Revisiting Estate Recovery in New Jersey (Part 1)

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Medicaid Attorney

In New Jersey, the Department of Human Services, is required by law to recover Medicaid payments from the savings and assets of a Medicaid recipient at the time of his/her death. It should be noted that a person may be eligible to receive benefits under the program, but payment for those benefits can later be recovered by the state. This recovery of benefits paid for by the state is known as “estate recovery” – and it is the issue this blog will address.

Let me briefly address the relevant federal and state statutes regarding the recovery of Medicaid benefit payments. Many of those statutes, however, have been amended multiple times.

Federal Statutes

Federal law generally prohibits recovery of properly paid Medicaid benefits, except from the Medicaid recipient’s estate. The relevant statute provides, in part as follows:

(b) Adjustment or recovery of medical assistance correctly paid under a State plan

(1) No adjustment or recovery of any medical assistance correctly paid on behalf of an individual under the State plan may be made, except that the State shall seek adjustment or recovery of any medical assistance correctly paid on behalf of an individual under the State plan in the case of the following individuals:

(A) In the case of an individual described in subsection (a)(1)(B) of this section, the State shall seek adjustment or recovery from the individual’s estate.

(B) In the case of an individual who was 55 years of age or older when the individual received such medical assistance, the State shall seek adjustment or recovery from the individual’s estate, but only for certain identified forms of medical assistance.

42 USC § 1396p(b)

Because recovery can be made only from the Medicaid recipient’s estate, much depends on what “estate” means. Federal law provides some guidance on that as well. The federal statute defining “estate,” 42 USC § 1396p(b)(4), contains two parts. The first part provides that the Medicaid recipient’s estate includes whatever state’s probate law defines as the estate. The Federal statute also gives the states (like New Jersey) the option to choose to expand that definition, so that it includes not only the probate estate, but also other property interests that the Medicaid recipient had at the time of death. Specifically the term ‘estate,’ with respect to a deceased individual means:

(A) All real and personal property and other assets included within the individual’s estate, as defined for purposes of State probate law; and

(B) May include, at the option of the State, any other real and personal property and other assets in which the individual had any legal title or interest at the time of death (to extent of such interest), including such assets conveyed to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement.

42 USC § 1396 (b)(4)

The permissive definition of “estate” in subparagraph (B) applies only to the extent of the “property interest” that the Medicaid recipient held at the time of death. (permissive definition includes interest held at time of death. The mere existence of a Medicaid recipient’s interest does not necessarily entitle the state to recover the full value of the asset. The state may recover only the value of the Medicaid recipient’s legal property interest.

Estate recovery can occur only after the Medicaid recipient’s spouse also has died. 42 USC § 1396p(b)(2).

To discuss your NJ Medicaid matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.