Titles of Regulations: 12VAC30-10. State Plan Under Title XIX of the Social Security Act Medical Assistance Program; General Provisions (amending 12VAC30-10-560).

12VAC30-20. Administration of Medical Assistance Services (adding 12VAC30-20-141; repealing 12VAC30-20-140).

Statutory Authority: §§32.1-324 and 32.1-325 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comments: Public comments may be submitted until November 14, 2008.

Agency Contact: Kathy Colley, Fiscal Division, Department of Medical Assistance Services, 600 East Broad Street, Suite 1300, Richmond, VA 23219, telephone (804) 786-3839, FAX (804) 786-1680, or email kathy.colley@dmas.virginia.gov.

Basis: Section 32.1-325 of the Code of Virginia grants to the Board of Medical Assistance Services the authority to administer and amend the Plan for Medical Assistance. Section 32.1-324 of the Code of Virginia authorizes the director of the department to administer and amend the Plan for Medical Assistance according to the board's requirements. The Medicaid authority as established by §1902 (a) of the Social Security Act (42 USC §1396a) provides governing authority for payments for services.

The Medicaid Estate Recovery program was mandated by the federal Omnibus Budget Reconciliation Act of 1993, as codified at 42 USC §1396p(b)(1)(B) of the Social Security Act (42 USC §1396p), which requires the Commonwealth to seek adjustment or recovery from certain beneficiaries' estates. Section 32.1-326.1 of the Code of Virginia directs DMAS to comply with the federal requirements and operate a Medicaid estate recovery program.

Purpose: Several aspects of the regulations regarding Medicaid estate recovery are in need of updating and clarification. This action clarifies ambiguous language and augments the language of the estate recovery regulations to add greater detail to enhance understanding about the Medicaid estate recovery process. This proposed action is expected to have a significant and positive impact on the health, safety, and welfare of the citizens of the Commonwealth by aiding the fiscal integrity of the Medicaid program, and recovering Medicaid benefits correctly and incorrectly paid under the estate recoveries provisions in §1917(b) of the Social Security Act. This regulatory action further provides clarification on mandatory and optional recovery when a Medicaid beneficiary receives services that are specified as collectible services under the Commonwealth’s State Plan for estate recovery.

Substance: DMAS intends to update the language of the estate recovery regulations to more closely reflect current agency practice based upon language provided by the federal Medicaid agency, the Centers for Medicare and Medicaid Services. Specifically the agency intends to delete the definitions for "estate" and "applicable medical assistance payments" located in 12VAC30-10-560 and move these two definitions into new 12VAC30-20-141.

The agency also intends to repeal 12VAC30-20-140 (Estate Recoveries) in order to repromulgate this section in a restructured and revised format in 12VAC30-20-141. The agency intends to revise several of the definitions included in the section and to add two new definitions, for "cost effective" and "homestead of modest value." The revision also includes the exemption from Medicaid estate recovery for American Indian/Alaska Native income, resources and property as defined in the State Medicaid Manual, and assets or resources that were disregarded due to an authorized State Long-Term Care Insurance Partnership policy.

Issues: The advantages of these changes to the public are that they clarify what is required by the Centers for Medicare and Medicaid Services relating to Medicaid estate recovery. The proposed update does not change how DMAS is currently handling Medicaid estate recovery, but better articulates the provisions and understanding of the regulations. DMAS has not identified any disadvantages to the public or the Commonwealth regarding these proposed changes.

The Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The proposed changes will clarify and update the regulations to more closely reflect the estate recovery practices currently followed in accordance with the Centers for Medicare and Medicaid guidance document titled "State Medicaid Manual."

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. The proposed changes will clarify and update the regulations to more closely reflect the estate recovery practices currently followed in accordance with the Centers for Medicare and Medicaid guidance document titled "State Medicaid Manual." These changes include reorganizing the regulations and adding clarifying definitions and language.

According to Department of Medical Assistance Services, none of the proposed changes will change the estate recovery practices currently followed in practice, but the changes are expected to increase the clarity of the regulations. Consequently, no significant economic effect is expected other than avoiding the potential confusions and communication costs that may have otherwise occurred from less clear language.

Businesses and Entities Affected. Approximately, 10 estate recovery cases per year are estimated.

Localities Particularly Affected. The proposed regulations apply throughout the Commonwealth.

Projected Impact on Employment. No significant effect on employment is expected.

Effects on the Use and Value of Private Property. No significant effect on the use and value of private property is expected.

Small Businesses: Costs and Other Effects. The proposed regulations are not expected to create any significant costs or other effects on small businesses.

Small Businesses: Alternative Method that Minimizes Adverse Impact. The proposed regulations are not expected to create any significant adverse impact on small businesses.

Real Estate Development Costs. No significant effect on real estate development costs is expected.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 36 (06). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB’s best estimate of these economic impacts.

Agency's Response to the Department of Planning and Budget's Economic Impact Analysis: The Department of Medical Assistance Services concurs with the economic impact analysis prepared by the Department of Planning and Budget regarding the regulations concerning Estate Recovery (12VAC 30-10-560, 12VAC 30-20-140, and 12VAC 30-20-141).

Summary:

The proposed amendments update and clarify the current regulations regarding Medicaid estate recovery carried out by the Department of Medical Assistance Services. This regulatory action more closely reflects current agency practice based upon language provided by the federal Medicaid agency, the Centers for Medicare and Medicaid Services, in its guidance document publication titled "State Medicaid Manual." This change repeals 12VAC30-20-140 (Estate Recoveries) in order to repromulgate this section in a restructured and revised format as 12VAC30-20-141. This regulatory action will add new definitions for "cost effective" and "homestead of modest value." The definitions for "estate" and "applicable medical payments" will be deleted from 12VAC30-10-560 and moved into new 12VAC30-20-141. This revision also includes the exemption from Medicaid estate recovery for American Indian/Alaska Native income, resources and property as defined in the federal State Medicaid Manual. Consistent with the State Medicaid Manual, assets or resources that were disregarded due to an authorized State Long-Term Medicaid Insurance Partnership policy are being exempted from estate recovery actions.

12VAC30-10-560. Liens and recoveries.

Liens are not imposed against an individual's property.

A. Adjustments or recoveries for Medicaid claims correctly paid are as follows: See 12VAC30-20-140 12VAC30-20-141.

1. For permanently institutionalized individuals, adjustments or recoveries are made from the individual's estate.

2. For any individual who received medical assistance at age 55 or older, recovery of payments are made for nursing facility services, home- and community-based services, and related hospital and prescription drug services.

Payments are recovered for all services covered under the plan which are provided to individuals at age 55.

3. For any individual with long-term care insurance policies, if assets or resources are disregarded, recovery is made for all Medicaid costs for nursing facility and other long-term care services from the estate of persons who have such policies.

4. 3. If an individual covered under a qualified long-term care partnership insurance policy pursuant to § 32.1-325 of the Code of Virginia received benefits for which assets or resources were disregarded as provided for in 12VAC30-40-290 G, the state Commonwealth does not seek adjustment or recovery from the individual's estate for the amount of assets or resources disregarded.

B. No money payments under another program are reduced as a means of recovering Medicaid claims incorrectly paid.

C. Liens. See 12VAC30-20-130.

1. Specifies the process for determining that an institutionalized individual cannot reasonably be expected to be discharged from the medical institution and return home; the description of the process meets the requirements of 42 CFR 433.36(d).

The Commonwealth does not impose liens therefore this subsection is not applicable.

2. Specifies the criteria by which a son or daughter can establish that he or she has been providing care under 42 CFR 433.36(f).

3. Definitions: individual's home; equity interest in home; residing in home for at least 1 or 2 years, on a continuing basis; discharge from the medical institution and return home; and lawfully residing.

The Commonwealth does not impose liens therefore this subsection is not applicable.

D. Estate recoveries.

1. Definitions.

"Applicable medical assistance payments" means the amount of any medical assistance payments made on behalf of an individual under Title XIX of the Social Security Act.

"Estate" means with respect to a deceased individual, (i) all real and personal property and other assets held by the individual at the time of death and (ii) any other real and personal property and other assets in which the individual had any legal title or interest (to the extent of such interest) at the time of death.

2. 12VAC30-20-140 further 12VAC30-20-141 (Attachment 4.17-C) specifies the policy for estate recoveries.

12VAC30-20-140. Estate recoveries. (Repealed.)

A. General. Under the authority and consistent with the requirements of the Social Security Act §1917, the Commonwealth recovers certain Medicaid benefits when they have been correctly paid on behalf of certain individuals. The Commonwealth seeks recovery for all services which have been paid for consistent with the coverage and reimbursement policies in the State Plan for Medical Assistance.

B. Identification of deceased recipients' estates. The Medical Assistance Title XIX agency shall take all reasonable measures to determine the existence of deceased eligible individuals with recoverable estates.

C. Initiation of claim and recovery.

1. The Medical Assistance Title XIX agency's estate recovery unit will review and initiate recovery activities for all deceased eligible individual's estates identified which meet agency minimum criteria defined in subsection B of this section. A review of all deceased eligible individuals' applicable medical assistance payments paid correctly must be performed to determine the amount of the Commonwealth's claim against the estate. A "Notice of Claim" shall be sent to the deceased eligible individual's estate administrator or executor upon determination that estate recovery meets the minimum criteria. The "Notice of Claim" shall include, at minimum, (i) the deceased eligible individual's identification information, (ii) the claim amount, (iii) the agency contact, and (iv) the attached summary of applicable medical claims paid. The "Notice of Claim" shall also contain, but not necessarily be limited to, information regarding the exclusions identified below, the applicant's right to appeal, and the hardship rule.

2. The Medical Assistance Title XIX agency will, at a minimum, initiate recovery when the following conditions are met:

a. Legal estate administrator or executor has been verified.

b. Dollar amount of applicable medical assistance payments (claim amount) and estate meets agency cost effective threshold. The Title XIX agency will determine a cost effective threshold based on the administrative costs to pursue recovery from an estate. The Title XIX agency will adjust the cost effective threshold as the agency's administrative costs change. Recovery shall not be initiated unless both the amount of the claim and the value of the estate at least exceed the administrative cost of recovery.

c. Deceased eligible was single or surviving spouse is deceased.

d. Deceased eligible has no surviving children under 21 or children who are blind or disabled.

e. Deceased eligible was 55 years of age or older when the individual received such medical assistance.

f. Deceased eligible had no surviving sibling who had an equity interest in the deceased's home and such sibling resided in the property for at least one year prior to the deceased's entering a nursing facility.

3. Appeals related to the recovery of funds will be administered by the Medical Assistance Title XIX agency.

4. The Medical Assistance Title XIX agency will pursue recovery only to the extent that payments for applicable medical claims have been correctly made under the State Plan for Medical Assistance.

D. Hardship clause. The Medical Assistance Title XIX agency shall waive its claim if it determines that enforcement of the claim would result in substantial hardship to the devisees, legatees, and heirs or dependents of the individual against whose estate the claim exists. Special consideration shall be given to cases in which the estate subject to recovery is (i) the sole income-producing asset of survivors (where such income is limited), such as a family farm or other business, or (ii) a homestead of modest value, or (iii) other compelling circumstances. In cases where recovery is not waived and beneficiaries of the estate from which recovery is sought wish to satisfy the Commonwealth's claim without selling a nonliquid asset which is subject to recovery, alternative methods of recovery may be considered.

12VAC30-20-141. Estate recoveries.

A. Definitions. The following words and terms when used in this regulation shall have the following meanings unless the context clearly indicates otherwise:

"Act" means the Social Security Act (42 USC §1396) as applicable.

"Applicable medical assistance payment" means the amount of any medical assistance payments made on behalf of an individual under Title XIX of the Social Security Act.

"Claim" means, for the purposes of this section, action taken by DMAS to recover from the estate of an individual, who was age 55 or older when that person received medical assistance, the total amount of assistance paid for services consistent with the coverage and reimbursement policies in the State Plan for Medical Assistance.

"Cost effective" means that both the dollar amount of the medical assistance payments (claim) and the value of the estate at least exceed the administrative costs of recovery.

"Dual eligibles" mean individuals who are entitled to Medicare hospital insurance under Part A or supplementary medical insurance under Part B, or both, and are eligible for some form of Medicaid benefit.

"Estate" means, with respect to a deceased individual, (i) all real and personal property and other assets held by the individual at the time of death and (ii) any other real and personal property and other assets in which the individual had any legal title or interest (to the extent of such interest) at the time of his death.

"Homestead of modest value" means a home that is worth 50% or less of the average price, as contained in the most recent U.S. Census data, of homes in the county or city, as appropriate, where the homestead is located as of the date of the individual’s death.

"Undue hardship" means that DMAS has determined that enforcement of a claim to recover Medicaid benefits would result in substantial hardship to the devisees, legatees, and heirs or dependents of the deceased individual against whose estate the Medicaid claim exists.

B. Under the authority and consistent with the requirements of the Social Security Act §1917 (the Act), the Commonwealth shall recover applicable medical assistance payments when such payments have been correctly or incorrectly paid on behalf of certain individuals. The Department of Medical Assistance Services (DMAS) shall provide notice of the Commonwealth’s Medicaid estate recovery program at the time of application for medical assistance.

C. Adjustment and recovery. Adjustment or recovery can only be made after the death of the individual's surviving spouse, if any, and only at a time when the individual has no surviving child under age 21, or a blind or disabled child as defined in §1614 of the Act. The Commonwealth shall seek adjustment or recovery of all medical assistance payments correctly paid on behalf of an individual under the State Plan as follows:

1. The Commonwealth shall seek adjustment or recovery from the estate of an individual who was age 55 or older when that person received medical assistance. The Commonwealth shall recover amounts up to the total amount spent on the individual's behalf for medical assistance for all items or services provided for the individual under the State Plan.

2. The Commonwealth shall recover from the estates of the following dual eligibles who receive full Medicaid benefits in addition to Medicare: (i) qualified Medicare beneficiaries with full Medicaid benefits (QMB Plus), (ii) specified low-income Medicare beneficiaries with full Medicaid benefits (SLMB Plus), and (iii) Medicare beneficiaries eligible for a limited package of Medicaid benefits (QMB, SLMB, qualified individuals (QI) or qualified disabled and working individuals (QDWI)). The Commonwealth shall recover from the individual’s estate for all medical assistance payments made on behalf of the individual. In addition, the Commonwealth shall include in the Commonwealth’s claim against the estate, amounts expended for Medicare cost-sharing or Medicare premiums, or both.

3. The Commonwealth shall recover from individuals with long-term care insurance policies. The Commonwealth shall not seek adjustment or recovery from the individual's estate for all Medicaid costs for nursing facility and other long-term care services if assets or resources are disregarded to the extent of payments made under a qualified long-term care partnership insurance policy.

4. Estate recovery and managed care. When a Medicaid beneficiary is enrolled in a managed care organization and services are provided by the managed care organization that are included under the State Plan, the Commonwealth shall seek adjustment or recovery from the individual’s estate for the premium payments in the Commonwealth’s claim against the estate. When the individual enrolls in the managed care organization, the Commonwealth shall provide a separate notice to the individual that explains that the premium payments made to the managed care organization are included in whole in the claim against the estate. The Commonwealth shall recover from the individual’s estate the total capitation rate for the period the individual was enrolled in the managed care organization.

5. The following American Indian/Alaska Native (AI/AN) income, resources, and property shall be exempt from Medicaid estate recovery pursuant to §1917(b)(3) of the Act for hardship applicable to federally recognized tribes:

a. Certain AI/AN income and resources (such as interests in and income derived from tribal land and other resources currently held in trust status and judgment funds from the Indian Claims Commission and the U.S. Claims Court) that are exempt from Medicaid estate recovery by other laws and regulations;

b. Ownership interest in trust or nontrust property, including real property and improvements:

(1) Located on a reservation (any federally recognized Indian tribe’s reservation or near a reservation) as designated and approved by the Bureau of Indian Affairs of the U.S. Department of the Interior; or

(2) For any federally recognized tribe not described in this subdivision, located within the most recent boundaries of a prior federal reservation.

(3) Protection of nontrust property described in this subdivision is limited to circumstances when it passes from an Indian (as defined in §4 of the Indian Health Care Improvement Act, 25 USC §§ 1601-1683) to one or more relatives (by blood, adoption, or marriage), including Indians not enrolled as members of a tribe and non-Indians, such as spouses and step-children, that their culture would nevertheless protect as family members; to a tribe or tribal organization or to one or more Indians, or all of these;

c. Income left as a remainder in an estate derived from property protected in this subdivision, that was either collected by an Indian, or by a tribe or tribal organization and distributed to an Indian or Indians, as long as the individual can clearly trace such income as coming from the protected property.

d. Ownership interests left as a remainder in an estate in rents, leases, royalties, or usage rights related to natural resources (including, but not necessarily limited to, extraction of natural resources or harvesting of timber, other plants and plant products, animals, fish, and shellfish) resulting from the exercise of federally protected rights, and income either collected by an Indian, or by a tribe or tribal organization and distributed to an Indian or Indians derived from these sources as long as the individual can clearly trace the interest as coming from protected sources.

e. Ownership interests in or usage rights to items not covered by this subdivision that have unique religious, spiritual, traditional, or cultural significance or rights, or all of these, that support subsistence or a traditional lifestyle according to applicable tribal law or custom.

6. The Commonwealth shall recover the following income, resources and property from the estates of American Indians and Alaska Natives:

a. Ownership interests in assets and property, both real and personal, that are not described in this subdivision.

b. Any income and assets left as a remainder in an estate that do not derive from protected property or sources in this subdivision.

7. Reparation payments to individuals. Government reparation payments to special populations shall be exempt from Medicaid estate recovery.

8. Annuities. The Commonwealth considers annuities to be legal devices by which ownership of assets, such as estates, is defined and therefore may seek recovery from individuals’ estates that may include such annuities. This provision is effective for deaths or estates that are opened 90 days after the Commonwealth meets applicable state and federal law for appropriate notice and due process.

D. Undue hardship. Whenever estate recovery would work an undue hardship on the deceased individual’s heirs, the Commonwealth shall waive adjustment or recovery. Recovery from deceased individuals’ estates shall be waived when the heirs are themselves Medicaid eligible. The Commonwealth shall determine whether individuals who will be affected by Medicaid estate recovery may have the right to apply for an undue hardship waiver.

1. Special consideration shall be shown in cases in which the estate subject to recovery is: (i) the sole income-producing asset of survivors (where such income is limited), such as a family farm or other family business; (ii) a homestead of modest value; or (iii) other compelling circumstances as may be set out in agency guidance documents.

2. The Commonwealth may determine that an undue hardship exists when it would not be cost effective to recover the assistance paid.

3. In cases where recovery is not waived and heirs of the estate from which recovery is sought wish to satisfy the Commonwealth's claim without selling a nonliquid asset that is subject to recovery, alternative methods of recovery may be considered. DMAS may also establish a reasonable payment schedule.

4. The Commonwealth may limit the hardship waiver to the time period during which the undue hardship circumstances existed or continue to exist.

5. An undue hardship shall not exist if the beneficiary created the hardship by resorting to estate planning methods under which the beneficiary divested assets in order to avoid estate recovery.

E. DMAS shall establish collection procedures to include identification of the estate administrator or executor, determination of the medical assistance claim amount, notification procedures, and such other procedures as are appropriate to pursue the recovery of medical assistance expenditures. Such procedures will be set out in an agency guidance document.

F. Recovery or adjustment not cost effective.

1. The Commonwealth may waive adjustment or recovery in cases in which it is determined that it would not be cost effective for the Commonwealth to recover from a deceased individual’s estate. The estate administrator, executor, survivor, or heir does not need to assert undue hardship in such situations.

2. In determining whether recovery would be cost effective, the department may consider, but is not limited to consideration of, the following costs: staff time, litigation costs, expert witness fees, deposition expenses, travel expenses, office supplies, postage, advertising, and publishing costs. DMAS shall adjust the cost effective threshold as the agency's administrative costs change.

G. Appeals. The DMAS Appeals Division will administer appeals related to the recovery of funds pursuant to 12VAC30-110.