funeral homes, cemeteries, life insurance companies and other entities holding funds establishing a burial or funeral agreement for a medical assistance recipient, or the spouse of a former medical assistance recipient, are required to remit any funds remaining after payment of reasonable funeral expenses to ERU. This is applicable to all funeral or burial plans regardless of the funding source, including but not limited to, bank accounts, trusts, annuities, burial insurance, life insurance and certificates of deposit. This also applies to term life insurance policies specifically assigned to a provider of funeral services. It does not apply to non-assigned life insurance polices or accounts. However, such items may become part of the estate and therefore, subject to recovery. To support this provision, all medical assistance applicants or recipients are required to notify DCF upon the establishment of any prearranged burial agreement. This information is then recorded on KAECSES. In addition, individuals are also required to notify the funeral home holding any pre-arranged burial agreement if medical assistance is approved. The funeral home is then required to notify the entity holding the funds associated with the prepaid account.

 

1725.6 Voidable Transfers - Transfers of property by medical assistance recipients subject to the estate recovery provisions can be voided based on State law. The estate recovery unit (ERU) can take legal action against the recipient and have such transfers set aside, thus returning ownership of the property to the individual. This provision is applicable for any transfer made by a Medicaid recipient. Transfers prior to the date of application are also included if the individual transferring property is ultimately approved for prior medical assistance for the date the transfer occurred. Any transfers made prior to the effective date of medical coverage are not voidable but are subject to the provisions of 5720 and subsections.

 

Transfers by the following recipients would be considered under this provision.
 

  1. Persons 55 years of age or older, including those in independent living or long term care arrangements (except for QMB, LMB, or QWD only recipients; and
     
  2. Persons receiving long term institutional or HCBS care.
     

Any partial or total transfer of property may be considered including transfers of exempted property such as a home or a car. Transfers to children, as defined in 1725, or transfers resulting from the spousal impoverishment provisions of 8144 and 8244 will not be voided. However, transfers between a husband and wife other than for spousal impoverishment purposes will be considered. This would include transfer of the home property and later acquired assets which would not fall under the original resource division.

 

Transfers which equal or exceed the following threshold amounts shall be referred to the ERU. These thresholds are to be viewed as a guideline for staff in order to provide latitude to the client to meet ongoing living expenses while helping to prevent a concerted attempt to divest resources in order to deplete the estate. They were also developed to avoid unnecessary administrative burden on staff to investigate and refer all transfers.

 

  1. For real property, the total value of the property transferred must be $5,000 or more.
     
  2. For personal property, the total value of the property transferred must be $500 or more. This would include but is not limited to checking accounts, savings accounts, C.D.'s, stocks, bonds, life insurance cash values, and trust funds.
     

Information regarding such transfers is to be referred to the ERU for determination of action. Any resulting penalty period per 5720 shall be applied prior to referring to ERU for a determination. If ERU determines action to void the transfer will not be taken, the transfer penalty remains in place. If action to void will be initiated, any payment denied because of a transfer penalty will be reversed and payment may be authorized. If the transfer is ultimately voided, eligibility shall be reevaluated considering the property.

 

It should be noted that the guidelines in this section do not directly parallel the transfer provisions of 5720. Transfers of property may be voided even though they would not be penalized under the guidelines of 5720 (e.g., transfers between spouses or transfers by persons in independent living.) In addition, only transfers by persons ultimately considered recipients can be voided whereas transfers of both applicants and recipients can be penalized under the provisions of 5720.

 

1725.7 Impact on Funeral Assistance - As noted above, ERU is responsible for verifying and assessing the extent of a deceased person's estate. In addition, payment of reasonable funeral expenses takes precedence over the medical assistance claim. As the value of a person's estate must also be considered in determining the amount of funeral assistance for persons who had no surviving dependents per 2322.2, local staff must notify ERU if a request is taken on a person subject to estate recovery. If there are assets available for funeral assistance, local staff will advise ERU of those assets. If ERU identifies a discrepancy in assets, the local staff will be contacted. If funeral assistance is approved, a copy of the funeral home bill along with notice of the amount of assistance provided shall be forwarded to ERU. If the asset considered available for funeral assistance has already been collected by ERU, ERU is then responsible for making the remaining payment due the funeral home out of the estate monies collected.