UPDATE ON GEORGIA’S ESTATE RECOVERY PROGRAM

On July 14, 2004, Georgia's Department of Community Health (“DCH”) adopted the final rules for the state's Estate Recovery Program.  The rules will be effective August 1, 2004, but the state does not expect to begin the recovery process immediately.  The Program will recover costs paid to Medicaid beneficiaries from their estates upon their death.  Only individuals who pass away after the effective date of the rules and who receive notice of the Estate Recovery Program will be affected.  With our clients and friends in mind, we have provided below a summary with highlights of the final rules.

Scope of Recovery.  Estate recovery will apply to Medicaid beneficiaries ("members") who:

• At the time of death, were 55 years of age or older and an inpatient in a nursing facility, intermediate care facility for the mentally retarded, or other mental institution where a state plan paid for the costs of medical care, or where a member received medical assistance for medical services, but only for services consisting of nursing facility services, personal care services, home and community based services, and hospital and prescription drug services provided to individuals in nursing facilities or receiving home and community based services; or
• At any age, were inpatients in a nursing facility, intermediate care facility for the mentally retarded, or other mental institution if the individual is required, as a condition of receiving services in the facility under the state plan, to spend for costs of medical care all but a minimal amount of their income required for personal needs.

No Recovery. Estates valued at $25,000 or less are exempt from estate recovery.  DCH also will not recover costs during periods in which "exception conditions" exist.  These exception conditions include situations where the member is survived by:

• A spouse
• A child under 21 years of age
• A child who is blind or permanently disabled pursuant to the eligibility requirements of Title XIX of the Social Security Act.

DCH may postpone recovery until all exception conditions are no longer present.  An estate does not have to be open in order for DCH to execute its claim after all exception conditions are no longer present.  Termination of recovery will occur when all real and personal property included as part of the member's estate is "no longer accessible."

Reach-Back Period for Recovery. The new estate recovery rules apply to debts to the state resulting from the payment of Medicaid benefits created on or after August 1, 2001.  However, only current Medicaid beneficiaries who pass away after the effective date of the rules (August 1, 2004) and who receive notice of the Estate Recovery Program will be affected.

Notice to DCH. If a debt is due, the administrator of the nursing facility and the personal representative of the estate (if applicable) must notify DCH when a member passes away within thirty (30) days of the death.  This notice is in addition to the notice required by the member's responsible party.  After receipt of notice of a member's death, DCH will file a claim against the estate, if the estate is probated, for the full value of the Medicaid benefits paid on behalf of the member.

Notice Letter from DCH.  Once notified of a member's death, DCH must provide a letter to the personal representative and any known heirs to explain the terms and conditions of estate recovery.  DCH must state its intent to recover the value of Medicaid benefits from the member's estate and state the amount.  DCH must also explain that recovery may include filing a lien on real property and that the heirs may file an undue hardship waiver.  The letter must also advise the heirs of their right to a hearing and include a statement advising that the amount of the claim may increase if there are additional Medicaid claims that have not yet been processed.

Personal Liability.  The personal representative must notify DCH of the member's death before dispersing assets of the member.  A personal representative is personally liable for any incorrectly paid assets, if DCH is not informed of the member's death and assets are distributed to heirs and/or creditors. 

• Priority of Claims.  Upon filing a statement of claim in the probate proceeding, DCH's estate recovery claim has priority over all other claims except:
• Years support for the family
• Funeral expenses (not to exceed $5,000; $0 if decedent prepaid funeral expenses that were included as a resource for Medicaid eligibility)
• Necessary expenses of administration
• Reasonable expenses of the decedent's last illness
• Unpaid taxes or other debts due to the state or United States

DCH may amend the claim as a matter of right until the member's estate has been closed.

Time Restrictions for Recovery Actions.  No actions by DCH to recover a debt due shall be commenced against the personal representative until after six (6) months from the date the personal representative was qualified to serve.

Recovery if No Probate Estate – Financial Institutions.  If a decedent held an account with a financial institution in the decedent's name only, the administrator of the Estate Recovery Program may request that a financial institution release account proceeds to recover the cost of services.  However, the administrator may do this only if no estate has been, and it is reasonable to assume that no estate will be, opened for the decedent, the decedent has no outstanding debts known by the administrator of the Estate Recovery Program, and the financial institution receives no objections or has determined that no valid objections to release proceeds have been received.

Real Property – Imposition of Liens.  The state may impose a lien on a member's real property after a member is "permanently institutionalized" (i.e., residing in a nursing facility or intermediate care facility for the mentally retarded and developmentally disabled for six (6) consecutive months or more); and if there is not a reasonable expectation that the member will return home; and when none of the persons listed below are living in the home:

• A spouse
• A child under 21 years of age
• A child who is blind or permanently disabled pursuant to the eligibility requirements of Title XIX of the Social Security Act
• A sibling with an equity interest in the home who has lived in the home for at least one (1) year before the member entered a nursing home.

Notice of Liens.  The use of this lien authority requires prior notification to the member or any known heirs (and personal representative, if applicable).  The notice must state the determination that the member is permanently institutionalized, that the member is not reasonably expected to return home, and DCH's intent to file a lien on the member's real property.  A lien may not be filed less than thirty-one (31) days from the date of the notice to the member.  A member or his or her designee, within thirty (30) days after receipt of notice, may request an administrative hearing and only one (1) appeal is afforded on behalf of a member for each notice received.  Prior to the member's death, notice of the lien must be filed with the recorder of the county in which the real property subject to the lien is located.  Thus, even if a member's estate is not probated, the state may recover debt from the member's real property if a lien is properly imposed on the property and recorded with the county prior to the member's death.

Enforcement of a Lien.  The State may not enforce a lien on a home under the following circumstances:

• The member's spouse is alive, even if not living in the home
• The member's child under 21 years of age is alive, even if not living in the home
• The member's blind or disabled child is alive, even if not living in the home
• An adult child of the member is living in the home, if that child lived in the home for at least two (2) years prior to the member's admission to the nursing home and provided care that kept the member from entering a nursing home
• The member's brother or sister is living in the home, if he or she lived in the home for at least two (2) years prior to the member's admission to a nursing home.

Thus, in some instances, a lien may be imposed on a home in which a member's adult child or sibling lives in the home, but the lien cannot be enforced by the state if the adult child or sibling living in the home meets one of the above listed conditions.

Release of a Lien.  DCH must release a lien within thirty (30) days after it receives notice that the member is no longer permanently institutionalized and is living in his or her home.  If the real property subject to the lien is sold, the office shall release its lien at the closing and the lien shall attach to the net proceeds of the sale.  A lien continues from the date of filing until the lien is satisfied, released or expires.

Hardship Waivers.  In very limited circumstances, a hardship waiver may be submitted within thirty (30) days from receipt of the notice from DCH, primarily if the recovery of assets would result in the applicant becoming eligible for governmental public assistance based on need and/or medical assistance programs.  Undue hardship does not exist where the recovery causes family members inconvenience, where it restricts the family's lifestyle or where heirs divest assets to qualify under the hardship provision.  If hardship does exist, the state, in its sole discretion, may waive recovery or defer recovery until the death of the eligible exempt dependents.

These estate recovery rules will not apply to everyone.  However, if you or any of your friends or family know someone who entered a nursing home or received medical assistance at home which was paid for by a State plan, and who retained any assets in Georgia, such as real property or personal property, these rules may apply, and that person's assets may be recovered by the State of Georgia after his or her death.

If you have any questions about this bulletin or need additional information, please contact Dana Perry at (423)757-0228 or by email at dperry@cbslawfirm.com.