A case with significance for Oregon Medicaid recipients and their families is headed to the Oregon Supreme Court. The dispute centers on administrative rules issued by the State of Oregon’s Department of Human Services (DHS) in 2008. The rules enlarged the State’s ability to seek reimbursement on account of benefits paid to Medicaid recipients. Ultimately, the rules were challenged in court; this past November, the court of appeals ruled against DHS and the rules were invalidated.  DHS has appealed that decision to the Oregon Supreme Court, which has agreed to consider the matter. It will be a number of months before any final decision is issued. In order to understand the case’s impact, a brief review of Medicaid is in order.
Medicaid is a federal program providing financial assistance for eligible recipients (aged, blind and disabled persons) in need of certain medical care, such as long-term skilled nursing care. The program, although funded jointly by the federal and state governments, is run by the individual states. Individual states are permitted to design and implement their own Medicaid plan, so long as the plan complies with the federal statutes and regulations governing Medicaid. Here in Oregon, DHS is the administrative agency responsible for managing the Medicaid program.
Applicants for Medicaid must meet certain basic eligibility requirements, including limits as to their monthly income and available financial resources. In Oregon, an applicant for Medicaid is limited to having not more than $2,000.00 in “countable” financial assets; i.e., checking and savings accounts, stocks and bonds, certificates of deposit, retirement accounts, the cash value of any life insurance policies and real estate (other than a personal residence). A Medicaid applicant with countable resources in excess of that amount must “spend down” his or her assets in order to become eligible for Medicaid. If the Medicaid applicant is married, assets which are jointly titled in the name of the Medicaid applicant and his or her spouse are considered to belong in whole to the Medicaid applicant. The applicant must then unload sufficient assets to qualify for Medicaid, but in a way that will not deprive his or her spouse of needed financial resources.
Federal and state “spousal impoverishment” laws allow the spouse of the Medicaid recipient (referred to as the “Community Spouse”) to retain a specific dollar amount of assets (the Community Spouse Resource Allowance, or CSRA) without jeopardizing the Medicaid eligibility of his or her spouse. The CSRA is intended to assure that the Community Spouse has adequate resources available while his or her spouse is in a nursing facility. Essentially, the CSRA limits a portion of the couple’s joint assets from having to be spent down in order to make one of them eligible for Medicaid. In order to qualify for Medicaid, without impoverishing his or her spouse, the Medicaid recipient is permitted to transfer the CSRA amount of assets to the Community Spouse.
With the above as background, the dispute headed towards the Oregon Supreme Court involves DHS’ attempts to recover Medicaid benefits which were rightfully paid to a recipient, in the period after that recipient has died. The federal regulations which govern Medicaid require that states pursue recovery from the estate of a deceased Medicaid recipient whenever possible. Stated simply, what the state pays out in Medicaid benefits, it is required to seek reimbursement of, after the Medicaid recipient has passed away. DHS’ estate recovery efforts will include claims against assets in the deceased’s probate estate, and against assets which were owned by the recipient at the time of his or her death, but then conveyed to a survivor or heir by any one of several defined methods, such as a living trust or joint tenancy, or, in the words of the applicable statute, by some “other arrangement.”
Precisely what constitutes this “other arrangement” was the focus of the court case involving the estate recovery rules DHS issued in 2008. In its view, DHS was legally entitled to pursue estate recovery efforts against assets transferred by the Medicaid recipient during the five (5) year period prior to his or her first receiving Medicaid. DHS asserted that the pre-Medicaid transfers were an “other arrangement” so as to constitute an available asset against which estate recovery could be pursued. The court rejected DHS’ argument, ruling that estate recovery is limited to real and personal property in which the Medicaid recipient held an ownership interest at the time of his or her death. The result was that the estate recovery rules issued by DHS in 2008 were thrown out.
We will watch, with interest, how this case is ultimately decided by our state’s highest court. The decision will impact the extent to which DHS can claim entitlement to assets formerly owned by Medicaid recipients. In the meantime, we welcome your questions regarding Medicaid planning.
© 5/19/2015 Charles A. Ford of Hunt & Associates, P.C. All rights reserved.
 Nay v. Dept of Human Services, 267 Or App 240 (2014).