Ketchum Estate v. Dep't of Health & Human Servs., Docket No. 324741.

• Decision Date: 01 March 2016
• Docket Number: Docket No. 324741.
• Parties: KETCHUM ESTATE v. DEPARTMENT OF HEALTH AND HUMAN SERVICES.
• Court: Court of Appeal of Michigan — District of US

314 Mich.App. 485

887 N.W.2d 226

KETCHUM ESTATE

v.DEPARTMENT OF HEALTH AND HUMAN SERVICES.

Docket No. 324741.

Court of Appeals of Michigan.

Submitted Feb. 2, 2016, at Lansing.

Decided March 1, 2016, at 9:00 a.m.

Charlotte F. Shoup, PLC, Saint Johns (by Charlotte F. Shoup ), and Chalgian & Tripp Law Offices PLLC, Okemos (by David L. Shaltz ) for the estate of Wilma Frances Ketchum.

Bill Schuette, Attorney General, Aaron D. Lindstrom, Solicitor General, and Brian K. McLaughlin, Assistant Attorney General, for the Department of Health and Human Services.

Barron, Rosenberg, Mayoras & Mayoras, PC (by Amy E. Peterman ), for the Elder Law and Disability Rights Section of the State Bar of Michigan.

Before: BOONSTRA, P.J., and K.F. KELLY and MURRAY, JJ.

MURRAY, J.

This case involves the estate of Wilma Francis Ketchum's attempt to preclude the state Department of Health and Human Services (DHHS)¹ from recovering from the estate certain amounts that it paid to the decedent, Wilma Ketchum, for Medicaid long-term care benefits during her lifetime. After defendant DHHS initially denied plaintiff estate's request for a hardship waiver, plaintiff requested an administrative hearing that resulted in a proposal for a decision recommending the denial be upheld, which the DHHS's director ultimately followed. Plaintiff then filed an appeal in the circuit court, which overturned the DHHS's decision. We then granted the DHHS's application for leave to appeal, Ketchum Estate v. Dep't of Community Health, unpublished order of the Court of Appeals, entered April 10, 2015 (Docket No. 324741), limited to the issue raised in the application, MCR 7.205(E)(4). We now reverse.

I. BACKGROUND FACTS AND PROCEEDINGS

“In 1965, Congress enacted Title XIX of the Social Security Act, commonly known as the Medicaid act. See 42 U.S.C. 1396 et seq. This statute created a cooperative program in which the federal government reimburses state governments for a portion of the costs to provide medical assistance to low-income individuals.” Mackey v. Dep't of Human Servs., 289 Mich.App. 688, 693, 808 N.W.2d 484 (2010). In 1993, Congress required states to implement Medicaid estate recovery programs. 42 U.S.C. 1396p(b). “The term ‘estate recovery’ refers to the provisions of federal law requiring states to attempt to recover payments made to healthcare providers on behalf of a Medicaid recipient from the recipient's estate after his or her death.” Swanberg & Steward, Medicaid Estate Recovery Update: What You Need to Know Now, 93 Mich. B J 28, 28 (May 2014). In 2007, the Michigan Legislature passed 2007 PA 74, which added MCL 400.112g though MCL 400.112k to Michigan's Social Welfare Act, MCL 400.1 et seq. This legislation empowered defendant to “ establish and operate the Michigan medicaid estate recovery program to comply with” 42 U.S.C. 1396p.

MCL 400.112g(1). MCL 400.112g(5) required approval by the federal government before the estate recovery program would be implemented.

Specifically, MCL 400.112g(3) details what defendant had to seek federal approval for when it comes to a hardship exemption:

(3) The department of community health shall seek appropriate changes to the Michigan medicaid state plan and shall apply for any necessary waivers and approvals from the federal centers for medicare and medicaid services to implement the Michigan medicaid estate recovery program. The department of community health shall seek approval from the federal centers for medicare and medicaid regarding all of the following:

(a) Which medical services are subject to estate recovery under section 1917(b)(1)(B)(i ) and (ii ) of title XIX.

(b) Which recipients of medical assistance are subject to estate recovery under section 1917(a) and (b) of title XIX.

(c) Under what circumstances the program shall pursue recovery from the estates of spouses of recipients of medical assistance who are subject to estate recovery under section 1917(b)(2) of title XIX.

(d) What actions may be taken to obtain funds from the estates of recipients subject to recovery under section 1917 of title XIX, including notice and hearing procedures that may be pursued to contest actions taken under the Michigan medicaid estate recovery program.

(e) Under what circumstances the estates of medical assistance recipients will be exempt from the Michigan medicaid estate recovery program because of a hardship. At the time an individual enrolls in medicaid for long-term care services, the department of community health shall provide to the individual written materials explaining the process for applying for a waiver from estate recovery due to hardship. The department of community health shall develop a definition of hardship according to section 1917(b)(3) of title XIX that includes, but is not limited to, the following:

(i ) An exemption for the portion of the value of the medical assistance recipient's homestead that is equal to or less than 50% of the average price of a home in the county in which the medicaid recipient's homestead is located as of the date of the medical assistance recipient's death.

(ii ) An exemption for the portion of an estate that is the primary income-producing asset of survivors, including, but not limited to, a family farm or business.

(iii ) A rebuttable presumption that no hardship exists if the hardship resulted from estate planning methods under which assets were diverted in order to avoid estate recovery.

(f) The circumstances under which the department of community health may review requests for exemptions and provide exemptions from the Michigan medicaid estate recovery program for cases that do not meet the definition of hardship developed by the department of community health.

(g) Implementing the provisions of section 1396p(b)(3) of title XIX to ensure that the heirs of persons subject to the Michigan medicaid estate recovery program will not be unreasonably harmed by the provisions of this program.

(4) The department of community health shall not seek medicaid estate recovery if the costs of recovery exceed the amount of recovery available or if the recovery is not in the best economic interest of the state.

(5) The department of community health shall not implement a Michigan medicaid estate recovery program until approval by the federal government is obtained.

(6) The department of community health shall not recover assets from the home of a medical assistance recipient if 1 or more of the following individuals are lawfully residing in that home:

(a) The medical assistance recipient's spouse.

(b) The medical assistance recipient's child who is under the age of 21 years, or is blind or permanently and totally disabled as defined in section 1614 of the social security act, 42 U.S.C. 1382c.

(c) The medical assistance recipient's caretaker relative who was residing in the medical assistance recipient's home for a period of at least 2 years immediately before the date of the medical assistance recipient's admission to a medical institution and who establishes that he or she provided care that permitted the medical assistance recipient to reside at home rather than in an institution. As used in this subdivision, “caretaker relative” means any relation by blood, marriage, or adoption who is within the fifth degree of kinship to the recipient.

(d) The medical assistance recipient's sibling who has an equity interest in the medical assistance recipient's home and who was residing in the medical assistance recipient's home for a period of at least 1 year immediately before the date of the individual's admission to a medical institution. [Emphasis added.]

The current state plan, approved by the federal government, provides the following regarding the definition of undue hardship:

4. The State defines undue hardship as follows:

An undue hardship exists when (1) the estate subject to recovery is the primary income producing asset of the survivors (where such income is limited), including, but not limited to, a family farm or business; (2) the estate subject to recovery is a home of modest value or (3) the State's recovery of a decedent's estate would cause a survivor to become or remain eligible for Medicaid.

There is a presumption that no hardship exists if the hardship resulted from estate planning methods under which assets were diverted in order to avoid estate recovery. The agency will not grant an undue hardship waiver if the granting of such waiver results in the payment of claims to other creditors with a lower priority standing.

Home of modest value is defined as A home valued AT fifty percent (50%) or less of the average price of homes in the county where the homestead is located, as of the date of the beneficiary's death.

For individuals who apply for but do not meet the definition of undue hardship as found in MCL § 400.112g and provided above, the State will consider granting an exemption when a survivor who was residing in the deceased beneficiary's home continuously for at least two years immediately before the beneficiary's date of death, provided care that kept the deceased beneficiary out of an institution, even if the deceased beneficiary never entered an institution. This exemption will only be granted in circumstances where non-institutional long-term care services approved under the State Plan were provided and only after the means test has been satisfied.

The State is following its own definition of undue hardship in accordance with MCL § 400.112g(3)(e). When considering whether to grant an undue hardship waiver, a means test will be applied. West Virginia v. Thompson, 475 F.3d 204 [C.A.4, 2007]. An applicant will satisfy the means test only if both of the following are true:

total household income of the applicant is less than 200 percent of the poverty level for a household of the same size; and

total household resources of the applicant do not exceed $10,000.

Undue hardship waivers are temporary. Undue hardship waivers expire when the conditions which qualified an estate, or a portion of an

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