LTC Bullet: WV Loses Estate Recovery Challenge

Tuesday May 29, 2001


The U.S. District Court for the Southern District of West Virginia recently denied West Virginiaís bid to eliminate estate recovery as a condition of receiving federal Medicaid funds. In the Omnibus Budget Reconciliation Act of 1993 (OBRA í93), Congress amended Medicaid law to require that states recover benefits from the estates of deceased recipients as a condition of receiving federal funds. Congress mandated estate recovery in order to maximize the amount of funds available to help needy Medicaid recipients. The Courtís decision in "State of West Virginia v. U.S. Department of Heath and Human Services" upholds the constitutionality of estate recovery, thereby denying West Virginia's attempt to evade a critical element of the Medicaid program.

Whatís the lesson of this court ruling? States unhappy about estate recovery should support public policy reform that encourages people to save, invest or insure for the risk of long-term care, thereby avoiding welfare dependency and the prospect of Medicaid estate recovery. Estate recovery will remain a necessary fact of life for many people, however, as long as Medicaid continues to struggle as this nationís de facto nationalized long-term care program.

Hereís the rest of the story.

In 1995, the State of West Virginia established an estate recovery program pursuant to OBRA Ď93, but included in the enabling legislation a provision directing its attorney general to challenge the constitutionality of the federal mandate. Accordingly, West Virginia Attorney General Darrell McGraw filed this lawsuit on behalf of the state seeking to enjoin the federal government from enforcing its estate recovery law. The Attorney General argued that estate recovery is an illegitimate exercise of congressional power and, therefore, it violates the 10th Amendment of the U.S. Constitution.

In its opinion the Court wrote: "West Virginia, by its Attorney General, argues in effect that conditioning receipt of Medicaid funds upon the implementation of an estate recovery program is an unacceptable Hobsonís Choice. . . . Read in the harshest way, the [estate recovery] amendments say: Take the funding that requires you to implement an estate recovery program or take no funding at all. The question before the court is whether Congress can put the matter to the State of West Virginia in such a way. Can Congress, consistent with the Constitution, require West Virginia to implement an estate recovery program as a condition precedent to the receipt of Medicaid funds?"

The Court answered this question in the affirmative, upon demonstrating that estate recovery meets all of the requirements for a valid exercise of Congressís spending power granted in Article 1, Section 8 of the Constitution. The Court did acknowledge, however, its sympathy for West Virginiaís plight. In demonstrating how dependent the state has become on federal Medicaid assistance, the Court cited these facts: Medicaid pays 75 percent of West Virginiaís nursing home costs; more than 90 percent of its long-term care costs for the mentally retarded, behavioral health services and HCBS; and that West Virginiaís Medicaid expenditures doubled from 1992-1997.

Notably, the Court stated that "OBRA í93 does not force estate recovery upon any citizen of a state. Persons subject to estate recovery elect to receive Medicaid benefits and the regulations demand that such recipients receive notice of the estate recovery requirement when choosing to accept or reject Medicaid long-term care benefits." The Court also noted that the legislative history of estate recovery "reflects Congressís salutary purpose of maximizing the amount of money available to those who absolutely cannot afford medical and nursing care."

Ironically, the Court cited Ira Wiesner, Past President of the National Academy of Elder Law Attorneys (NAELA), for the proposition that Congress established estate recovery to "counterbalance rocketing Medicaid expenditures and overall budget and deficit reductions." Wiesner is given further credit for the observation that "Congress [via estate recovery] sought a way to stymie the growth in state Medicaid expenditures without depriving eligible recipients of much needed care." If youíre new to LTC Bullets, you need to know that NAELA is the trade association of the Medicaid planning bar. Many NAELA members take great pride in helping their clients evade estate recovery (often the very same people they artificially impoverish to qualify for Medicaid in the first place), thereby frustrating the goal of the program.

As noted above, estate recovery reflects Congressís decision that Medicaid be treated as a loan from the U.S. Treasury so that more people can benefit from our limited public resources. Medicaid planning to evade estate recovery is more or less planning to default fraudulently on this loan and should be addressed if Congress is serious about enforcing the law and saving Medicaid for truly needy.