by Meredith A. Fine
In In the Matter of the Estate of Kendall, 486 Mass. 522 (2020) (“Kendall”), the Supreme Judicial Court (“’SJC”) held that MassHealth has three years from a beneficiary’s death to file its claims for reimbursement on estates or the claim is barred.
MassHealth filed a claim against the estate of Jacqueline Ann Kendall more than three years after Ms. Kendall died intestate on August 7, 2014. At the time of her death, Ms. Kendall owned a one half interest in a house and had received $104,738.23 in MassHealth benefits, which payments were subject to recovery by MassHealth from her estate.
More than three years after her death, on May 24, 2018, an heir filed a Petition for Late and Limited Testacy in the Probate & Family Court, seeking appointment as the personal representative. As required by statute, a copy of the probate petition was mailed to the Division of Medical Assistance (the “Division”), the state Medicaid agency that administers the MassHealth program. MassHealth notified counsel for the probate petitioner it would file a notice of claim in the estate. The estate rejected the claim as untimely.
MassHealth filed objections asserting its rights to present and recover claims under the Massachusetts Uniform Probate Code, G. L. c. 190B (the “Probate Code”), even after the three-year bar on creditor claims established under § 3-108 (4), and the one-year creditor filing deadline established under § 3-803 (a). MassHealth also filed a petition for formal probate requesting the appointment of a public administrator as the personal representative so that the MassHealth claim could be paid.
In April 2019, after a judge of the Probate and Family Court certified a series of questions to the Massachusetts Appeals Court, the SJC transferred the case on its own initiative. The National Academy of Elder Law Attorneys, joined by the Real Estate Bar Association, filed an amicus brief in support of the position taken by Ms. Kendall’s estate.
The SJC’s Decision
Justice Scott L. Kafker, writing for a unanimous Court, held that the Probate Code § 3-108 (4) prohibits the filing of any claims other than expenses of administration in estates after three years from the date of death, and also prohibits the personal representative from paying such late presented claims. In its 21-page decision, the SJC first reviewed the statutory background of the Probate Code and the MassHealth Estate Recovery program and determined that although the Legislature provided MassHealth with various advantages over other creditors, it did not exempt MassHealth from the three-year “ultimate time limit” on the filing and payment of all creditors’ claims against estates established in § 3- 108 of the Probate Code. Kendall, 486 Mass. at 523.
‘Plain and clear language’
In explicating the statutory scheme under well-established principles of statutory construction, the SJC’s 21-page decision emphasized that the three-year time limit is critical to the Commonwealth’s longstanding policy of “promoting a speedy and efficient system for liquidating the estate of the decedent and making distribution to the decedent’s successors” that is embodied in G. L. c. 190B, § 1-102 (b) (3). Kendall, 486 Mass. at 526.
The Court reasoned that the Legislature knew how to exempt MassHealth from requirements that applied to other creditors, but specifically did not include an exemption for the Division from the three-year limit on creditors’ claims set forth in § 3-108 of the Probate Code which “functions essentially as a statute of repose” and has “the effect of placing an ‘absolute time limit’ on liability.” Kendall, 486 Mass. at 528 (“Where the Legislature intended for differential treatment for MassHealth in the probate process, it did so expressly.”).
The Court continued, “The three-year ultimate time limit is a critical provision ensuring the orderly settlement and liquidation of estates in a relatively expeditious manner. We conclude that if the Legislature intended to create an exception for MassHealth to this ultimate time limit, it would have done so expressly in that particular provision.” Id. Indeed, the language of the Probate Code establishing the ultimate time limit and limiting the powers of the personal representatives in late and limited testacy is “plain and clear.” Id.
The Court gave significance to the fact that creditors, including MassHealth, have the power to open estates in order to preserve claims, “provided that the petition for an appointment of a personal representative was filed prior to the expiration of the ‘ultimate time limit’ of § 3-108.” Kendall, 486 Mass. At 531. However, the Court rejected MassHealth’s argument that limiting the time to file claims would violate federal Medicaid rules. “Nothing in the Federal law requires, as MassHealth claims, that MassHealth go beyond the bounds of State law to recover the maximum possible extent of its benefits.” Id. at 533 (citing to Daley v. Secretary of the Executive Office of Health & Human Servs., 477 Mass. 188, 204 n. 15 (2017), describing how state has limited right to recover probate assets consistent with federal Medicaid law).
The Court also acknowledged but dismissed MassHealth’s argument about unfairly shifting an undue burden to the Division to track the status and receipt of notice of the deaths of beneficiaries who are not in long-term care facilities. The Court observed that most estates will be settled quickly, and that MassHealth with due diligence should be aware when benefits to its clients cease and can cross-match this information with public death records or undertake direct inquiry to ascertain a beneficiary’s status as MassHealth’s Estate Recovery Unit already takes steps to do.
In addressing MassHealth’s argument that heirs would wait out the three-year period to avoid reimbursing MassHealth, the Court pointed out that the Legislature had already examined that possibility and deemed the scenario unlikely and the associated risk low. “The Legislature’s risk assessment and overall cost-benefit analysis is entitled to respect.” Id. (quoting from official comment to G. L. c. 190B § 3-803).
The SJC has answered: The Massachusetts Uniform Probate Code is clear that more than three years from the date of death, a personal representative has the power only to sign title documents and pay estate administration expenses, and MassHealth is not exempt from the three-year “ultimate time limit” for bringing creditors’ claims against estates. Indeed, if MassHealth’s arguments prevailed, estates would never close. And, personal representatives of estates would never be freed from their duties and personal liability, and the estate’s interest in assets, such as real estate, would never be fully released. In Kendall, the Court affirmed that the obligation of timely filing estate claims rests squarely on the shoulders of the creditor, in this case MassHealth, as the Legislature intended. At some point, estates must close.
Meredith A. Fine, Esq., has offices in Gloucester and Ipswich, where her practice focuses on real estate, litigation, and business counseling. She can be reached through her website, capeannlegal.com. Winning the Kendall case was the highlight of her career to date but not as exciting as the NY Mets winning the World Series in 1969.
by Joseph Belza, Ingrid Schroffner
and Matthew Taylor
Since 1993, Federal Law has required state Medicaid agencies to seek reimbursement from enrollees whenever possible.[i] The goal is to make the federal program more sustainable and to allow Medicaid to provide coverage to more low-income individuals and families. One mechanism for Medicaid reimbursement is estate recovery, a process by which state Medicaid agencies—here, the Division of Medical Assistance (DMA)—recover payments made to program members from their probate estate, if any.
Estate recovery sometimes comes as a shock to affected families and has been negatively characterized by the public unfamiliar with the process with inaccurate images—e.g., of a greedy government taking houses.[ii] This article explains the estate recovery process as it currently operates under the DMA’s Medicaid program, commonly known as MassHealth.
Whom does estate recovery affect?
The scope of estate recovery varies by jurisdiction. Each state agency sets its own criteria to define which members are affected and what types of assistance payments may be recovered. In Massachusetts, for MassHealth members dying on or after April 1, 1995, estate recovery does not apply except to medical assistance paid for (1) any services for persons age 65 and over when he or she received the assistance, (2) only services provided on or after October 1, 1993 for persons age 55 and over when he or she received the assistance, and (3) only services provided on or after March 23, 1991 for inpatients in a nursing facility or other medical institution regardless of age.[iii]
It is important to note that, unlike some other states, DMA currently recovers only from the MassHealth member’s probate estate.[iv] MassHealth does not seek reimbursement from families of the deceased member. If the probate assets are less than the amount owed to MassHealth, then the remainder of the claim is left unsatisfied. Moreover, as detailed below, there are important exceptions and waivers which limit or preclude estate recovery.
How does estate recovery work?
The estate recovery process begins after the death of a MassHealth member. M.G.L. c. 118E, §32(a) requires a copy of the probate petition and death certificate to be sent to MassHealth’s Estate Recovery Unit (ERU) by certified mail. The ERU also conducts regular cross-matches of new petitions with the probate courts. If a petitioner fails to send copies of the petition and death certificate to the ERU, “any person receiving a distribution of assets from the decedent’s estate [is] liable to [MassHealth] to the extent of such distribution” for which MassHealth is authorized to recover.[v]
After notification, the ERU checks the decedent’s records to determine if MassHealth has a “claim” for reimbursement in the probate proceedings. The ERU generates a medical billing printout calculating the total recoverable MassHealth payments and files a Notice of Claim for that amount, along with notice of the circumstances qualifying for deferral and waiver of recovery. The personal representative may request a copy of the medical billing printout.
The Notice of Claim presents the personal representative with three options: (1) pay the claim, (2) contest the claim, or (3) apply for an exception.[vi] Typically, the estate simply reimburses MassHealth in exchange for a Release of Claim. To contest a claim for reimbursement, the personal representative must reply in writing within 60 days of the Notice of Claim with sufficient documentation to support a finding that MassHealth’s claim is invalid or that an exception applies. Failure to respond within the 60 days statutory window is deemed an admission of the validity of the claim and that no exception exists.[vii] If the personal representative disallows the MassHealth claim, the ERU refers the case to the legal department of the Executive Office of Health and Human Services (EOHHS), which may file suit to enforce the claim.
For MassHealth estate recovery claims deemed valid, [viii] ERU works with the personal representative to collect payment. On a case-by-case basis, the ERU may accept alternative payment solutions, such as a promissory note secured by a mortgage deed. If the ERU is unable to resolve a claim or a personal representative is non-responsive, the legal division of EOHHS may seek a judgment and execution, which may be levied and suspended against any probate property of the deceased member by filing a Petition to Compel Payment in the probate court.[ix]
MassHealth will not enforce an otherwise valid claim in certain situations: if the estate qualifies for (1) a deferral, (2) a hardship waiver, or (3) a long-term care insurance exception. A deferral temporarily postpones collection of the claim during the lifetime of a surviving spouse, during the lifetime of any surviving child who is blind or permanently and totally disabled, or, for any surviving minor child who is not blind or permanently and totally disabled, until the child reaches the age of majority.[x] Further, MassHealth is required to grant waivers if estate recovery would impose an undue financial hardship on an individual who has survived the decedent.[xi] A waiver can be a permanent exemption. Where the probate asset includes real property, waivers are only available when a sale of real property would be required to satisfy the claim, and an individual was using that property as his or her principal place of residence at the time of the decedent’s death.[xii] Specifically, MassHealth repayment cannot be required for assistance provided on or after April 1, 1995 “while any of the following relatives lawfully resides in the property: (1) a sibling who had been residing in the property for at least one year immediately prior to the individual being admitted to a nursing facility or other medical institution; or (2) a child who (i) had been residing in the property for at least two years immediately prior to the parent being admitted to a nursing facility or other medical institution; and (ii) establishes to the satisfaction of the division that he provided care which permitted the parent to reside at home during that two year period rather than in an institution; and (iii) has lawfully resided in the property on a continuous basis while the parent has been in the medical institution.”[xiii] Additionally, that individual must meet several criteria. He or she must have lived in the decedent’s property for at least one year prior to when the decedent’s eligibility for MassHealth began, and he or she must continue to live there when MassHealth files its Notice of Claim. Moreover, he or she must have inherited or received an interest in that property. This individual becomes ineligible for the waiver if other devisees or heirs are forcing him or her to sell the property. Finally, the individual must be financially eligible to qualify; the gross annual income of his or her family group must be at or below 133 percent of the applicable federal poverty line. If granted, a hardship waiver is not immediately permanent. Rather, it exists conditionally for the first two years. If all of the above criteria are still met when MassHealth reviews the situation at the end of the conditional period, then the waiver becomes permanent.
Finally, MassHealth will not recover under certain conditions if the deceased member had a long-term care insurance policy that, when purchased, met minimum coverage requirements described in its regulations.[xiv] In order to qualify for this exception, the deceased individual must have (1) been institutionalized; (2) notified MassHealth that he or she had no intention of returning home; and (3) on the date of his or her or admission to a long-term-care institution, had long term-care insurance, that, when purchased, met the minimum coverage requirements of 211 CMR 65.00. The requirement that the member must have notified MassHealth that he or she had no intent of returning home in order for this estate recovery exception to apply has been strictly construed.[xv]
As the Massachusetts Supreme Judicial Court has noted, “Medicaid is, and always has been, a program to provide basic health coverage to people who do not have sufficient income or resources to provide for themselves.” Cohen v. Commissioner of the Division of Medical Assistance, 423 Mass. 399, 403-404 (1996), quoting from H.R.Rep. No. 265, 99th Cong., 1st Sess., pt. 1, at 72 (1985). Estate recovery is simply another facet of the federal law designed to ensure that the Medicaid program is able to continue to fulfill its mandate of serving those for whom it was intended.
[i] 42 U.S.C. § 1396p(b)(1)(B), inserted by Pub. L. No. 103-66, Omnibus Budget Reconciliation Act of 1993 (approved August 10, 1993).
[iii] M.G.L. c. 118E, §31(b). See M.G.L. c. 118E, §31(a) for estate recovery applicable to members who died prior to April 1, 1995.
[iv] M.G.L. c. 118E, §31(b). See M.G.L. c. 118E, §31(a) for estate recovery applicable to members who died prior to April 1, 1995.
[v] M.G.L. c. 118E, §32(a).
[vi] The exceptions are specifically delineated by statute and regulation. M.G.L. c. 118E, §§ 31, 32(d) and 33; 130 CMR 501.013(B) and (C), 130 CMR 515.011(B), (C) and (D), 130 CMR 515.014.
[vii] M.G.L. c. 118E, §32(d). Another important deadline to note: a 12% interest begins to accrue on the claim amount 4 months and 60 days after the appointment of the personal representative. M.G.L. c. 118E, §32(g).
[viii] Either because (1) the personal representative admitted to its validity, or (2) the personal representative did not contest the Notice of Claim or submit a request for and sufficient documentation to satisfy the requirements for an exception.
[ix] See M.G.L. c. 118E §32(g).
[x] M.G.L. c. 118E, §31(b). See 130 CMR 501.013(B), 130 CMR 515.011(C).
[xi] Id. (M.G.L. c. 118E, §31(b)).
[xii] 130 CMR 501.013 (C).
[xiii] M.G.L. c. 118E, §31(d).
[xiv] M.G.L. c. 118E, §32; 130 CMR 515.014, 130 CMR 515.011(B).
[xv] See Executive Office of Health and Human Services v. Heinmets, SU2010-2431D (Massachusetts Superior Court) July 15, 2011 (Cratsley, J.), aff’d, 83 Mass. App. Ct. 1118 (2013).
Joseph Belza is a second year J.D. candidate at Boston College Law School and staff writer on the Boston College Environmental Affairs Law Review. He was a 2015 legal intern at the Massachusetts Executive Office of Health and Human Services.
Ingrid Schroffner, an Assistant General Counsel at the Executive Office of Health and Human Services, is the lead attorney there for MassHealth Estate Recovery.
Matthew Taylor is a second year J.D. candidate at Boston College Law School and staff writer on the Uniform Commercial Code Reporter Digest-Journal. He was a 2015 legal intern at the Massachusetts Executive Office of Health and Human Services.