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ALTCS Estate Recovery Methods and Exemptions

While federal law requires states to recover the costs paid on behalf of a Medicaid beneficiary after he or she has passed away, exemptions apply in certain cases.

More: Frazer Ryan's Long-Term Care Legal Services and Related Articles

ALTCS attorney Marsha Goodman  

Marsha Goodman

 

Federal and state laws require that, when an individual becomes eligible for benefits through the Arizona Long Term Care System (ALTCS), the Arizona Health Care Cost Containment System (AHCCCS) must provide a written notice describing the rights of the State, upon the individual’s death, to recover for costs paid. This Notice is usually included with the forms that an individual must complete to apply for benefits.

The federal government requires all states to implement a system for recovering the costs paid on behalf of a Medicaid beneficiary once he or she has passed away. Arizona has enacted provisions that create two different ways for AHCCCS to recover the costs that have been paid.

RECOVERY METHODS

The first method is to seek recovery from the estate of a deceased ALTCS beneficiary. Arizona defines “estate” in the narrowest possible terms, so AHCCCS is limited to recovering the amounts paid only from property subject to either formal probate, or the Small Estate Affidavit. A home that was solely owned by an ALTCS beneficiary or owned jointly without right of survivorship is subject to estate recovery. However, a home that passes by right of survivorship to a co-owner with whom the deceased beneficiary had owned with right of survivorship, or a home that passes through a beneficiary deed, is not subject to estate recovery. Similarly, joint accounts with rights of survivorship, payable-on-death accounts, and contracts with beneficiary designations, such as annuities, brokerage accounts or life insurance policies, are not subject to estate recovery.

To the extent that there are assets subject to estate recovery, the method for the State to recover expenses paid under the probate definition is to file a claim, just like any other creditor, against the estate of the decedent. The AHCCCS claim begins to accrue on the first day of the month in which the ALTCS beneficiary begins to receive ALTCS benefits and is 55 or older. If the beneficiary is not yet 55, the claim accrues beginning with the month in which the beneficiary turns 55.

The second method for recovering costs paid on behalf of an ALTCS beneficiary is to place a lien during the beneficiary’s lifetime on real property owned by the ALTCS beneficiary after the beneficiary becomes permanently institutionalized at a nursing home, mental health hospital or other long-term care medical facility. The purpose of the lien is to recover the cost of benefits provided upon the beneficiary’s death or upon a sale or transfer of an interest in the property. The lien is not enforced until one of these events occurs. This sort of lien, often called a “TEFRA lien”[1] will not be placed until the recipient is residing in the type of facility listed above. A group home, memory care, or assisted living facility is not considered a nursing home, so a TEFRA lien would not be placed.

EXEMPTIONS

AHCCCS may recognize an exemptions to the recovery requirement when the deceased ALTCS beneficiary is survived by a spouse, a child under age 21, or a child of any age who meets Social Security Administration disability criteria and is blind or disabled, especially if those parties live in the home.

Another situation where AHCCCS may waive recovery is when there is adequate proof that recovery will impose an undue hardship on the decedent’s heirs. AHCCCS specifies in their policy manual the circumstances under which they will consider waiving recovery. An argument that estate recovery would result in undue hardship should be made in writing, and may need to include financial information.

SEEKING LEGAL GUIDANCE

As you can see, ALTCS recovery and lien rules are complicated and advice from an attorney who frequently works in this area of the law is highly recommended. At Frazer Ryan, we work hard to say up to date on the law and on methods to ensure that all eligible individuals are properly prepared to qualify for ALTCS. We encourage you to give us a call to discuss your particular situation with us.

 

[1] Tax Equity and Fiscal Responsibility Act