Oregon High Court to Rule on DHS Rule Expanding Medicaid Recovery Efforts

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
Oregons Department of Human Services (DHS) in 2008. The rules enlarged the States 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. 1 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 cases 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 couples 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
1 Nay v. Dept of Human Services, 267 Or App 240 (2014).

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 deceaseds 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 states 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.