A controversial topic in the news in our state this year was Governor Snyder’s proposal to reduce the exemption of pensions and other retirement income from Michigan’s income tax. That topic was of great interest to seniors and other older people living on a fixed income who were understandably concerned about how such a change would affect their ability to make ends meet. In the end, the favorable income tax treatment afforded to some retirement income was reduced, especially for people born after 1952.
What got lost in the shuffler during the controversy over the income taxation of older people’s retirement income was the subject of estate recovery. At the same time, the administration was seeking to have an estate recovery program implemented in Michigan that may have a significant effect on seniors.
Estate recovery is the process by which states are required to recover expenses from the estates of individuals who receive Medicaid assistance in a Michigan nursing home or through the MI Choice Waiver program. On September 30, 2007, Michigan became the last state in the nation to adopt an estate recovery law. The estate recovery law allows the state to recover the costs paid for by the Medicaid program from assets owned by the Medicaid beneficiary at the beneficiary’s death. In most cases, the recovery would typically come from the only asset most Medicaid beneficiaries own at their deaths, the home.
The Granholm administration’s estate recovery plan was rejected by the federal government based on it being not expansive enough. The updated plan submitted by the Snyder administration was approved by the federal government on May 23, 2011. The state has started to issue correspondence to Medicaid beneficiaries regarding estate recovery.
Under the Estate Recovery program, the Michigan Department of Community Health (MDCH) will seek repayment of benefits received from Medicaid.
Who is Subject to Estate Recovery?
Estate Recovery only applies to Medicaid beneficiaries who are 55 years of age or older and have received long-term care services anytime on or after September 30, 2007.
What is an Estate?
An estate includes all property and other assets that pass from a deceased beneficiary to that person’s heirs through a probate proceeding.
How Does Estate Recovery Work?
When MDCH learns of a Medicaid beneficiary's death, a notice and other information will be sent to the estate representative or heirs. This notice will state that MDCH intends to file a claim and how much the claim will be. A questionnaire will be sent with the notice.
Once the questionnaire is returned, an undue hardship application may be requested. If no exemptions apply, then MDCH will file a claim against the estate.
Future posts will address additional details about Michigan's new estate recovery law.