Department  of  Health and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
MEDICAID  ESTATE  RECOVERY 
PROGRAMS  OFFICE  OF  INSPECTOR  GENERAL 
The  mission  of the  Office of Inspector  General  (OIG),  as mandated  by Public  Law 95-452, as 
amended,  is to protect  the integrity  of the Department  of Health  and Human  Services (HHS) 
programs  as well as the  health  and welfare  of beneficiaries  served by those  programs.  This 
statutory  mission  is carried  out  through  a nationwide  network  of audits,  investigations,  and 
inspections  conducted  by three  OIG  operating  components:  the  Office of Audit  Services, the 
Office of Investigations,  and the  Office of Evaluation  and Inspections.  The  OIG  also informs 
the  Secretary  of HHS  of program  and management  problems  and recommends  courses  to 
correct  them. 
OFFICE  OF  AUDIT  SERVICES 
The  OIGS  Office of Audit  Services  (OAS)  provides  all auditing  services for HHS,  either  by 
conducting  audits with its own audit  resources  or by overseeing  audit work  done  by others. 
Audits  examine  the  performance  of HHS  programs  and/or  its grantees  and contractors  in 
carrying out  their  respective  responsibilities  and are intended  to provide  independent 
assessments  of HHS  programs  and operations  in order  to reduce  waste,  abuse,  and 
mismanagement  and to promote  economy  and efficiency throughout  the  Department. 
OFFICE  OF  INVESTIGATIONS 
The  OIGS  Office of Investigations  (01)  conducts  criminal,  civil, and administrative

investigations  of allegations  of wrongdoing  in HHS  programs  or to HHS  beneficiaries  and of

unjust  enrichment  by providers.  The  investigative  efforts  of 01  lead to criminal  convictions,

administrative  sanctions,  or civil money  penalties.  The  01  also oversees  State  Medicaid  fraud

control  units which investigate  and prosecute  fraud  and patient  abuse  in the  Medicaid  program.

OFFICE  OF  EVALUATION  AND  INSPECHONS 
The  OIGS Office of Evaluation  and Inspections  (OEI)  conducts  short-term  management  and 
program  evaluations  (called  inspections)  that  focus on issues of concern  to the  Department, 
the Congress,  and the  public.  The  findings  and recommendations  contained  in these  inspection 
reports  generate  rapid,  accurate,  and up-todate  information  on the  efficiency, vulnerability, 
and effectiveness  of departmental  programs.  The  report  was prepared  in the Kansas  City 
regional  office under  the  direction  of Jim Wolf, Regional  Inspector  General.  Project  staff 
include: 
Kansas City  Headquarters 
Dennis  Tharp,  Project  Leader  Penny  Thompson,  Branch  Chief

Tim Dold,  Team  Leader  Jennifer  AntiCo, Program  Specialist

Perry  Seaton,  Team  Leader

Linda  Paddock,  Program  Assistant

To obtain a copy of this report, call the Kansas City Regional Office at (816) 426-3697.  f 
Department  of  Health and Human  Services 
OFFICE  OF 
INSPECTOR  GENERAL 
MEDICAID  ESTATE  RECOVERY

PROGRAMS

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 EXECUTIVE  SUMMARY

PURPOSE 
To  describe  States  efforts  in implementing  Medicaid  estate  recovery  programs, 
focusing  on long  term  care  recoveries. 
BACKGROUND 
Working  within  Federal  guidelines  and  requirements,  each  State  has its own Medicaid 
rules  and  provisions  governing  Medicaid  long term  care  eligibility.  The  States  submit 
a State  Plan  that,  when  approved  by the  Health  Care  Financing  Administration 
(HCFA),  provides  the  basis  for the  payment  of federal  funds  to cover  at least  half  of 
the  expenditures  incurred  by the  State  in providing  medical  assistance  and 
administering  programs. 
The  Omnibus  Budget  Reconciliation  Act  of 1993 (OBRA)  requires  States  to recover 
expended  Medicaid  funds  from  the  estates  of Medicaid  long term  care  decedents.  In 
this manner,  States  are  able  to return  monies  back  to their  Medicaid  program  and  the 
Federal  government. 
METHODOI.X3GY 
We  conducted  a mail  survey  of the  50 State  Medicaid  agencies  in  October  1993. 
Topics  addressed  include  eligibility  policy,  asset  verification,  Medicaid  recipient  fraud 
referrals,  estate  recoveries  by  type  and  amount,  Medicaid  liens,  death  and  spousal 
information,  and  trusts  and  other  influences  on estate  recovery. 
We  selected  five States  in the  spring  of 1994 to visit based  on information  and 
materials  received  from  the  mail  survey  and  our  analysis  of cost recovery  information. 
We  chose  Massachusetts,  Minnesota,  Missouri,  Oregon  and  Wisconsin  because,  when 
compared  to all States,  information  indicated  they had  aggressive  methods  in place  to 
recover  assets.  At  these  States  we interviewed  State  agency  staff  and  State  fraud 
investigators  to supplement  information  from  the  surveys. 
FINDINGS 
Tkmty-seven StatesHave EstateRecowy  Bograms 
Many  States  had  recovery  programs  prior  to passage  of OBRA  93.  Some  of these 
States  are  now assisting  the  States  which  are  facing  difficulties  in meeting  OBRAS 
mandate. 
Due  to the  complexity  of establishing  recovery  programs,  16 States  without  recovery 
programsplan to  employ  a consultant  or have  State  staff  develop  procedures,  while  12 
said  they would  adapt  procedures  from  another  States  recovery  program.  Ten  of 
i  Ihese  same  States  responded  that  they  would  employ  a combination  of  both  of the 
above  strategies,  thus  the  duplication  of responses. 
Malure  Recoveryl?rogramsare General~Succe.wjidad  Cost-Effective 
States  with  recovery  programs  report  that  they  are  cost-effective  and  return  substantial 
amounts  of  money  to  the  State  and  Federal  governments. 
b	 States  with  programs  recovered  over  $85  million  in  FY  1993,  with  the  average 
amount  of Medicaid  estate  recoveries  per  State  being  $3.1  million.  The  State 
of  California  had  the  highest  amount  with  over  $21  million  in  FY  1993. 
b	 Most  successful  recovery  programs  are  comprised  of  an  aggressive,  well-trained 
staff  that  have  a strong  emphasis  in recoveries  from  the  sale  of  homes. 
Exivling  ProgramsProvideLessons on OperationalChallenger 
States  have  experienced  various  challenges  in their  efforts  to  establish  effective  and 
efficient  estate  recovery  programs. 
b  Enabling  Legislation 
According  to  HCF~  40 of 50 States  will require  authorizing  or  confirming 
legislation  to  implement  the  OBRA  93 mandatoxy  requirements,  including 
those  States  that  already  had  recovery  programs  prior  to passage  of the  Act. 
Some  States  have  asked  for and  received  extensions  from  their  HCFA  regional 
office,  allowing  them  to delay the  implementation  date  for starting  an  estate 
recovery  program. 
b  Insufficient  Resources  and  Limited  Staffing 
Sixteen  States  provided  information  to us on staffing  levels.  These  States  had 
one  to six individuals  assigned  to their  program.  Often  these  staffers  are  part-
time  or work  only a small  percentage  of time  on estate  recovery  cases. 
k  Liens  on  Homestead  Properties 
In  estate  recovery  programs,  real  properties  are  the  biggest  source  of revenue 
recouped  for  the  State  Medicaid  programs.  Yet,  only  14 States  file liens.  Of 
these,  only six States  use the  lien recove~  authority  granted  by the  Tax Equity 
and  Fiscal  Responsibility  Act of 1982 (TEFRA).  Liens  are  viewed  by many 
States  as politically  unpopular. 
P  Out-of-State  Assets 
If a Medicaid  applicant  does  not  disclose  out-of-State  assets,  those  assets  may 
go undetected  and  the  applicant  may improperly  obtain  Medicaid  eligibility. 
ii  b  swiving  spouseEstates 
States  that  keep  files on surviving spouses  say eventual  recovery  can  be 
substantial.  Yet,  at the  time  of our  survey, only  10 States  reported  that  they 
pursue  this type  of recovery.  The  remaining  States  cite  difficulty  in tracking  the 
death  of a surviving  spouse  and  the  disposition  of the  estate. 
HCFA has takenAction to hwkle  StateswithTechnicalAssistance 
The  HCFA  has  conducted  numerous  training  and  technical  assistance  conferences  on

estate  recovery  during  the  last  two years,  including  substantial  new efforts  since  the

time  we completed  our  survey.

RECOMMENDATIONS

We believe  that  improvements  in the  recovery  of long term  care  costs will result  in

substantial  savings over  time  for both  the  Federal  and  State  governments.  As such, we

believe  that  States  progress  in implementing  OBRA  1993 requirements  desemes

scrutiny  and  attention.

We  offer  the  results  of our  study to reinforce  HCFAS own initiative  in this area.

We  support  HCFAS efforts  to provide  training  and  technical  assistance  to States  who

are  attempting  to  establish  recovery  programs  or to improve  the  productivity  of

existing  units.  These  efforts  are  extremely  important  to the  success  of OBRA  1993.

As a concern  and  expressed  need  mentioned  numerous  times  by the  States,  we

support  HCFAS continued  efforts  to provide  training  and  technical  assistance  and  act

as a clearinghouse  for identification  of effective  practices,  as well as to monitor  States

activities  and  progress.

The  operational  challenges  reported  to us by States,  and  confirmed  in the  research

literature,  our  prior  work  in this area,  and  in discussion  with HCFA  staff, merit  special

attention.  Without  overcoming  these  operational  challenges,  the  impact  of OBRA

1993 will be  reduced  and  the  savings that  would  be  generated  put  in jeopardy.  As a

result,  we make  the  following  three  recommendations  to HCFA:

%  HCFA shoulddeveloppefomumce  indicationtos trackStatdprogrzxs h 
implementingthe OBRA 1993 requirenwm. 
Such  performance  indicators  would  encourage  States  to staff  their  recovery 
units  appropriately  and  use  all available  tools,  such  as TEFRA  liens,  to obtain 
appropriate  recoveries.  This would  aid in identif@g  States  with  particular 
problems,  establish  expectations  and  a method  for benchmarking  progress,  and 
yet  allow States  flexibility in finally choosing  the  mix of tools  to  achieve 
expected  results. 
... 
111 
.  TheHCFA shouilitqget mechaniwnsfor recoverythathavehighdolkupayofl and 
Menti&strategiato helpmakenecessaryinfomudioraavaiikblkto Stateagenciesw pursue 
thosemecharukrns. 
States  have  difficulty  pursuing  out-of-State  assets  and  surviving  spouse  estates 
because  of a lack  of information;  yet, these  are  important  areas  for States  to 
pursue  and  can  offer  substantial  savings to the  State.  Some  of those 
information  needs  can  only be  met  by interstate  data  sharing  and  cooperation, 
which  HCFA  could  facilitate.  The  HCFA  may wish to convene  interested 
groups  to specifically  talk  about  possible  solutions  to these  problems,  which 
could  require  Federal  legislation.  For  example,  these  could  include  mandating 
TEFRA  liens  and  providing  for better  legislative  support  for  spousal  recoveries. 
lle  HCFA shouldmonitorclmelyStatesprogressihobtatig  enablingStati&@Wion 
andpumuekgiddive author@ to imposesanctionsorpendies  ifStatesdb notactwithzk 
a reasonableperiodof timeto implementO13RA1993. 
One  of the  most  difficult  problems  for HCFA  to address  is the  reluctance  that 
might  exist in some  States  to implement  OBRA  1993 requirements.  While 
HCFA  should  allow States  time  to enact  the  appropriate  legislation,  some  kind 
of penalties  should  be  available  for HCFA  to use  if States  dont  take  action 
within  a specified  time  frame. 
We  have  no way of estimating  the  potential  savings to the  Medicaid  program 
that  could  result  if all States  were  to adopt  proven  cost-effective  estate  recovery 
techniques.  However,  the  experiences  of the  most  successful  States  we studied 
indicate  that  such  savings would  be  quite  substantial,  amounting  to tens  of 
millions  of dollars  per  year  nationwide. 
COMMENTS

The  HCFA  concurred  with  all the  recommendations  in this report.  (See  Appendix  D).

The  HCFA  has  since  developed  performance  indicators  which  the  regions  are

currently  reviewing,  and  have  issued  compliance  letters  to  12 States.  Also,  the

technical  advisory  group  on third  party  liability  met  on February  16, 1995 to discuss

strategies  for implementing  our  recommendation  to impose  sanctions  or penalties.

iv  TABLE  OF  CONTENTS

-CDIJCmN  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...1 
FIND~GS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4 
  Twenty-seven  States  Have  Recove~  Programs  . . . . . . . . . . . . . . . . . . . . .  4 
  Mature  Recove~  Programs  are  Successful  and  Cost-Effective  . . . . . . . . . .  4 
  Existing  Programs  Protidebssons  on Operational  Challenges  . . . . . . . . .  6 
Enabling  Legislation 
 
Insufficient  Resources  and  Limited  Staffing 
 
Liens  On  Homestead  Properties 
 
Out-of-State  Assets 
 
Surviving  Spouse  Estates 
 
  HCFA  has  taken  Action  to Provide  States  with  Technical  Assistance  . . . .  9 
=~MWz~AnONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..I1 
APPENDIcEs 
A - Staffing  and  Budget  for State  Recovery  Programs  as Reported  by States 
B - Use  of Liens 
C - Recovery  from  Surviving  Spouses 
D - Agency  Comments  INTRODUCTION

PURPOSE 
To  describe  States  efforts  in implementing  Medicaid  estate  recovery  programs, 
focusing  on long term  care  recoveries. 
BACKGROUND 
El&ibil@ for Medicati Long Tm  Care 
Each  State  has its own Medicaid  rules  and  provisions  governing  Medicaid  long term 
care  eligibility.  These  include  the  guidelines  and  limitations  established  by Part  430 of 
Grants  to States  for Medical  Assistance  Programs  in Title  XIX  of the  Social  Security 
Act  and  implementing  Medicaid  eligibility regulations  (42 Code  of Federal  Regulations 
430). 
Medicaid  coverage  of long term  care  is intended  for those  individuals  with  inadequate 
resources  to provide  for themselves.  As such, persons  with  substantial  assets  are  not 
eligible.  However,  in determining  eligibility for Medicaid  long  term  care,  States  may 
count  only income  and  assets  that  are  available  to the  applicant  or recipient,  i.e., those 
funds  under  the  applicants  control.  Certain  assets  and  resources  (which  can  often  be 
of any value)  are  exempt,  including  the  home  (in many  cases),  burial  policies,  small 
savings accounts,  and  funds  to maintain  the  spouse  in the  home.  There  is also  a 
provision  for coverage  of persons  with  a higher  dollar  amount  of assets  who have 
incurred  long term  care  expenses.  Once  these  individuals  have  depleted  their  excess 
resources,  they  may qualify  for Medicaid.  In addition,  they  must  also reduce  their 
excess income  each  month  in order  to remain  eligible. 
Studies  have  found  that  individuals  can  qualify for Medicaid  quickly  and  easily while 
preseming  income  and  assets  from  recovery.  Two  Office  of Inspector  General  (OIG) 
reports,  Medicaid  Estate  Recoveries  (OAI-09-86-00078)  and  Transfer  of Assets:  A 
Case  Studv  in Washington  State  (OAI-09-88-01340),  issued  in the  late  80s, found  that 
many elderly  recipients  retain  sizeable  estates  which  pass  to their  heirs  without 
reimbursement  of public  costs. 
A March  1989 U.S.  General  Accounting  Office  report  entitled  Recoveries  from 
Nursing  Home  Residents  Estates  Could  Offset  Pro~ram  Costs  (GAO/HRD-89-56) 
found  that  States  need  programs  to deal  with both  transfer  of assets  and  recovery 
from  estates.  This  study found  that  Medicaid  recovers  little  of its nursing  home  costs 
from  recipients  estates  and  that  expanding  the  programs  to recover  from  estates  of 
institutionalized  recipients  under  age  65 would  increase  recoveries.  In the  eight  States 
studied,  as much  as two-thirds  of the  amount  spent  for nursing  home  care  for 
Medicaid  recipients  who  owned  a residence  could  be recovered  from  their  estates  or 
from  the  estate  distribution  to their  spouses.  The  report  concluded  that  estate 
recovery  programs  can  achieve  savings while  treating  the  elderly  equitably  and 
humanely. 
1

-.  Recoupmentof MedicaidLong Tm  CareBene@  @m  Assetr 
According  to a 1992 Health  Care  Financing  Administration  (HCFA)  and  American

Public  Welfare  Association  collaborative  project,  States  are  having  limited  success  with

the  recoupment  of money  from  the  estates  of deceased  Medicaid  recipients.  At  that

time,  only nine  States  were  pursuing  the  recovely  of property  held  in joint  tenancy  and

only five States  attempted  to recover  property  transferred  through  living trusts.

Liens  on property  are  another  intricate  issue.  Section  1917 (a)-(c)  of the  Social

Security  Act  [42 United  States  Code  1396p(b)]  says that  the  State  must  seek

adjustment  or recovery  from  the  individuals  estate  or upon  sale  of the  property

subject  to a lien,  at a minimum,  of the  amount  spent  by Medicaid  on the  persons

behalf  for services  provided  in a nursing  facility...!  The  law applies  this to

permanently  institutionalized  individuals  who the  State  determines  cannot  reasonably

be  expected  to be  discharged  and  return  home,  including  individuals  who  quali$  as

both  permanently  institutionalized  individuals  and  who  are  at least  55 years  old.

Prior  to  1993 only a few States  used  liens  as a means  to recover  Medicaid  payments.

These  States  followed  the  rules  outlined  by Section  1917 of the  Social  Security  Act  and

can utilize  the  lien  recovery  authorization  granted  by the  1982 Tax Equity  and  Fiscal

Responsibility  Act  (TEFRA).  TEFRA  liens have  great  authority  to recoup  under

many  circumstances,  yet  most  State  legislatures  are  reluctant  to approve  this law.

States  are  required  to seek  recovery  of the  amounts  spent  by Medicaid  on

permanently  institutionalized  individuals  over  the  age  of 55 for nursing  facility  services,

home  and  community  based  services,  and  related  hospital  and  prescription  drug

services.  At State  election  the  State  can, in addition  to these  services,  collect  for any

other  services  provided  under  the  State  plan.  Recoveries  may  come  either  from  the

individuals  estate  (after  death)  or from  the  sale  of property  subject  to  a lien  (which

could  be  during  the  individuals  lifetime).  In addition,  the  HCFA  State  Medicaid

Manual  issuance  of September  1994 maintains  that  States  are  not  required  to use  the

Supplemental  Security  Income  intent  to return  home  rule  for purposes  of determining

whether  an individual  is permanently  institutionalized  for purposes  of estate  recovery.

Effective  October  1, 1993, the  Omnibus  Budget  Reconciliation  Act  requires  all States

to establish  recovery  programs.  These  programs  may be  developed  in any manner

that  is approved  by each  State.  However,  the  law permits  a delayed  compliance  date

for States  requiring  authorizing  or conforming  State  legislation.  Nevertheless,  the

State  must  take  action  during  its first legislative  session  after  August  1993, with  a

delayed  compliance  date  no later  than  the  first day of the  first  quarter  immediately

after  the  close  of the  first legislative  session.

Even  though  the  law mandates  action  during  the  first legislative  session  after

August  1993, 12 States  do not  plan  to enact  legislation  on estate  recovery  programs

until  calendar  year  1995, according  to a July  1994 HCFA  Transmittal.  These  States

have  requested  and  been  granted  legislative  extensions  from  their  respective  HCFA

regional  offices.

2
 METHoDoInGY 
Mail SunJey 
The  inspection  was conducted  in two phases.  In phase  one,  we conducted  a mail 
survey of the  50 State  Medicaid  agencies.  While  the  survey was comprised  of many 
closed-ended  questions,  we also used  some  open-ended  questions  that  provided  more 
in-depth  information  to explain  and  expand  upon  close-ended  responses. 
The  surveys were  submitted  to State  Medicaid  agencies  in late  October  1993. We 
received  our  final State  responses  in late  May  1994. 
Fke StateSampk 
In phase  two, we selected  a judgmental  sample  of five States  based  on the  information 
obtained  from  phase  one.  We  chose  Massachusetts,  Minnesota,  Missouri,  Oregon  and 
Wisconsin  because  of the  comparative  effectiveness  of their  estate  recovery  programs 
and  information  completed  on their  surveys.  We  visited  each  State  and  used  data 
collection  instruments  to conduct  interviews  with State  Medicaid  agency  staff  and  State 
Medicaid  fraud  investigators.  This  technique  was also used  to follow up  on responses 
reported  in the  sumeys. 
Analysis 
The  inspection  team  summarized  and  tabulated  the  responses  to all the  survey 
questions.  The  responses  were  quantified  to determine  how many  State  Medicaid 
agencies  have  programs  to identify  and  prevent  transfers  of assets,  the  outcomes  from 
these  identification  systems,  how many  States  have  recovery  programs,  what  those 
programs  entail,  and  the  dollar  value  of assets  and  estates  which  have  been  recovered. 
scope 
This  report  is one  of two related  reports.  A companion  report  will focus  on eligibility 
determinations,  verification  of information  presented  at application,  and  referrals  of 
potential  fraud  to Medicaid  Fraud  Control  Units. 
We  conducted  our  review  in accordance  with the  Standardsfor Inspectionsissued  by 
the  Presidents  Council  on Integrity  and  Efficiency. 
3
 FINDINGS 
?Iwnty-sevenStatesHave EstateRecoveryRograms 
Twenty-two  of the  27 States  with recovery  programs  had  programs  before  the

Omnibus  Budget  Reconciliation  Act  of 1993 (OBRA  93).  According  to survey

information,  a few States  have  been  recovering  Medicaid  expenditures  for  a couple  of

decades  or more,  with  a majority  of the  27 States  beginning  their  recovery  programs  in

the  late  80s/early  90s.  Although  over  half  of all States  have  recovery  programs,  most

of these  States  still sought  authorizing  or confirming  legislation  to implement  the

OBRA  93 mandatory  requirements.

Twenty-three  States  did not  have  recovery  programs  at the  time  of our  review  but  are

now mandated  by the  OBRA  93 to develop  a recovery  program  in their  State.  Due

to the  complexity  of establishing  a recovery  program,  16 of these  States  plan  to

employ  a consultant  or have  State  staff  develop  procedures  for the  programs

operation.  Twelve  said that  they would  adapt  procedures  from  another  States

recovery  program,  with  ten  of these  States  responding  that  they would  employ  a

combination  of both  of the  above  strategies,  thus  the  duplication  of responses.  One

State  said they would  adapt  procedures  from  an existing  tax lien  agency.  Another

State  said that  they would  acquire  the  input  of public  special  interest  groups

concerning  estate  recovery.  One  State  simply did not  know  how they would  develop

operational  guidelines  for  a recovery  program.

At  the  time  of our  review,  over  half  of the  23 States  indicated  they would  need

training  on procedural  issues  and  guidelines/policies  used  by other  States.  Twelve  also

said that  they would  need  staff training  on the  law and  legal  procedures,  emphasizing

once  again  the  technical  complexity  of estate  recovery  programs.

MatureRecovery_ms  areGenerallySucwssjidandCost-Efiective 
Existing  Programs  report  in Excess  of $85  Million  in  FY  1993  Recoveries 
b 
States  with recovery  programs  report  that  they  are  cost-effective  and  return 
substantial  amounts  of money  to the  State  and  Federal  governments.  The 
average  amount  of Medicaid  estate  recoveries  per  State  with  a recovery 
program  in Fiscal  Year  1993 was $3.1 million.  The  State  of California  had  the 
highest  amount  with  over  $21 million  in FY  1993.  Overall,  States  recovered 
over  $85 million  (Federal  and  State  dollars)  in FY  1993.  (See  Appendix  A). 
Of those  States  that  reported  budget  information,  the  typical  recovery  ratio 
reported  was approximately  9 to  1.  We  did not  verify the  budget  information 
as accounting  methods  differ  from  State  to State. 
The  chart  on the  following  page  shows the  top  five States  in terms  of dollar 
amounts  recouped  in estate  recovery. 
4
 ESTATE  RECOVERY

TOD Five States in FY 1993

...... 
...  .......  ... 
I 
CA MA NY  IN MN

The  five States  shown  above  recovered  over  $50 million  dollars  in Medicaid

recoveries  in FY  1993.  In addition,  increased  collections  in FY  1994 and

FY  1995 should  continue  in these  States  as future  projections  of recovery  look

promising.  Over  theyears,  these  five States  have  developed

well-established,  cost-effective  estate  recovery  programs.

We  found  that  those  States  with mature  or long-standing  recovery  programs

were  generally  more  successful  than  the  States  with  recently  developed

programs.  This  should  remain  true  due  to the  lengthy  start-up  time  associated

with  developing  estate  recovery  programs.  The  HCFA  Third  Party  Liability

(TPL)  Branch  confirmed  this, stating  that  it takes  two to three  years  for most

recovery  programs  to become  cost-effective.

Successful  Recovery  Units  Demonstrate  Identifiable  Strengths 
b 
. Tra~~staff 
o 
Aggressiveness 
  FOCUS on  Homes 
.  Inventive! 
5
 During  our  onsite  visits, we learned  that  successful  recovery  programs  had 
specific  strengths.  These  typically  included  a well-trained  staff that  can 
aggressively  or doggedly  pursue  the  verification  of income,  assets  and  property. 
Recovery  units  that  have  a strong  emphasis  in home  recoveries  and  a readiness 
to litigate  usually  returned  large  amounts  to the  Medicaid  program  through  the 
sale  of real  property. 
Etini?lgl%gnnns l?ovkk?Lewons on optional  challenges 
Enabling  Legislation 
b 
According  to I-ICF&  40 of 50 States  will require  authorizing  or confirming

legislation  to implement  the  OBRA  93 mandatory  requirements,  including

those  States  that  already  had  recovery  programs  prior  to passage  of OBRA  93.

As such, State  enabling  legislation  is required  for over  half  of the  States  which

do not  have  estate  recovery  programs.  Some  States  have  asked  for and

received  extensions  from  their  Attorney  Generals  office,  allowing  them  to delay

the  implementation  date  for starting  an estate  recovery  program.  HCFA

reported  in July  1994 that  12 States  do not  plan  to enact  legislation  on estate

recove~  programs  until  calendar  year  1995.

States  indicate  that  legislation  to establish  Medicaid  recovery  programs  is

unpopular  and  difficult  to get passed.  The  give-and-take  legislative  process  to

get  estate  recovery  program  language  approved  will take  considerable  time  in

some  of the  States.  Also, this type  of legislation  is quite  technical  and  may

require  changes  in existing  State  legislation.  States  which  do not  have  estate

recovery  programs  said that  political  sensitivity  and  citizen  concerns  within  the

State  are  often  very large  impediments  in establishing  Medicaid  estate  recovery

programs.

w  Insufficient  Resources  and  Limited  Staffing 
Most  of the  27 operating  recovery  programs  are  comprised  of staff  from  a 
variety  of disciplines.  Professionals  with  accounting,  investigative  and  legal 
backgrounds  are  commonly  found  in these  settings.  As shown  in Appendix  ~ 
over  half  of the  27 States  have  one  to six individuals  assigned  to the  everyday 
monitoring  and  followup  of recovery  cases.  However,  few States  are  able  to 
budget  for  these  positions  on a full-time  basis.  Many  of the  staffers  are 
currently  in a Third  Party  Liability  or Cost  Benefits  Recovery  unit  devoting  only 
1/3 to  1/2 of their  time  to Estate  Recovery.  Most  States  indicate  that  these 
limitations  severely  restrict  their  recovery  capability, 
F  Liens  on Homestead  Properties 
In estate  recovery  programs,  real  property  of the  deceased  Medicaid  long term 
care  recipients  is the  most  frequently  recovered  item,  followed  by checking 
accounts,  savings  accounts,  and  personal  needs  funds  of nursing  home  patients. 
In terms  of dollar  amounts  recovered,  real  properties  are  also the  biggest 
6
 source  of revenue  recouped  for the  State  Medicaid  program,  followed  by 
savings and  checking  accounts,  personal  needs  funds,  and  inheritances  and 
stocks/bonds. 
$ Amt.  of Recovery 
by Type of Item 
Tw..e   of Reoovew Item
Ezl 
Homes
Savingskcts. 
(25
 
,,.::..:1:..::.,,::.,,..:::,..::.::::.:,.   CheckingAcots. 
:.:+:+:.:. 
Pers. Needs Funds 
(2%)

Inheritance 
(4%)

Stookslbonds 
Fourteen  States  file liens  on property  (See  Appendix  B).  In almost  all 
instances  this is a lien placed  on the  homestead  property  of the  Medicaid  long 
term  care  recipient.  However,  many  States  do not  use  liens because  they 
believe  that  liens  present  a public  relations  problem.  Some  States  feel  that 
senior  lobby groups  can prevent  home  lien  recoveries.  Some  States  also  choose 
not  to  employ  liens because  of the  perception  that  the  elderly  have  worked  all 
their  lives to retain  their  homestead  property.  Once  they become  sick or 
institutionalized,  the  appearance  may be  that  the  State  takes  everything  away 
from  the  Medicaid  applicant  (including  their  home). 
Six States  utilize  TEFRA  liens.  TEFRA  liens grant  authority  to recover  costs 
of all Medicaid  services  by imposing  liens  on real  property,  thus  protecting  the 
States  interest  in the  property  in the  event  that  it is sold or transferred.  Estate 
recovery  may then  be  made  at the  time  the  property  is sold or transferred  or 
upon  the  death  of the  Medicaid  beneficiary.  TEFRA  lien benefits  are  the 
immediate  recovery  of monies  when  the  realty  is sold during  the  lifetime  of the 
beneficiary  and  the  priority  position  of the  States  claim  against  available 
probate  assets.  Funds  are  reimbursed  at settlement  from  proceeds  of sale 
rather  than  at  the  closing of the  estate  where  the  State  only shares  as a general 
creditor.1  TEFRA  liens, however,  have  severe  restrictions.  For  instance, 
TEFRA  liens  cannot  be  placed  if the  non-institutionalized  spouse  is still living 
in the  home,  if there  is a child living in the  home  under  the  age  of 21 or if 
lfrom  Estate  Recove rv Reference  Guide,  produced  by the  APWA  & HCF~ 
October  1994, pgs. 29-35.  there  is a blind  or disabled  child of any age living in the  home.  Also, if there  is 
a sibling of the  beneficiary  who has  an equity  interest  in the  home,  and  the 
sibling was residing  in the  home  for a period  of at least  one  year  immediately 
before  the  date  of the  individuals  admission  to the  medical  institution,  no 
TEFRA  lien  can be  placed.  These  restrictions  are  a reason  why few States  use 
TEFRA  liens.  In addition,  TEFRA  liens  are  as unpopular  as estate  recovery 
programs  in many  States,  and  will require  legislative  changes  in those  States 
which  choose  to make  TEFRA  liens  an option. 
Out-ofState Assets 
 
The  States  we visited  said they have  limited  capabilities  to determine  and  verify 
the  existence  and  amount  of a Medicaid  recipientss  out-of-State  financial  and 
property  holdings.  If a Medicaid  applicant  does  not  disclose  all out-of-State 
assets,  there  is a very good  chance  that  those  assets  will go undetected  and  the 
applicant  may improperly  obtain  Medicaid  long term  care  benefits.  States 
listed  several  barriers  that  make  it difficult  to recover  out-of-State  property 
such  as probate  codes  which vary by State,  inability  to  attach  liens  in other 
States,  and  lack  of knowledge  on how to recover  assets  in other  States. 
Another  factor  that  impedes  out-of-State  asset  verification  is the  inability  of 
States  to go beyond  what  is reported.  It is virtually  impossible  for a State  to 
examine  all possible  assets.  Therefore,  unreported  assets  are  not  usually 
investigated.  These  assets  are  normally  discovered  only through  fortuitous  tips 
from  third  parties. 
State  of Wisconsin  staff reported  to us during  the  onsite  visit that  they  had 
difficulties  in learning  about  out-of-State  properties.  Even  when  they  did find 
out  about  out-of-State  property,  they had  difficulty  pursuing  recoveries  in other 
States  (except  a couple  of adjoining  States  with which  they  had  developed 
cooperative  interstate  agreements). 
The  State  of Massachusetts  said  that  they  do  occasionally  find  out  about 
holdings  of out-of-State  property  of Medicaid  long  term  care  recipients. 
Massachusetts  State  agency  staff  said  that  they  follow  the  particular  probate 
codes  of whatever  State  in which  the  Medicaid  recipient  held  property.  They 
did  not  perceive  the  recovery  of identified  out-of-State  assets  as  a big 
impediment  because,  for  example,  they  would  simply  follow  Florida  probate 
procedure  to  recover  real  or vacation  property  in  Miami  Beach,  Florida. 
However,  they  reiterated  the  problem  of seldom  finding  out  about  additional 
and/or  out-of-State  property  holdings. 
SurvivgiSnpouse  Estates 
 
The  OBRA  93 provides  for recovery  from  the  estate  of a deceased  surviving 
spouse,  but  only  10 States  currently  pursue  this type  of recovery  (See 
Appendix  C).  The  remaining  States  cite  difficulty in tracking  the  death  of a 
surviving  spouse  for many  reasons:  no on-line  capability  of denoting  updated 
8
 information  on the  State  Medicaid  records,  no  cross-referenced  obituary 
clipping  bureaus,  and  current  low rates  of recovery  amounts  on these  types  of 
cases.  States  also said that  the  real  property  is often  legally transferred  to 
someone  else,  preventing  recove~. 
states  also expressed  difficulty in monitoring  surviving  spouse  cases.  To  be 
successful,  the  recovery  units  must  keep  suspension  files with  financial  and 
demographic  information  on all the  well spouses  of nursing  facility  patients. 
Although  it is often  unwieldy  and  cumbersome  to remain  up-to-date  and 
knowledgeable  of the  status  of surviving spouses,  States  employing  this strategy 
tout  its success.  Also, while  recovery  levels  are  currently  low in surviving 
spouse  cases,  States  feel  that  the  revenue  from  these  recoveries  will soon  grow 
considerably. 
HCFA hastakenAction ti bvii.zk State withT~hnicalAss&tance 
The  HCFA  has responsibility  for monitoring  and  assisting  States  in their  development

of estate  recovery  programs.  It has conducted  numerous  training  conferences  for TPL

coordinators  and  Medicaid  State  representatives.  There  have  also been  panel

discussions  on estate  recovery  presented  at State  Medicaid  Directors  meetings.  The

HCFA  contacted  all 50 States  in the  summer  of 1994 to determine  implementation

dates  of recovery  programs,  and  released  an OBRA  93- Estate  Recovery  Program

Survey  Results.  The  HCFA  staff have  also attended  elder  law conferences,  discussing

its Medicaid  recoveries  and  the  fiscal impact  of estate  recoveries  on Medicaid  budgets.

In September  1994, HCFA  released  a State  Medicaid  manual  issuance  to provide

guidance  to States  in meeting  the  requirements  of OBRA  1993.  In November  1994,

HCFA  released  a resource  guide  for States  in collaboration  with the  American  Public

Welfare  Association.  The  HCFA  is now scheduled  to release  a directive  on those

States  which  did not  initiate  an  estate  recovery  program  during  their  State  legislatures

first legislative  session.  This forthcoming  issuance  will report  those  States  which  are

not  in compliance  by year-end  1994.

The  HCFA  has  also contracted  with a consulting  firm  to perform  an  assessment  of

estate  recovery  programs  in NY, CA  CT,  and  FL.  The  assessment  will focus  on

OBRA  93, trusts,  and  transferring  of assets.

These  efforts  by HCFA  respond  to the  needs  expressed  by States  in response  to our

survey.  In their  survey  responses,  some  States  indicated  an  ongoing  need  for

continued  technical  assistance  from  HCFA.  Thirteen  States  (at  the  time  of our  review

in October  1993- May  1994) desired  additional  training  or technical  assistance  focused

on making  their  recovery  programs  more  effective.  For  example,  one  State  said  that

HCFA  should  provide  technical  assistance  and  publish  uniform  guidelines  for States

to use  regarding  asset  verification  procedures.  This  State  also said  that  HCFA  should

conduct  workshops  or training  sessions  for State  staff.  Few  States  reported

networking  or sharing  best  practices  with  one  another.  We  also found  that  some

States  are  unaware  of the  cumulative  dollar  amount  which  can be  recovered  from

9
 personal  needs  finds  ofnursing  facili~  patient  accounts.  Inaddition,  we found  that 
not  all States  were  active  in contacting  HCFA  for technical  assistance. 
10
 RECOMMENDATIONS

We believe  that  improvements  in the  recovery  of long term  care  costs will result  in

substantial  savings over  time  for both  the  Federal  and  State  governments.  As such, we

believe  that  Stat~s progress  in implementing  OBRA  1993 re~uirements  deserves

scrutiny  and  attention.

We  offer  the  results  of our  study to reinforce  HCFAS own initiative  in this area.

We  support  HCFAS efforts  to provide  training  and  technical  assistance  to  States  who

are  attempting  to establish  recovery  programs  or to improve  the  productivity  of

existing  units.  These  efforts  are  extremely  important  to these  success  of OBRA  1993.

As a concern  and  expressed  need  mentioned  numerous  times  by the  States,  we

support  HCFAS continued  efforts  to provide  training  and  technical  assistance  and  act

as a clearinghouse  for identification  of effective  practices,  as well as to monitor  States

activities  and  progress.

The  operational  challenges  reported  to us by States,  and  confirmed  in the  research

literature,  our  prior  work  in this area,  and  in discussion  with HCFA  staff, merit  specia

attention.  Without  overcoming  these  operational  challenges,  the  impact  of OBRA

1993 will be  reduced  and  the  savings that  would  be  generated  put  in jeopardy.  As a

result,  we make  the  following  three  recommendations  to HCFA.

The HCFA shoulddeveloppeflonnanceindicattnxto trackStatesprogressih 
irnplenwntkgthe OBRA 1993 requirement. 
Such performance  indicators  would  encourage  States  to staff their  recovery  units 
appropriately  and  use  all available  tools,  such as TEFRA  liens, to obtain  appropriate 
recoveries.  This would  aid in identifying  States  with particular  problems,  establish 
expectations  and  a method  for benchmarking  progress,  and  yet  allow States  flexibility 
in finally choosing  the  mix of tools  to achieve  expected  results. 
77w HCFA shoukittqet znechanikrnfsor recoverythathave highdolikrpayoff and 
&n@  strategii=tso hdp make necasaq infornu&n avaiiizbk-toState;g&&2x to pumu.e 
threemechanisms. 
States  have  difficulty  pursuing  out-of-State  assets  and  surviving  spouse  estates  because 
of a lack  of information;  yet, these  are  important  areas  for  States  to pursue  and  can 
offer  substantial  savings to the  State.  Some  of those  information  needs  can  only be 
met  by interstate  data  sharing  and  cooperation,  which  HCFA  could  facilitate.  The 
HCFA  may wish to convene  interested  groups  to specifically  talk  about  possible 
solutions  to these  problems,  which  could  require  Federal  legislation.  For  example, 
these  could  include  mandating  TEFRA  liens  and  providing  for better  legislative 
support  for spousal  recoveries. 
11
 l%? HCFA shouklrnonhr cihse~Statespmgmw inobtaihingenabibzgSate ikgidiztion 
andpumuelqjskztie authorityto iinpwesanctkmsorpndlies  # Statesdo notactwithin 
a reasonablepaid  of time to implkmentOBRA 1993. 
One  of the  most  difficult  problems  for HCFA  to address  is the  reluctance  that  might 
exist in some  States  to implement  OBRA  1993 requirements.  While  HCFA  should 
allow States  time  to  enact  the  appropriate  legislation,  some  kind  of penalties  should  be 
available  for HCFA  to use if States  dont take  action  within  a specified  time  frame. 
We have  no way of estimating  the  potential  savings to the  Medicaid  program  that 
could  result  if all States  were  to adopt  proven  cost-effective  estate  recovery 
techniques.  However,  the  experiences  of the  most  successful  States  we studied 
indicate  that  such savings would  be  quite  substantial,  amounting  to tens  of millions  of 
dollars  per  year  nationwide. 
COMMENTS 
The  HCFA  concurred  with our  three  recommendations.  The  HCFA  has  since 
developed  performance  indicators  which  the  regions  are  currently  reviewing,  and  have 
issued  compliance  letters  to  12 States.  Also, the  technical  advisory  group  on third 
party  liability  met  on February  16, 1995 to discuss strategies  for implementing  our 
recommendation  to impose  sanctions  or penalties. 
12
 APPENDIX  A

STAFFING AND  BUDGET  FOR STATE RECOVERY  PROGRAMS  AS 
REPORTED  BY STATES 
OR  12  A  c  E  $550,000  $4,000,000 
cl-  17  BC  E  not  available  $3,806,774 
WI  5  AB  C  D  $346,808  $3,450,886 
NH  5  A  c  E  $167,382  $2,002,058 
AL  2  CD  $99,000  $1,666,351 
WA  5  AB  C  D  $89,000  $1,300,000 
MO  5  A  CD  $135,759  $1,274,876 
MD  I  41  CDEI  $96,174  I  $1,162,480 
ND  3[  CD  $44,000  I  $806,241 
ID  2  A  c  $75,000  $587,580 
NJ  2  A  c  $100,000  $550,300 
UT  2  B  D  $26,300  $414,384 
KS  4  A  CD  $120,000  $178,000 
FL  No response  Vary/district  not  available  $159,141 
MT  1  B  $15,000  $150,000 
AR  4  D  $41,000  $122,394 
A-1
 co  2  c  E  $273,883  I  $71,559 
I  I  I 
HI  91A  CD  $11,135  I  $46,958 
VA  7  AB  C  D  E  $25,000  I  $31,629
I  1  1 
RI  31A  CD  not  available  not  available 
o 
I 
VT  No response  I  c  not  available  not  available 
I 
Total  Medicaid  Estate  Recoveries  in Fiscal  Year  1993  $85,031,118 
INo response:  States  that  were  unable  to report  their  No. of Staff  information  typically 
have  recovery  programs  that  are  operated  at the  county  level. 
2A  =  accountants/analysts  (14 States) 
B=  investigators  (7 States)

c=  clerical/  administrative,  and  research  positions  (19 States)

D=  attorneys  (13 States)

E=  supervisors/managers  (7 States)

A-2
 APPENDIX  B

USE OF LIENS 
At the  time  of our  survey  (October  1993- May  1994), the  following  14 States  reported 
that  they  use ~. 
Alabama  *

California  *

Colorado  *

Connecticut  *

Illinois

Maryland  *

Massachusetts

Montana

New  Hampshire

New Jersey

New York  *

Rhode  Island

Utah

Wisconsin

[The  State  of Minnesota
 was planning  to begin  implementation  of TEFRA  liens in 
July  1994, according  to
 a HCF~APWA  survey.] 
$% 
Uses  TEFRA  liens 
B-1  APPENDIX  C

RECOVERY  FROM SURVIVING  SPOUSES 
At the  time  of our  survey,  the  following  ten  States  reported  that  they  recover  from  the 
estate  of the  suwivin~ sDouse. 
California  (pending,  due  to recent  court  action  in December  1994)

Illinois

Kansas

Minnesota  (applies  to information  from  Hennepin  county,  MN  only)

Missouri

New Hampshire

New York

North  Dakota

Oregon

Wisconsin

c-l
 APPENDIX  D 
AGENCY  COMMEITIS 
D-1  . 
. 
,,twc$b 
# +  $.  Health  Care 
2*  DEPARTMENT  OF HEALTH&  HUhqANSKRVICES  Financing  Administration
: 
.
5 -g 
% 
4 +>v d, o  Memorandum 
DATE  MAR  81995 
FROM	 Bruce  C.  Vladeck ~etiuL{ 
Administrator 
SUBJECT	 Office  of  Inspector  General  Draft  Report:  Medicaid  Estate  Recove~ 
Programs,  (OEI-07-92-00880) 
TO	 June  Gibbs  Brown 
Inspector  General 
We  reviewed  the  subject  final  report  which  describes  States  efforts  in  implementing 
Medicaid  estate  recove~  programs.  Our  comments  are  attached  for  your  review. 
Thank  you  for  the  opportunity  to  review  and  comment  on  this  report.  We  commend 
OIG  staff  for  their  willingness  to  act  on  our  previous  comments. 
Attachment  Page  2 
At  the  bottom  of page  7, the  authority  of the Tax Equity  and  Fi&al  Responsibility  Act 
of 1982 (TEFRA)  liens  is overstated.  While  it is true  that  TEFRA  liens  can  be placed 
on the  real  property  of permanently  institutionalized  beneficiaries,  while  they  are  still 
alive,  there  are  severe  restrictions.  The  TEFRA  liens cannot  be placed  if the  community 
spouse  is still living in the  home  (primary  residence)  nor can  a lien  be placed  if there  is 
a child  living in the home under the age of 21 or if there is a blind or disabled child of 
any age  living in the  home.  Finally,  if there  is a sibling of the  beneficiary  who  has an 
equity  interest  in the  home,  and  the  sibling was residing  in the  home  for a period  of at 
least  1 year  immediately  before  the  date  of the  individuals  admission  to the  medical 
institution,  no lien  can  be  placed.  These  limitations  should  be pointed  out  in the  text  as 
reasons  why more  States  are  not  using TEFRA  liens.