In re Estate of Barg, No. A05-2346.

• Citation: 752 N.W.2d 52
• Decision Date: 30 May 2008
• Docket Number: No. A05-2346.
• Parties: In re the ESTATE OF Francis E. BARG, a/k/a Francis Edward Barg.
• Court: Supreme Court of Minnesota (US)

752 N.W.2d 52

In re the ESTATE OF Francis E. BARG, a/k/a Francis Edward Barg.

No. A05-2346.

Supreme Court of Minnesota.

May 30, 2008.

Rehearing Denied July 21, 2008.

Mille Lacs County Attorney, Melissa M. Saterbak, Asst. Mille Lacs County Attorney, Milaca, MN, for appellant Mille Lacs County.

Thomas J. Meinz, Princeton, MN, for respondent Michael Barg.

Julian J. Zweber, St. Paul, MN, for amici curiae Elder Law Section of the Minnesota State Bar Association and National Senior Citizens Law Center.

Lori Swanson, Attorney General, Robin Christopher Vue-Benson, Asst. Attorney General, St. Paul, MN, for amicus curiae Minnesota Commissioner of Human Services.

Heard, considered, and decided by the court en banc.

OPINION

MEYER, Justice.

The Mille Lacs County Family Services and Welfare Department (County) filed a claim against the Estate of Francis E. Barg (Estate), seeking to recover Medicaid benefits correctly paid on behalf of his predeceased wife, Dolores Barg. The Estate partially allowed the claim, and disallowed the other part. The district court, concluding that Dolores Barg's interest in the couple's property was limited because she had conveyed it to her husband before her death, evaluated her interest as a life estate, and upheld the partial disallowance. The County appealed, arguing that it was entitled to recovery from the full value of the property. The court of appeals reversed and remanded, partially allowing the claim and evaluating Dolores Barg's interest in the property as a joint tenancy interest equivalent to one-half the value of the property. In re Estate of Barg, 722 N.W.2d 492, 497 (Minn.App.2006). We affirm in part and reverse in part.

Factual and Procedural Background.

The parties have stipulated to the facts in this case. Dolores J. Barg was born in 1926, married Francis E. Barg in 1948, and remained married to him until her death in 2004. In 1962 and 1967, in two separate transactions, the Bargs took title as joint tenants to real property in Princeton, Minnesota. Their home was located on this property. On October 24, 2001, Dolores Barg entered a nursing home in Mille Lacs County, at first paying the costs herself. In December 2001, she applied for long-term Medicaid benefits.¹

An asset assessment for Dolores Barg was completed in February 2002. The Bargs' marital assets including their homestead totaled $137,272.63.² Approval for long-term Medicaid benefits was given retroactive to December 1, 2001.

On February 27, 2002, Francis Barg executed his will, nominating the couple's son Michael F. Barg as personal representative, leaving his estate to his surviving descendants, and making no provision for his wife. Dolores Barg transferred her joint tenancy interest in the homestead property to Francis Barg on July 2, 2002, when her daughter and guardian of her estate, Barbara Anderson, executed a Guardian's Deed. Also in July 2002, Barbara Anderson deleted Dolores Barg's name from certificates of deposit the couple held jointly at Bremer Bank. There is no allegation that these actions were improper or fraudulent.

On January 1, 2004, Dolores Barg died, having received $108,413.53 in Medicaid benefits. At the time of her death, assets belonging to either Dolores or Francis Barg included three certificates of deposit, a checking account, and an IRA account, all in the name of Francis Barg alone; one certificate of deposit payable to the funeral home for Dolores Barg's funeral; two vehicles, together worth approximately $9,000; the homestead titled in Francis Barg's name, valued at $120,800; and miscellaneous household goods and furniture. All of these assets had been jointly held at some time during the couple's 55-year marriage.

On May 27, 2004, Francis Barg died, never having received Medicaid benefits. On July 30, 2004, the County filed a claim against Francis Barg's estate, seeking to recover $108,413.53, the full amount Dolores Barg had received in Medicaid benefits.

Michael Barg disallowed $44,533.53 of the claim, and allowed $63,880. The County petitioned for an allowance of the full claim, arguing that the entire value of the marital property, both the homestead and the certificates of deposit, was subject to its claim because Dolores Barg's joint tenancy interest gave her a right to use of the entire property. The district court concluded that Dolores Barg's interest in the property at the time of her death was equivalent to a life estate, and upheld the partial disallowance.

The County appealed. The court of appeals explained that, based on In re Estate of Gullberg, 652 N.W.2d 709 (Minn.App. 2002), the County's ability to recover against Francis Barg's estate was limited to Dolores's interest in marital or jointly owned property at the time of her death. Barg, 722 N.W.2d at 496. The court decided that property law principles should be applied to determine the nature of that interest and that under federal law and Gullberg, Dolores Barg retained a joint tenancy interest in the homestead at the time of her death. Id. at 497. The court valued that interest as an undivided one-half of the property's value, and remanded the case to the district court for a recalculation of the amount of the claim that was allowable. Id.

The County petitioned for review. The Estate opposed review but sought conditional cross-review on the issue of whether federal law permits the State to recover at all from a surviving spouse's estate. We granted review, as well as cross-review, and asked for briefing on whether the Estate had adequately preserved for review the issue of "whether the county may recover Medicaid benefits correctly paid on behalf of a predeceased spouse from the estate of a surviving spouse." We granted requests by the Minnesota Commissioner of Human Services to file an amicus curiae brief aligned with the County and to participate in oral argument.³ We also granted requests by the Elder Law Section of the Minnesota State Bar Association and the National Senior Citizens Law Center to file an amicus curiae brief aligned with the Estate. After oral argument, we asked the parties for supplementary briefing on the relationship of the 2003 and 2005 amendments of Minn.Stat. § 256B.15, subds. 1 and 1c-1k (2006), to the authority the County argues exists under Minn.Stat. § 256B.15, subd. 1a (2006) and Minn.Stat. § 256B.15, subd. 2 (2006), and how that relationship affects preemption analysis and the scope of recovery permissible under Minnesota law.

Statutory Framework.

Congress enacted Medicaid in 1965 as Title XIX of the Social Security Act to ensure medical care to individuals who do not have the resources to cover essential medical services. Martin ex rel. Hoff v. City of Rochester, 642 N.W.2d 1, 9 (Minn. 2002). Medicaid was intended to be the payor of last resort. Id. The program is jointly funded with the states as a "cooperative endeavor in which the Federal Government provides financial assistance to participating States to aid them in furnishing health care to needy persons." Harris v. McRae, 448 U.S. 297, 308, 100 S.Ct. 2671, 65 L.Ed.2d 784 (1980). Participating states enact legislation and rules, incorporate them into state medical assistance plans, and submit those plans to the U.S. Secretary of Health and Human Services for approval. 42 U.S.C. § 1396a(a)-(b) (2000 & Supp. III 2003). After this, the states can receive federal payments. 42 U.S.C. § 1396 (2000). Each state administers its own program within the federal requirements, and the Centers for Medicare and Medicaid Services (CMS)⁴ administer the program and approve state plans. Martin, 642 N.W.2d at 9. One of the requirements imposed on state plans is that they must "comply with the provisions of [42 U.S.C. § 1396p] with respect to liens, adjustments and recoveries of medical assistance correctly paid, transfers of assets, and treatment of certain trusts." 42 U.S.C. § 1396a(a)(18) (2000).

To receive Medicaid, a person must qualify as either "categorically" or "medically" needy. Estate of Atkinson v. Minn. Dep't of Human Servs., 564 N.W.2d 209, 210-11 (Minn.1997). A person is "categorically needy" if he is eligible for other specified federal assistance programs. Id. at 211. A person is "medically needy" if he incurs medical expenses that reduce his income to roughly the level of those who are categorically needy. Id. To qualify as medically needy a person may have income no higher than a defined threshold and may own assets of no more than a defined value. Id. If the assets of a Medicaid applicant and her spouse exceed the qualifying threshold, they must "spend down" their assets until they are at or below the qualifying threshold. Id. If a potential Medicaid recipient transfers assets below fair market value within a certain period of time before eligibility, the recipient is deemed ineligible for benefits for a time period mandated by statute. 42 U.S.C. § 1396p(c) (2000). This provision prevents people who are not needy from becoming eligible for Medicaid by transferring their assets away.

When determining the eligibility of a married person to receive Medicaid, states consider assets of both husband and wife as available to the spouse requesting benefits. 42 U.S.C. § 1396r-5(c) (2000). But there are several provisions in place to protect the community spouse⁵ from being impoverished as a result of the spend-down of assets needed to qualify the applicant for Medicaid. See Atkinson, 564 N.W.2d at 211; 42 U.S.C. § 1396r-5 (2000). The value of the couple's home is not included among assets considered eligible to pay for medical care. Id. § 1396r-5(c)(5); 42 U.S.C. § 1382b(a)(1) (2000). The community spouse of a Medicaid recipient is also entitled to an allowance of income and assets designated for his or her needs that is not considered available to pay for the recipient spouse's medical care. 42 U.S.C. § 1396r-5(d). Furthermore, the recipient spouse has the right to transfer assets, including an interest...