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Medicaid Estate Recovery Reaches Deposit Refund

Federal law, per the Omnibus Budget Reconciliation Act of 1993, dictates that individual states must attempt to recover against Medicaid recipients aged 55 and older for the cost of their long-term care benefits. States differ, however, on the breadth of this estate recovery: some states limit estate recovery to probate assets while some states have expanded estate recovery. In expanded estate recovery states, recovery can be made against almost any asset in which the Medicaid recipient had an interest – this includes assets that pass outside of probate.

Many states have exemptions for estate recovery of the Medicaid recipient’s home. A state agency may not place a lien on the home if the Medicaid recipient is survived by:

  • a spouse;
  • a child under age 21;
  • a permanently disabled child or blind child; or
  • a sibling who had been residing in the home for at least one year immediately before the Medicaid recipient entered the nursing home.

But for assets other than the home, estate recovery can be a point of contention. What assets are available to the state for estate recovery? And what must the Medicaid recipient’s interest in that asset look like? Does the recipient have a legal interest in a particular asset? For those cases where it isn’t clear, litigation may ensue. Here, let’s take a look at a case where a deposit refund was at issue.

This is a case out of Ohio, and per Ohio Rev. Code § 5162.21(A),

“(1) "Estate" includes both of the following:

(a) All real and personal property and other assets to be administered under Title XXI of the Revised Code and property that would be administered under that title if not for section 2113.03 or 2113.031 of the Revised Code;

(b) Any other real and personal property and other assets in which an individual had any legal title or interest at the time of death (to the extent of the interest), including assets conveyed to a survivor, heir, or assign of the individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement.”

The Ohio Department of Medicaid (“ODM”) filed a complaint against defendant Nina French, as executor of Harry L. Ward’s estate, in 2017, asserting that it was entitled to recover from Harry’s recoverable estate, including half of a refund based off his wife’s one half-interest in the deposit. According to the complaint, Harry and his wife Lessel entered a reservation agreement with a retirement community, pursuant to which they paid a deposit of $108,400. Under the terms of the contract, if at any time Harry and Lessel terminated the contract, they would be jointly entitled to the deposit refund.

Lessel received Medicaid benefits between 2001 and 2015, in the amount of $269,929.82. In January 2016, ODM presented a claim to Harry as Lessel’s surviving spouse and the person responsible for her probate estate, in the amount of the Medicaid medical assistance benefits she received. Harry then died in March 2016, and in July 2016 the defendant and executor of the estate in question filed an inventory and appraisal of assets in Harry’s probate estate, at a total value of $51,280, including a refund of $48,780 from the retirement community from the deposit.

Based off Lessel’s one-half interest in the unused portion of the deposit, ODM asserted that it was entitled to $24,390.00. The defendant counterclaimed that the ODM had agreed settle the claim for $408.21, to which ODM replied that any settlement was based off of the defendant’s misrepresentation of the facts. The ODM filed for summary judgment, and claimed that the unused portion of the deposit was comparable to a joint and survivorship deposit bank account, a survivorship tenancy in real estate, and transfer-on-death designation and payable-on-death accounts. The chief financial officer of the retirement community submitted an affidavit stating that “[m]ost residents, including a surviving spouse, eventually require advanced care … and, therefore, any remaining Original Deposit balance is transferred to pay for a resident’s advance care rather than [the retirement community] issue a refund… Typically, most Original Deposit refunds are applied to a resident’s next continuum of care, and, more often than not, no Original Deposit refund is available to a resident at the resident’s time of death…”

The defendant asserted that ODM was not entitled to the refund because Lessel had no interest in the refund at the time of her death. The defendant argued that the use of the word “jointly” in the contract meant if they were both alive that Harry and Lessel would have had the refund payable to both of them. Because Lessel was not alive at the time of the refund, she did not have an interest therein. However, the court concluded that Lessel did have an interest in and access to a refund at the time she sought Medicaid benefits, based on the terms of the resident agreement, which allows termination of the license to occupy the residential facility at the behest of the resident, at which point the resident possesses various rights to the original deposit. Accordingly, the trial court granted the ODM’s motion for summary judgment and held that the ODM was entitled to recover the one-half of a refund paid by a retirement community to the estate because the estate was subject to recovery for Medicaid medical assistance benefits previously paid. The defendant appealed, and the court of appeals affirmed the trial court’s judgment.

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