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Notes From the Mulligan Bench*

(*An appellate blog and other musings)


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Legend: ALR = Appellate Law Related; GLR = General Law Related; NLR = Not Law Related.

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Do You or Your Family Member Receive Medicaid Benefits? If So, You're Gonna Wanna Read This (GLR; ALR)

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Of the hundreds of judicial opinions I drafted as an appellate clerk, the civil case that stands out the most is Phillips v. McCarthy.  It involved the state of Ohio's right to seek repayment for Medicaid benefits from the assets of a person who has passed away.  To learn more about Ohio's Medicaid Estate Recovery Program, click here.  Why learn more about a program that sounds about as appealing as a root canal, you might ask?  Because if you or someone you hope to inherit from elects to receive Medicaid benefits, it may have a big impact on your estate plans.

In Phillips, a man named Lawrence Hesse conveyed his ownership interest in farmland to his three daughters.  A wise estate planning move at the time, Hesse retained a life estate in the residence on the property (meaning he no longer owned it but could live there until he died).  In the last year of this life, Hesse moved to a nursing home and received Medicaid benefits.  Once he died, the state of Ohio filed a lien against the property subject to Hesse's life estate.

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Let's back up for a moment.  It is helpful to know that, once a state agrees to accept money from the federal government to help fund its Medicaid program, it must comply with certain requirements imposed by the federal government.  One of these requirements is that the state must seek reimbursement from a deceased Medicaid recipient's estate for benefits correctly paid on their behalf during their lifetime.  Ohio is one such state bound by this requirement.

The law pertaining to Medicaid changes a lot.  Typically, the rules in effect at the time a person applies for benefits govern.  Prior to Phillips, Medicaid recovery received quite a boost when the Ohio General Assembly broadened the definition of a recoverable "estate" under Ohio law.  Unfortunately for Lawrence Hesse, the definition now includes nonprobate assets like life estates.  The Phillips court held that, "[f]or purposes of Medicaid recovery [  ], a recipient's life estate interest transcends physical death and is subject to posthumous encumbrance by state agency."

Beautifully written, Judge Ringland, beautifully written.

Beautifully written, Judge Ringland, beautifully written.

So what does this mean for you? Well, if you're not receiving Medicaid benefits from the state of Ohio, possibly not much.  You see, Medicaid programs are hybrid creatures consisting of federal and state law facets.  Each state has different laws, and some do not define "estate" quite so broadly as Ohio for Medicaid recovery purposes.  In fact, one commentator called Ohio's Medicaid Estate Recovery Program "one of the most aggressive collection efforts in the nation."  Browning & Meyer, H.B. 66 and Medicaid Recovery, 16 Ohio Prob. L.J. 42 (2005).

If you or someone you know does receive Ohio Medicaid benefits, you may need to adjust your estate planning in contemplation of Phillips.  Nonprobate assets used to be a viable estate planning tool for safeguarding assets from government reach.  For purposes of Medicaid estate recovery in Ohio, however, this is no longer the case.  As the Twelfth District Court of Appeals noted, "[i]n the absence of a probate estate, the [state] may recover against individuals to whom a deceased Medicaid recipient's assets have passed."  That's you and me, Gen Xers.

The most frustrating part of the Phillips case, in my opinion, was an oversight perpetrated while the case was in the trial court.  Arguably, the best argument for Hesse's daughters was offered for the first time on appeal.  They argued that the updated Medicaid recovery laws expanding the definition of an "estate" to encumber property interests that pre-dated the 2005 amendments were unconstitutional.  This may have been a viable argument.  But appellate law strictly prohibits raising new issues for the first time on appeal.  Therefore, the appeals court could not even address the argument.  (By the way, this is precisely why it is important to engage an attorney like me with experience in appellate practice before filing an appeal ... to avoid the vast sea of pitfalls!).

Medicaid is but one of many considerations in estate planning.  Be sure to consult an experienced attorney to implement the best estate plan for you and your loved ones!

Thanks for reading.

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