DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-26-12 
Baltimore, Maryland   21244-1850 
 
         
Center for Medicaid, CHIP and Survey & Certification 
 
 
SMDL # 11-006 
 
June 10, 2011 
 
RE: Same Sex Partners and Medicaid Liens, 
Transfers of Assets, and Estate Recovery 
 
Dear State Medicaid Director: 
 
The purpose of this letter is to ensure that States are informed of the existing options and 
flexibilities regarding the application of Medicaid liens, transfer of assets, and estate recovery.  
Specifically, this letter is intended to advise States of existing choices and options regarding 
spousal and domestic partner protections related to liens, transfer of assets, and estate recovery.  
 
Liens: 
Section 1917(a) of the Social Security Act (the Act) allows, but does not require, States to 
impose liens on the property of a Medicaid beneficiary under certain circumstances.  
 
More specifically, liens are permitted in two instances prior to a beneficiarys death:   
1)  when there has been a court judgment that benefits were incorrectly paid; or  
2)  when the lien is imposed against the real property of an individual  
a.  who is an inpatient in a nursing facility, intermediate care facility for the 
mentally retarded, or other medical institution, if the individual is required to 
spend for medical care all but a minimal amount of his or her income, and  
b.  with whom the State determines that the individual cannot reasonably be 
expected to be discharged from the institution and return home.   
State plans must specify the medical assistance services that are subject to recovery. 
 
Section 1917(a)(2) of the Act provides important beneficiary protections from liens.  Liens may 
not be imposed in instances where certain people are lawfully residing in the home.  These 
individuals include:   
1)  a spouse (as defined in the Defense of Marriage Act of 1996 [DOMA] Pub. L. No. 104-
199),  
2)  a child under age 21,  
3)  children who are blind or totally/permanently disabled, and  
4)  siblings residing in the beneficiarys home who have an equity interest in such home and 
were residing in the home for at least 1 year immediately before the date the individual 
was admitted to the medical institution.
 
  Page 2  State Medicaid Director 
The Federal beneficiary protections listed above represent the minimum level of protection, in 
other words, the floor for protection from imposition of liens, that must be implemented by the 
State.  States have considerable flexibility to determine the ceiling for such protection and to 
develop their own rules regarding when they will impose/pursue liens, as long as the Federal 
beneficiary protections noted above are fully implemented.  A State can have a policy or rule not 
to pursue liens when the same-sex spouse or domestic partner of the Medicaid beneficiary 
continues to lawfully reside in the home. 
 
States choosing not to pursue liens when the same-sex spouse or domestic partner beneficiary 
continues to lawfully reside in the home would exercise their existing discretion in determining 
the scope or circumstances, either prior to, or when pursuing liens.  States are encouraged to 
incorporate their criteria for determining when to impose a lien in the Medicaid State plan. 
 
Transfers of Assets:  
States are required to have provisions regarding transfers of assets for less than fair market value 
under sections 1902(a)(18) and 1917(c) of the Act.  A State Medicaid plan must provide that, if 
an institutionalized individual or the spouse of an individual transfers assets for less than fair 
market value after the look-back date defined in the statute, the State will calculate and impose 
a period of ineligibility.  Medicaid payment is not available for the long-term care services the 
individual receives during the period of ineligibility, although the individual remains eligible for 
Medicaid coverage of non-long term care State plan services. 
 
While periods of ineligibility are generally required, the Act establishes certain exceptions to the 
provisions regarding transfers of assets to prevent hardship, allowing individuals who have 
transferred assets to receive long-term care services without the imposition of any penalty period 
in certain circumstances.  The statute specifically exempts transfers of any type of asset to a 
spouse or to another person for the sole benefit of the spouse under section 1917(c)(2)(B)(i) of 
the Act, and also exempts the transfer of a home to a spouse under section 1917(c)(2)(A)(i) of 
the Act.  The exemptions for transferring assets to a spouse cannot be directly applied to same-
sex spouses or partners as a result of DOMA. 
 
However, under section 1917(c)(2)(D) of the Act, a transfer of assets penalty period will not be 
applied if the State determines, under procedures established by the State, that denial of 
eligibility would create an undue hardship.  The Deficit Reduction Act of 2005 (DRA, Pub. L. 
No. 109-171) provided that, in applying this provision, States should determine that an undue 
hardship exists when application of the transfer of assets penalty and denial of eligibility for 
Medicaid payment for long-term care would deprive the individual of medical care such that the 
individuals health or life would be endangered, or the individual would be deprived of food, 
clothing, shelter, or other necessities of life.
 
The Centers for Medicare & Medicaid Services has provided guidance on undue hardship 
determinations in the State Medicaid Manual and in a State Medicaid Director letter  
(SMD #06-018, dated July 27, 2006) emphasizing that States have considerable flexibility in 
determining whether undue hardship exists, and the circumstances under which they will not 
impose transfer of assets penalties.  Because of the flexibility afforded to States in determining 
undue hardship, we believe that States may adopt criteria, or even presumptions, that recognize 
  Page 3  State Medicaid Director 
 
that imposing transfer of assets penalties on the basis of the transfer of ownership interests in a 
shared home to a same-sex spouse or domestic partner would constitute an undue hardship. 
 
Estate Recovery: 
Sections 1902(a)(18) and 1917(b)(1) of the Act require States to pursue estate recovery when a 
Medicaid beneficiary received medical assistance under the State plan:  1) in cases where a lien 
has been imposed under the States lien authority, and 2) for recipients age 55 and over, who  
received nursing facility services, home and community-based services, or related hospital and 
prescription drug services.  States may optionally seek recovery to pay for costs of other 
approved State plan services provided to those 55 and over, except Medicare cost sharing paid on 
behalf of Medicare Savings Program beneficiaries on or after January 1, 2010, as provided in 
Section 115 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA), 
Pub. L. 110-275). 
 
Per section 1917(b)(2) of the Act, Medicaid estate recovery may be made only when there is no 
surviving spouse (subject to the provisions in DOMA) and when there is no surviving child  
under age 21, or blind or disabled child of any age.  When estate recovery occurs pursuant to a 
lien, protections are afforded for siblings still lawfully residing in the home, as well as for sons 
or daughters who provided care to the parents and who continue to lawfully reside in the home.   
 
In addition, States are required by section 1917(b)(3) of the Act to have procedures to waive 
estate recovery where it would create an undue hardship for the deceased Medicaid recipients 
heirs. States have flexibility to design reasonable criteria for determining what constitutes an 
undue hardship and who may be afforded protection from estate recovery in such instances.  At 
the States discretion, this may include establishing reasonable protections applicable to the 
same-sex spouse or domestic partner of a deceased Medicaid recipient.  The State plan need only 
specify the criteria for waiver of estate recovery claims due to undue hardship.    
 
We hope this guidance regarding existing options for liens, transfer of assets, and estate recovery 
provides useful clarification regarding State plan flexibilities available to all Medicaid recipients, 
regardless of sexual orientation.  If you have any questions regarding the guidance pertaining to 
liens and estate recovery, please contact Nancy Dieter, Technical Director, Division of Integrated 
Health Systems at 410-786-7219, or by email at nancy.dieter@cms.hhs.gov.  Questions 
pertaining to transfers of assets may be referred to Roy Trudel, Technical Director, Division of 
Eligibility, Enrollment and Outreach at 410-786-3417, or by email at roy.trudel@cms.hhs.gov.                    
 
Sincerely, 
 
/s/ 
 
Cindy Mann 
Director
 
 
   
  Page 4  State Medicaid Director 
 
cc: 
 
CMS Regional Administrators 
 
CMS Associate Regional Administrators  
Division of Medicaid and Childrens Health  
 
Matt Salo  
President 
National Association of Medicaid Directors 
 
Alan R. Weil, J.D., M.P.P.  
Executive Director  
National Academy for State Health Policy 
 
Director of Health Legislation 
National Governors Association 
 
Christine Evans, M.P.H.  
Director, Government Relations  
Association of State and Territorial Health Officials 
 
Rick Fenton  
Acting Director  
Health Services Division  
American Public Human Services Association  
 
Joy Wilson  
Director, Health Committee  
National Conference of State Legislatures 
 
Debra Miller  
Director for Health Policy  
Council of State Governments