What is the Medicaid Estate Recovery Time Limit in New York City?

The Medicaid Estate Recovery Time Limit in New York refers to the statute of limitations, the period in which the state Medicaid agency has the right to file an action, to recover the costs of Medicaid disbursed to a Medicaid recipient.

Medicaid Estate Recovery

Medicaid estate recovery is the right of the state to recover costs disbursed for the long-term care, home-based and community-based care of the Medicaid recipient.

Generally, in order to be eligible for Medicaid, a Medicaid recipient must own very few assets. Usually, a Medicaid recipient then will only have one remaining valuable asset at the time of death: his house. The house remains as the Medicaid recipient’s only asset because it is an exempt asset for purposes of determining Medicaid eligibility.

For this reason, Medicaid estate recovery usually refers to recovery on costs from the house of the Medicaid recipient upon the Medicaid recipient’s death.

Limitations on Estate Recovery

In New York, Medicaid cannot place on a lien on a Medicaid recipient’s house if the following continue to live in the house:

• the spouse of the individual;
• a child of the individual who is under twenty-one years of age or who is blind or permanently and totally disabled;  or
• a sibling of the individual who has an equity interest in the home and who 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.

Above are defenses one can raise when Medicaid seeks to impose a lien on the Medicaid recipient/decedent’s house.

Time Limit on Medicaid Estate Recovery

The time limit or statute of limitations for Medicaid to recover costs from the estate of the Medicaid recipient is generally seven months from the time the executor or administrator is appointed by the court.

This seven-month period is a period for which creditors of the decedent’s estate must file their claims with the executor or administrator. Beyond this seven-month period, the executor or administrator may not be held liable for any distribution made to the beneficiaries in good faith.

Defending the decedent’s house from Medicaid estate recovery may need the expertise of a Medicaid lawyer. In the alternative, in case you are planning your estate, the advice of a Medicaid estate planning lawyer is important to ensure you protect your assets and build wealth for the future generation.

Should you need assistance in Medicaid-related matter, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].

The Federal Statutory Framework

Medicaid estate recovery is required by federal law. Under 42 U.S.C. § 1396p, every state must seek recovery from the estates of certain deceased Medicaid recipients. The federal floor requires recovery for:

• Long-term care services (nursing facility services).
• Home and community-based services that are part of the long-term care program.
• Related hospital and prescription drug services.

States can expand recovery beyond this minimum but cannot eliminate it. New York has generally chosen to limit recovery to the federal minimum, recovering only for the long-term care services and not for the full range of medical care received by Medicaid recipients.

What "Estate" Means for Recovery Purposes

Federal law gives states a choice in defining "estate" for recovery purposes. The narrow definition (used by New York) includes only assets passing through probate — assets in the decedent's sole name at death. The broader definition (used by some other states) includes non-probate assets such as joint accounts, trusts, life insurance, and TOD accounts.

New York's narrow definition is one of the most important features of its Medicaid estate recovery program. Assets that pass outside probate — joint with right of survivorship, in trust, with named beneficiaries — are generally not subject to recovery in New York. This is the foundation of much of the Medicaid asset protection planning we do for clients.

Who Is Subject to Recovery

Estate recovery applies to:

• Deceased Medicaid recipients who were 55 or older when they received the recoverable services.
• Deceased Medicaid recipients of any age who received institutional long-term care services.

Routine medical services provided to Medicaid recipients under 55 outside of institutional long-term care do not generate recoverable claims against the estate.

Exceptions to Recovery

Even where the basic eligibility for recovery is met, federal law requires states to forgo recovery in several situations:

Surviving spouse. Recovery is not pursued while there is a surviving spouse. The deferral lasts for the spouse's lifetime. After the spouse's death, recovery may be pursued against any of the original recipient's assets that ended up in the spouse's estate.

Minor child. Recovery is not pursued while there is a surviving child under age 21.

Blind or disabled child. Recovery is not pursued while there is a surviving child of any age who is blind or permanently and totally disabled.

These exemptions are absolute, not discretionary. If the situation meets the requirements, the state cannot recover during the protected period. The exemptions can be invoked through correspondence with the recovery unit and through formal claims procedures if needed.

Hardship Waivers

In addition to the statutory exemptions, federal law allows states to grant hardship waivers in specific circumstances. New York's hardship waiver applies primarily when:

• The estate's only significant asset is the family home and selling it would create significant hardship for a survivor who has occupied the home as their primary residence for a sustained period.
• The recovery would result in a survivor being unable to obtain alternative housing or basic necessities.
• Other circumstances make recovery unjust.

Hardship waivers are discretionary and require formal application with supporting documentation. They are sometimes granted, sometimes denied. Where granted, the waiver typically permits the heir or survivor to keep the asset without payment to the state.

The Mechanics of a Recovery Claim

When a Medicaid recipient dies, the local Department of Social Services (HRA in New York City) receives notice from various sources — the funeral director's statement, the Medicaid recertification process, family notification, or the Surrogate's Court filing for probate. Within a defined period, DSS evaluates whether recovery is appropriate.

If recovery is pursued, DSS files a notice of claim with the executor or administrator of the estate. The claim identifies the amount owed (broken down by services provided), the recipient's case number, and the basis for the claim. The executor must include the claim in the accounting and either pay it, settle it, or contest it.

Settlement of Recovery Claims

Recovery claims are negotiable. The state has limited litigation resources and faces statutory and equitable defenses. Many claims are settled at a discount — commonly 25 to 50 cents on the dollar — particularly where the estate has multiple competing claims or where the defenses are strong.

Negotiation typically involves:

• Review of the itemized statement of services to identify unsupported or improperly billed items.
• Identification of statutory exemptions and hardship circumstances.
• Analysis of competing claims that have priority over Medicaid.
• Discussion with the recovery unit about a discounted settlement.
• Documentation of the settlement in writing with release of further claims.

Defenses to Recovery

Available defenses to recovery claims include:

• Statute of limitations. Claims must be filed within statutory deadlines.
• Inadequate documentation. The state must support each portion of the claim with itemized records.
• Improperly billed services. Services not actually provided, billed at wrong rates, or otherwise improperly claimed can be excluded.
• Statutory exemptions. Surviving spouse, minor children, blind or disabled children.
• Hardship. Demonstrated hardship for survivors.
• Estate composition. Assets that passed outside probate are generally not subject to recovery in New York.

Each defense requires specific evidence. Working with counsel familiar with Medicaid recovery practice produces better outcomes than attempting to handle the claim alone.

Planning to Avoid Recovery

The most effective approach is to plan before Medicaid is needed. Strategies include:

• Irrevocable Medicaid Asset Protection Trusts to hold the home and other assets outside the eventual probate estate.
• Life estate deeds that transfer remainder interests during life.
• Joint ownership with right of survivorship for accounts and (in some cases) real estate.
• Updating beneficiary designations on retirement accounts and life insurance.
• Coordinating planning across the family's broader estate plan.

Planning works best when started early — ideally more than five years before Medicaid is anticipated, to satisfy the look-back period for institutional Medicaid. Planning is still possible in crisis situations but with fewer tools available.