On Friday, May 1, 2009, Katherine Pearson (Professor of Law, Penn State Dickinson School of Law), as Chair of the Pennsylvania Bar Association’s Elder Law Section, sent an email message alerting section members that, “[a]s part of a plan to implement Governor Rendell’s proposed budget for the Commonwealth, legislation was introduced on April 28 that would significantly affect Medical Assistance (MA) Estate Recovery.”
This legislative proposal would create far-reaching changes in the law — not only for Medicaid recovery, but also for estate planning, real estate ownership & transfer, creditors’ rights & lien priority, and fiduciary liability in estate & trust administrations. I hope that it is not reviewed lightly or superficially given these potential effects.
With her permission, I repost her alert.
In the key bill, House Bill 1351, at Section 1412 [See: Footnote 1, below], the proposal expands the ability of the Commonwealth to seek reimbursement of MA monies paid to/for a person 55 or older by giving the Commonwealth the right to make a claim against all real property, personal property and other assets in the deceased’s probate estate, including any such property in which the deceased had “any legal title or interest at the time of death . . . including such assets conveyed to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy by the entireties, tenancy in common, survivorship, life estate, living trust or other arrangement.
Section 1412 further creates a lien on the property, that follows the property into any surviving party’s hands, and establishes the Commonwealth’s priority rights of repayment, with the potential for penalties on executors or administrators who fail to protect the lien.
Section 1412, subsection 10, seeks to restrict attorneys fees payable from an estate that is subject to the Commonwealth’s lien.
HB 1351 also has provisions that affect calculations of eligibility for Medical Assistance because of payment of prior or “other” medical expenses, and that create new definitions.
This bill is likely to come to the floor of both houses very soon as part of the Governor’s Omnibus Budget proposal, and will certainly be voted on before the end of the session, June 30.
* * *
This is the language of Sections 1412 and 1417 of the bill (HB 1351):
Section 1412. Repayment from Estates.—
(a) Notwithstanding any other provision of this act or any other law, the department shall establish and implement an estate recovery program to recover medical assistance paid with respect to individuals who were fifty-five years of age or older at the time that assistance was received. Under this program, the department shall recover from the estate of an individual the amount of medical assistance paid for all services provided to the individual. For purposes of this section, an individual’s estate shall include all of the following:
(1) All real and personal property and other assets subject to inclusion within the deceased individual’s estate under 20 Pa.C.S. (relating to decedents, estates and fiduciaries).
(2) Any other real and personal property and other assets in which the deceased individual had any legal title or interest at the time of death, to the extent of such interest, including such assets conveyed to a survivor, heir, or assign, of the deceased individual through joint tenancy, tenancy by the entireties, tenancy in common, survivorship, life estate, living trust or other arrangement.
(a.1) Liability for debt shall be as follows:
(1) If property subject to the department’s claim is transferred without the department’s claim being satisfied, then the executor or administrator transferring such property, if there is one, shall become liable to pay the department’s claim.
(2) If property subject to the department’s claim is transferred to the extent that the transfer is made without valuable and adequate consideration in money or something worth money at the time of the transfer and without the department’s claim being satisfied, then the executor or administrator transferring such property, if there is one, and the person receiving such property shall become liable to pay the department’s claim.
(3) If property subject to the department’s claim is held by a person, including a cotenant, remainderman, or trustee, then the person holding such property is liable to pay the department’s claim.
(b) The executor or administrator of the estate of a decedent who attained fifty-five years of age shall ascertain whether the decedent received medical assistance during the five years preceding death and, if so, shall give notice to the department to secure from the department a statement of the department’s claim for medical assistance consistent with 20 Pa.C.S. § 3392(3) and (6) (relating to classification and order of payment). The department must submit its claim to the executor or administrator within forty-five days of receipt of notice or the claim shall be forfeited.
(c) This section shall apply notwithstanding the provisions of section 447.
(d) The department may administratively assess liability under this section. Any final order of the department determining liability under this section:
(1) Shall be a lien on the real and personal property of the individual in the manner provided by section 1401 of the act of April 9, 1929 (P.L.343, No.176), known as “The Fiscal Code.”
(2) May be entered by the department in the manner provided by section 1404 of “The Fiscal Code.”
(3) Shall continue and retain priority in the manner provided in section 1404.1 of “The Fiscal Code.”
Note that the legislation places personal liability on any person, including a trustee, holding any interest that the Department of Welfare determines is subject to estate recovery. “If property subject to the department’s claim is held by a person, including a cotenant, remainderman, or trustee, then the person holding such property is liable to pay the department’s claim.” Under the legislation this liability is set by the Department of Public Welfare administratively rather than by a court. This could allow the Department to effectively limit the payment of personal representative, trustee, and attorneys fees payable from a decedent’s estate or trust.
Another section of the Bill also attempts to limit attorneys fees.
Section 1417. Limit on claim reduction.
In any action, claim, or settlement where the department is required to reduce its claim, on account of attorney fees incurred by a recipient in obtaining a recovery of cash or medical assistance for the department, the reduction shall not exceed twenty-five percent of the department’s recovery.
Neil E. Hendershot is a practicing & teaching lawyer in Harrisburg, Pennsylvania who works daily in the legal areas covered by the PA EE&F Law Blog.