Estate of Schiola v. DEPT. OF HEALTH CARE, 01CA1255.

• Decision Date: 23 May 2002
• Docket Number: No. 01CA1255.,01CA1255.
• Citation: 51 P.3d 1080
• Parties: In the Matter of the ESTATE OF Rocco A. SCHIOLA, a/k/a Rocco Schiola, Deceased, Petitioner-Appellee, v. COLORADO DEPARTMENT OF HEALTH CARE POLICY AND FINANCING, Respondent-Appellant.
• Court: Colorado Court of Appeals

51 P.3d 1080

In the Matter of the ESTATE OF Rocco A. SCHIOLA, a/k/a Rocco Schiola, Deceased, Petitioner-Appellee, v. COLORADO DEPARTMENT OF HEALTH CARE POLICY AND FINANCING, Respondent-Appellant.

No. 01CA1255.

Colorado Court of Appeals, Div. V.

May 23, 2002.

Solem, Mack & Steinhoff, P.C., R. Eric Solem, Englewood, Colorado, for Petitioner-Appellee.

Ken Salazar, Attorney General, Ann Hause, Assistant Attorney General, Denver, Colorado, for Respondent-Appellant.

Opinion by Judge NIETO.

The Department of Health Care Policy and Financing appeals the dismissal of its petition for allowance of claim filed against the Estate of Rocco A. Schiola. We affirm.

Prior to his death, Mr. Schiola received Medicaid benefits from a program administered by the Department. The Department reimbursed expenses for medical care provided to Mr. Schiola. Following Mr. Schiola's death, the Department, through an agent, filed a claim against his estate to recover benefits paid on his behalf. The personal representative denied the claim, and a hearing was held on the Department's petition for allowance of claim.

At the hearing, the personal representative asserted that the probate court lacked jurisdiction because the Department had not followed its own procedures, which permit an application for an undue hardship waiver of the claim. The court continued the hearing so the application could be made.

The Department and the personal representative could not agree on the procedure, and no application was filed. The personal representative then filed a motion to dismiss the Department's petition for allowance of claim, alleging that the Department failed to give the heirs notice of their right to apply for a hardship waiver of the claim and that the Department's procedures failed to provide an administrative hearing on an application for waiver. The court found that the Department had failed to give proper notice to the individuals affected by the proposed recovery and granted the motion. This appeal followed.

The Department contends that the court erred in dismissing its petition because it followed all required administrative procedures and gave proper notice of the process for applying for a hardship waiver. We agree that the Department properly served notice on the personal representative, but nonetheless affirm the probate court's order because the written notice was defective.

Federal law provides that states participating in the Medicaid program must establish Medicaid recovery procedures in accordance with federal standards. See 42 U.S.C. § 1396p; § 26-4-403.3, C.R.S.2001. As relevant here, 42 U.S.C. § 1396p(b)(3) provides: "The State agency shall establish procedures (in accordance with standards specified by the Secretary) under which the agency shall waive the application of this subsection ... if such application would work an undue hardship as determined on the basis of criteria established by the Secretary."

The federal standards for the states' Medicaid recovery programs are set out in § 3810 of the State Medicaid Manual promulgated by the Federal Health Care Financing Administration. Section 3810(D) of the State Medicaid Manual requires states to adopt procedures under which individuals who will be affected by recovery will have the right to apply for an undue hardship waiver. These procedures must specify the method for applying for a waiver, the hearing and appeal rights, and the time frames involved. Section 3810(G)(2) of the State Medicaid Manual provides:

You should give a specific notice to individuals affected by the proposed recovery whenever [recovery is sought]. The notice should be served on the executor or legally authorized representative of the individual's estate, or, if these are not known to the State, other survivors or heirs. The executor or legally authorized representative should be required to notify individuals who would be affected by the proposed recovery. In the situation where there is no executor or legally authorized representative, the State should notify the family or the heirs. The notice should include, at a minimum, the action the State intends to take, reason for the action, individual's right to a hearing (42 CFR Subpart E), method by which he/she may obtain a hearing, procedure for applying for a hardship waiver, and the amount to be recovered. An administrative hearing is not required if State law provides for court review as the next appellate step.

Under state law, the Department is authorized to establish an "estate recovery program only insofar as such program is in accordance with" the federal requirements. Section 26-4-403.3(2)(c), C.R.S.2001.

The Department attempted to give notice "to the individuals affected by the proposed recovery" by sending a Notice of Estate Claim to the attorney who represented the personal representative. The probate court found that notice to the personal representative was not sufficient compliance with the federal regulation requiring notice to the individuals affected. However, we agree with the Department that service of a notice in proper form on the personal representative would be sufficient to give notice to the individuals affected by the claim against the estate.

Section 3810(G)(2) of the State Medicaid Manual specifically provides that notice of the right to apply for a hardship waiver should be served on the representative of the decedent's estate with directions to notify the affected individuals of their right to seek a waiver. Notice that is reasonably calculated to apprise interested parties of the...