When Does a Medicaid Recovery Claim Arise Under Alaskan Law?

Medicaid is a joint state and federal program to provide medical services to needy individuals.  The federal government pays most of the costs, with the states picking up the rest.  The federal government sets forth most of the rules for running the Medicaid program, but the states have some leeway in some areas to alter those rules, directly or in the implantation.  The eligibility rules are of supreme importance, as receiving free medical care from the government is a valuable entitlement.  Most people who work their whole lives never qualify for Medicaid, until they end up in a nursing home.  The cost of nursing homes tends to consume the bulk of a senior’s assets, after which Medicaid can be used to pay for the nursing home.

What is a Medicaid Recovery Claim?

Medicaid allows persons to keep some assets while still qualifying, but requires states to seek recovery of the cost of Medicaid from the estates of deceased Medicaid recipients.  Federal law allows Medicaid recipients to keep their home, but requires recovery from retained assets after death, from the estate of the deceased.

Alaska statute 47.07.055 allows the State of Alaska to seek reimbursement from the estates of deceased Medicaid recipients.  The federal government requires states to purse these estate claims.

What is the Deadline for Pursuing a Claim Under Alaskan Law?

The probate code of Alaska creates two classes of claims against estates of Alaskan decedents: those arising before the death of the decedent, and those arising at or after the death of the decedent.

For claims arising before the death of a decedent, a claim must be filed with the estate within four months of when notice to creditors is first filed.  For claims that arise at or after the death of the decedent, a claim must be filed within four months of when the claim arose.

In Estate of Abad, S-18380 (December 23, 2023), the Supreme Court of Alaska was faced with a Medicaid recovery claim for two estate, filed more than four months after the decedent died (which would make the claim untimely if the Medicaid claim arose at death), but within four months of the publication of the notice to creditors (which would make the claim timely if the Medicaid recovery claim arose at death).

Does a Medicaid Recovery Claim Arise Before Death or After Death?

The Medicaid services were all provided before the death of the decedent, suggesting that the State’s entitlement to be paid arose when the benefits were provided, even though the State could not collect until death.  Yet the State is not entitled to recover any of its claim until death, suggesting that the claim only arose then.  The Alaskan Supreme Court ruled in favor of the State.

The estate argument was as follows:

The estates emphasize the text of the estate recovery statute. They argue that because the State may bring a Medicaid estate recovery claim only “after an individual’s death” and only against the deceased individual’s estate,18 the State’s claim for reimbursement arises “at or after” the individual’s death.  The State instead emphasizes the text of the probate code. It points out that the probate code refers to when claims “arise,” rather than when they “accrue,” and recognizes that claims arising before death include those that are “due or to become due, absolute or contingent.”  Accordingly the State argues that a Medicaid estate recovery claim arises when the services are provided to the beneficiary, even if it is not enforceable and therefore remains contingent until the beneficiary’s death.

The State’s argument was as follows:

However, the legislature’s decision to explain that a claim may arise whether it is “due or to become due” and whether “absolute or contingent” favors the State’s position.26 These qualifiers suggest that the legislature meant that a claim might arise even before the claimant could enforce it. A “contingent claim” is, according to Black’s, “[o]ne which has not accrued and which is dependent on some future event that may never happen.”This language supports the conclusion that a claim may “arise” before it becomes enforceable. A Medicaid estate recovery claim, though contingent and unenforceable before the beneficiary’s death and the death of a surviving spouse, can therefore fall in the category of claims arising before death

The State argues that classifying Medicaid estate recovery claims as arising before death furthers the underlying purpose of estate recovery: “recovering from those with an ability to pay so as to make future funds available for those having the most need.”  Abad’s estate essentially argues that federal legislative intent is irrelevant because the Alaska legislature passed AS 47.07.055 to comply with federal requirements and access federal Medicaid funding — not necessarily to recover costs. But in order to access federal funding, Alaska needed a program that effectuates the federal act.

The Court ruled in favor of the State, as follows:

Interpreting Medicaid estate recovery claims as arising at or after death would undermine this legislative purpose by making it more expensive to pursue estate recovery. It is true, as the estates point out, that the State could prevent its claim from expiring four months after death by applying to be the personal representative within that time. But doing so would require the State to incur additional costs in administering the decedent’s estate. These additional costs would diminish the State’s net recovery, undermining the goal of recovering funds to be made available for other needy people. Classifying Medicaid estate recovery claims as arising at or after death would also subject the State to a risk of nonrecovery not faced by other creditors. One reason creditors whose claims arise before death are given four months from the date on which the estate publishes notice to creditors is that these creditors may not be aware that the person who owes them money has died.

The State concedes that administrative processes make it more likely than other creditors to learn of a Medicaid beneficiary’s death. But if Medicaid is not providing services to the beneficiary at the time of death, it may not immediately become aware of the death. Applying the deadline for claims arising at or after death risks precluding the State from pursuing legitimate claims when other creditors still can, with no clear policy justification.

Subjecting the State to these costs and risks would be directly at odds with the legislature’s decision to give Medicaid estate recovery claims priority over other creditors’ claims. The legislature  designated Medicaid estate recovery claims as “debts with preference.” An estate is required to pay such debts before “all other claims” — excluding estate administration, funeral expenses, and a few other debt categories. Creditors whose claims are based on obligations incurred by the decedent while alive (like doctors, lenders, or business partners) are subject to the deadline for claims arising before death: four months after notice to creditors is published, or three years after death if no notice is published.  Medicaid estate recovery claims are also based on obligations incurred by the decedent while alive. Making these claims subject to a different and sometimes more restrictive deadline (four months after death if the decedent had no surviving spouse or qualifying child) than other creditors’ claims would be inconsistent with the legislature’s decision to give Medicaid claims priority.

 

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