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 OIG’S 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 OBRA’S 

mandate. 

Due to the complexity of establishing recovery programs, 16 States without recovery 

programs plan to employ a consultant or have State staff develop procedures, while 12 

said they would adapt procedures from another State’s 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 parttime 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 HCFA’S own initiative in this area.


We support HCFA’S 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 HCFA’S 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 indicationsto 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 recoverythathave highdolkupayofl 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 shouldmonitorclmelyStates’progressih obtatig enablingStati &@Wion 

andpumuekgiddive author@ to imposesanctionsorpendies if Statesdb not act withzk 

a reasonableperiodof time to 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 don’t 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 applicant’s 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 individual’s estate or upon sale of the property


subject to a lien, at a minimum, of the amount spent by Medicaid on the person’s


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


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


could be during the individual’s 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 President’s 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 program’s


operation. Twelve said that they would adapt procedures from another State’s


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 are GenerallySucwssjidand Cost-Efiective 

b Existing Programs report in Excess of $85 Million in FY 1993 Recoveries 

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.


b Successful Recovery Units Demonstrate Identifiable Strengths 

. 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 

b Enabling Legislation 

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 General’s 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 

Twe . . of Reoovew Item

Ezl Homes

(25
 ,.1:,:,::::::

.:............ 

,::::,:,:,:::, 

:.:+:+:.:. 

(2%)


(4%)


Savings kcts. 

Checking Acots. 

Pers. Needs Funds 

Inheritance 

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 

State’s 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 State’s 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 individual’s 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 recipients’s 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. 

� Survivin g Spouse 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 has takenAction 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 Director’s 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 legislature’s


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 HCFA’S own initiative in this area.


We support HCFA’S 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 HCFA’S 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 trackStates’progressih 

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 HC’FA shoukittqet znechanikrnsfor recoverythathave highdolikrpayoff and 

&n@ strategii=sto hdp make necasaq infornu&n avaiiizbk-toState;g&&2x to pumu.e 

three mechanisms. 

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~ States’pmgmw in obtaihingenabibzgSate ikgidiztion 

andpumue lqjskztie authorityto iinpwe sanctkmsorpndlies # Statesdo not act within 

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 don’t 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 

I 1 

C D E 

1 $25,000 I $31,629

RI 31A CD not available not available 

o 

VT I No response I c I not available not available 

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


July 1994, according to


$% 

Uses TEFRA liens 

was planning to begin implementation of TEFRA liens in 

a HCF~APWA survey.] 

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 : 

-g 

.

5

%’ ‘4 +vd, 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 individual’s 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.