Medicaid Estate Recovery is Required

At common law there is no obligation to reimburse the government for financial support and services received while impoverished. When the Medicaid Act was enacted, Congress gave States the option of pursuing estate recovery and, until 1993, estate recovery remained optional. Now, within the parameters of the federal rule, States must pursue estate recovery (1) against the “estate” of Medicaid recipients; (2) who received Medicaid through specified classes of assistance; (3) and who are not survived by specified persons. They are not, however, required to pursue recovery beyond the statutory minimum. When State officials go beyond the federal minimums, they are politically accountable for their actions. West Virginia v. United States HHS, 289 F.3d 281, 296 (4th Cir. 2002).

In West Virginia v. United States HHS, the State of West Virginia challenged the estate recovery provisions, arguing that requiring States to pursue estate recovery is coercive and, therefore, violates the Tenth Amendment to the U.S. Constitution. That argument was rejected, primarily because it was a facial challenge launched by the State and because CMS had threatened to withhold, but had not actually withheld, federal dollars. The court reserved judgment concerning whether the estate recovery provisions might be coercive if CMS actually withheld federal funds for failure to implement an estate recovery program. The court seemed to imply that if the State chose to reject estate recovery, then the federal government could withhold those dollars that would have been recovered through the program, but that additional penalties might be coercive.

Subsequent to the original litigation, in West Virginia v. Thompson, 475 F.3d 204, 207 (4th Cir. 2007), the State proposed a $50,000 exemption from estate recovery for all homestead property. West Virginia’s exemption was opposed by the Centers for Medicare and Medicaid Services (CMS). West Virginia then modified its proposal to exempt from recovery homes valued below the statewide arithmetic mean value, which would cause approximately one-half of all West Virginia homes to be exempt from estate recovery. CMS disapproved West Virginia’s proposal, finding that it would negate the intent of the estate recovery program. The State argued in Court that CMS exceeded its authority by rejecting the State proposal. While the Court agreed that CMS cannot reject a State Plan for failing to comply with a requirement that has no statutory basis, Section 1396p(b)(3) grants the Secretary express authority to establish criteria governing hardship waivers. “An analysis of the Medicaid statute as a whole only bolsters our conclusion that the Secretary and his delegates have been granted at least the usual leeway to develop criteria through adjudication.” The court found that CMS was not arbitrary and capricious in denying approval of the plan because CMS had requested data on the cost that West Virginia incurred for estate recoveries, the market value of homes in West Virginia, and the average value of estates to which exemptions would apply. Such data would, theoretically allow CMS and the State to craft an exemption level that was not so overbroad that it unraveled the estate recovery program.