for all services provided, but it appears not to have updated its State Plan.
— But no recovery is permitted: • Until after the death of a surviv- ing spouse. Id., § 1396p(b)(2).
• If there is a surviving child under age 21 or who is blind or disabled. Id., § 1396p(b)(2)(A).
• For services provided when the beneficiary was under 55 years of age. 42 U.S.C. § 1396p(b)(1)(B).
• To the extent application of the recovery rule would work an “un- due hardship.” Id., § 1396p(b) (3).
Estate recovery is fundamentally
different from subrogation, broader in some ways, narrower in others. It is broader in that it applies to all assets, no matter how or when acquired, e.g., a home owned prior to eligibility or an inheritance acquired afterward, even after death. It is narrower in that there are specific limits on recovery designed to protect certain beneficiaries without their own independent showing of need (except for hardship) or satisfying Med- icaid eligibility requirements. There are a number of strategies avail-
able to limit or avoid recovery: — For individuals who are not expected to survive, assigning their cause of action, if possible, to, e.g., a spouse, adult children, or a revocable living trust may avoid recovery. Even if the plaintiff is at the time a Medicaid ben- eficiary, such an assignment should not result in a loss of benefits for long term or wai ver care (the only kind subject to the Medicaid anti-transfer rules) since the value of the cause of action at that point is speculative. Such assignments should be no less effective than those made to firms that advance funds in exchange for some portion or all of a future settlement or judgment.
— Where the estate is the plaintiff, dis- tributing its cause of action to a person enti t led to take it without recovery would avoid the problem presented by the lat ter’s death. That is, if the decedent’s spouse has survived but is not in good health, distributing the cause of action to the spouse while she is living avoids the adverse effect of loss of the defense if she passes away before settlement and distribu- tion. This would be effective if she is
not herself a Medicaid bene fi ciary, or in any event if the claim against her estate would be substantially less.
— Likewise the distribution to a child under age 21 or a disabled child. But if the disabled child him or herself needs Medicaid benefits, the cause of action is only protected by placing it in a special needs trust with payback for the disabled child.
— Although causation is not an issue, the other limits on recovery should be reviewed closely – were any benefits provided before age 55 and was the Medicaid program entitled to recover for these services at the time they were provided by having adequate State Plan provisions in place.
— Assignment of interests in an estate to the hardship claimant may preserve more of the recovery than could be done in any other way.
— Disclaimer by the recipient estate where one estate is paying to a second (usually a spouse) with Medicaid recovery exposure. The disclaimer is a transfer for Medicaid purposes, for which the only remedy is loss of future benefits – hardly significant for an estate.
Special Needs Trusts Special needs trusts stand in a some-
•• • •
44 Trial Reporter
what different relationship. They are of course used where a person with assets – from a settlement, an inheritance, or his or her own earnings and savings – needs to get or continue SSI and/or Medicaid eligibil ity. The SNT is funded after any Medicaid subrogation lien is satisfied ex- cept to the extent that recovery is waived or postponed by Medicaid. The SNT may be used where the person needing the benefit of an SNT is the plaintiff him or herself, or where he or she is the surviving child or other heir or legatee of a deceased beneficiary/plaintiff. In the latter case, the estate claim may be reduced or eliminated because of the disabled child or the hardship claim of the other heir or legatee. The utility of special needs trusts for
(Continued on page 46) Fall 2008
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