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A Better Partnership
February 08, 2016

COA – DHHS could not recover Medicaid debt incurred by decedents’ estates consistent with due process

In the consolidated appeals of In re Estate of Gorney, Nos. 323090, 323185, 323304, and 326642, the Michigan Court of Appeals held that the Department of Health and Human Services (“DHHS”) could not recover debt from the decedents’ estates incurred through Medicaid services before the Michigan estate recovery program was approved by the federal government and implemented by the State.  However, in light of a previous Court of Appeals’ decision, the Court held that DHHS had afforded sufficient statutory notice and judicial process to meet due process requirements by including estate recovery provisions in redetermination applications for Medicaid benefits.
In accordance with Congressional requirements, the State of Michigan implemented a Medicaid estate recovery program under MCL 400.1 et seq.  The program was approved by the federal government in May 2011 and implemented in July 2011.  The estate recovery program allows DHHS to seek recovery of Medicaid benefits paid on behalf of a decedent from the decedent’s estate.  In order to obtain Medicaid benefits, an applicant is required to submit an application for benefits annually.  In 2012, DHHS began including a provision in all applications that provided DHHS with the legal right to seek recovery of benefits paid by Medicaid from the applicant’s estate.   In the four underlying probate court actions, DHHS sought recovery of Medicaid benefits paid on behalf of the decedents under the estate recovery provisions in their applications.  The decedents’ estates claimed that DHHS had provided inadequate notice of the estate recovery program and thus violated their due process rights.  The probate courts agreed with the estates and dismissed DHHS’s claims; DHHS appealed.
On appeal, the estates argued that DHHS failed to provide them with proper notice of the estate recovery program when they initially enrolled in Medicaid, and thus violated their due process rights.  In addition, the estates claimed that DHHS violated their due process rights in trying to seek recovery for benefits paid in 2010, a year before the federal government approve the program and two years before the provisions were included in Medicaid applications.  In its analysis, the Court of Appeals followed its previous holding in In re Estate of Keyes, 310 Mich App 266; 871 NW2d 388 (2015) (discussed previously here), in resolving the issue of statutory notice and due process requirements.    The Court held that the inclusion of the estate recovery provisions in the applications “sufficiently notified [the decedent] that her estate could be subject to estate recovery,” and therefore, “the notice in these matters was statutorily sufficient and the probate courts erred in concluding otherwise.”  As to the estates’ due process arguments, the Court concluded that the estates had an opportunity to contest the estate recovery provisions in their Medicaid applications and therefore received an opportunity to be heard in accordance with due process requirements.          
In addressing the estates’ claim that DHHS violated their due process rights by seeking recovery for benefits paid in 2010, the Court discussed notions of fairness in the retroactivity of newly enacted statutory provisions.  The Court looked to two cases, one from Washington and the other from Arkansas, which addressed the retroactivity of Medicaid estate recovery programs.  In each case, the courts concluded that applying the program retroactively would “result in the unfairness for which courts traditionally have disfavored retroactivity.”  Here, the Court of Appeals agreed, and held that taking the estates’ property to recover costs between 2010 and the 2011 implementation of Michigan’s program “would therefore violate the decedents’ rights to due process.”  The Court affirmed the probate courts’ holding in part, reversed in part, and remanded for further proceedings.
Judge Jansen filed a partial concurrence and dissent in this case.  She agreed with the majority’s determinations regarding the statutory notice and due process requirements, but dissented with respect to its holding that DHHS violated due process rights in seeking to recover benefits paid between 2010 and 2011.  According to Jansen, because the Court in Keyes held that the recovery program did not violate due process “despite the fact that the decedent began receiving Medicaid benefits in April 2010,” its holding controlled in this case.

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