A. Chapter
Contents

This chapter covers the following:

Topic

1901.00

Recovery Agent

1902.00

Estate Recovery Claims

1902.01

Estate Recovery Process

1902.02

Estate Claims Exemptions

1902.03

Waivers and Reductions of Claims

1903.00

TEFRA Liens

B. Introduction

Congress passed the Omnibus Budget Reconciliation Act of 1993 (OBRA '93) on August 10, 1993. It became effective as Federal law under 42 U.S.C. 1396(p) on October 1, 1993. The passage of this Federal law mandated the states to implement an Estate Recovery Program. Arizona implemented its Estate Recovery Program effective January 1, 1994. Under this program, if certain conditions (MS 1902.00.E) are met, AHCCCS is required to file a claim against an ALTCS customer's estate to recover its costs for providing Medicaid benefits.

AHCCCSA may also impose a TEFRA lien, as authorized under 42 U.S.C.1396(p) (Tax Equity and Fiscal Responsibility Act of 1982) against the real property, including the customer's primary residence, of certain permanently institutionalized (i.e., nursing home) customers (MS 1903.00). The purpose of the lien is to recover the cost of AHCCCS benefits upon the customer's death or the transfer of the property. 

C. Program and Legal Authority

This requirement applies to the following programs:

Program

Legal Authorities

ALTCS

• 42 U.S.C. § 1396p

• A.R.S. §36-2935

• A.A.C. R9-22-1006

• A.A.C. R9-28-911 through R9-28-919

A. The AHCCCS Recovery Agent

The Health Management Systems, Inc. (HMS) is a private firm that handles recoveries on behalf of the AHCCCS, including:

• Claims against a customer's estate;

• TEFRA liens; and

• Recovery from Special Treatment Trusts (MS 809.00) 

B. Information Requested By HMS

Whenever HMS requests that the ALTCS local office provide it with information, the local office must do so in a timely fashion.

C. Questions About Claims and TEFRA Liens

Direct questions from customers, representatives and others about the Long Term Care Estate Recovery Program and TEFRA liens to Health Management Systems or to the AHCCCS TPL Unit in the Division of Business and Finance.

Health Management Systems, Inc.
Recovery Unit
P.O. Box 10530
Phoenix, AZ 85064
Local: 602-954-8380
Toll Free: (888) 378-2836

AHCCCS TPL/DBF
701 E. Jefferson Street, MD 8700
Phoenix, AZ 85034
(602) 417-4006

A. Claim Definition

A claim is a legal demand against the estate of an ALTCS customer to recover payment for AHCCCS expenditures issued on the customer's behalf.

B. Payments For Which AHCCCS Seeks Recovery

The amount of the AHCCCS claim that will be filed against the ALTCS customer's estate is the total of all ALTCS payments made by the AHCCCS Administration on behalf of the ALTCS customer. AHCCCS recovers for the following types of payments:

Payments Recovered

Description

Capitation

AHCCCS contracts with program contractors who are responsible to ensure the delivery of covered medical services to ALTCS customers. AHCCCS pays program contractors a monthly "capitation" payment prospectively for each enrolled ALTCS customer.

Medicare Coinsurance & Deductibles

AHCCCS may be responsible for the payment of the ALTCS customer's coinsurance and deductible payments prior to enrollment with the program contractor. AHCCCS recovers all Medicare coinsurance and deductibles paid on behalf of the ALTCS customer.

Medicare Part A-& Part B Premiums

AHCCCS recovers all Medicare Part A and B premium payments paid to the Social Security Administration on behalf of the ALTCS customer.

Reinsurance

AHCCCS provides a risk-sharing coverage to program contractors to reimburse them for certain costs incurred by an ALTCS customer that are beyond a certain monetary threshold. Therefore, in addition to the monthly capitation payment, AHCCCS may make a reinsurance payment to the program contractor.

Fee-for-Service Payments

AHCCCS directly pays ALTCS customers' medical bills in limited situations described in MS 1102.00.B. These payments are called "fee-for-service' payments.

C. When AHCCCS Claim Begins

The AHCCCS claim begins to accrue on the first day of the month in which the customer begins to receive ALTCS benefits and is 55 or older. If the customer is not yet 55, the claim accrues beginning with the month in which the customer turns 55.

D. Assets Subject To Estate Recovery

The AHCCCS estate claim is filed at the time of the customer's death against all property subject to either Small Estate Affidavit* or probate. A home that was solely owned by an ALTCS customer, owned jointly without right of survivorship, or owned jointly with right of survivorship (and the joint owner is deceased) is subject to an AHCCCS claim.

*NOTE: A Small Estate Affidavit is an informal procedure for administration of small estates of decedents and is less structured than ordinary probate. Normally, the services of an attorney are not required. Heirs or devisees file an affidavit in court stating that the estate's assets are less than $50,000. Claims are settled with creditors without probate procedures.

E. To Whom Does Estate Recovery Apply?

• Is not a Native American,

• Received ALTCS nursing home or HCBS benefits, and

• Was 55 years or older when benefits were received, and,

• Received benefits on or after January 1, 1994, and

• Is deceased.

A. Informing Customers About Estate Recovery

The financial eligibility specialist must inform all customers and/ or representatives about the estate recovery program during the initial application interview.

• The Estate Recovery Program Brochure (DE-810) must be provided to all HCBS and Long Term Care applicants following the initial application screening process. This brochure explains how the AHCCCS Estate Recovery Program works.

• The financial eligibility specialist must ensure that the customer acknowledges the receipt of the Estate Recovery Program brochure and the presenting of information on the estate recovery program by obtaining the signature of the customer or representative on the application.

B. Information Received by HMS

Health Management Systems (HMS) has various sources of information about ALTCS customers. When an individual is approved for ALTCS benefits, the information entered in the AHCCCS PMMIS system and the AHCCCS ACE system is available to HMS. When the customer has a Special Treatment Trust, the AHCCCS TPL Unit is notified. HMS also periodically receives a "data extract tape" from AHCCCS that provides information on recently deceased customers. HMS contracts with "clipping services" that provide names of individuals who have recently died and whose deaths have been reported in the newspaper.

C. Estate Recovery Claims Process

Once HMS knows that a customer who received ALTCS benefits and was at least 55 years old at the time has died, HMS proceeds as follows:

Step

Action

1

HMS issues a "Demand for Notice" with the probate division of the Arizona Superior Court. (The purpose of the "Demand for Notice" is to require notice to AHCCCS of all legal activity concerning the estate.) 

If the estate has already entered probate, HMS will bypass the Demand for Notice and Notice of Intent process. A claim is immediately placed against the estate.

2

HMS sends the customer's representative the following documents:

• A "Notice of Intent to File a Claim Against the Estate"

• An "Estate Questionnaire"

• A copy of the "Demand Notice"

3

HMS reviews the information returned by the representative. If an exemption (MS 1902.02) or reduction (MS 1902.03) applies, HMS will go over this with the representative. AHCCCS will waive a claim against an estate if a qualifying exemption exists.

4

HMS files a "Superior Court Claim Against the Estate" if the estate does not qualify for an exemption or reduction and the estate contains property that appears to be subject to a Small Estate Affidavit or probate.

5

HMS informs the representative in writing where to send payment, how to file a grievance or request a hearing, and HMS contact information.

D. Notice To Creditor Letters

When probate is filed in court, the executor of the will is legally required to notify creditors to submit claims against the estate by a specific date. If AHCCCS is a creditor because it provided ALTCS benefits to the deceased customer, the executor is required to send AHCCCS a letter advising the Agency to submit its claim. This letter is called a "notice to creditor" letter. If an ALTCS Local Office receives a "notice to creditor" letter, forward it immediately to the Health Management Systems, Inc. (HMS) or the AHCCCS TPL Unit (MS 1901.00.C). Also, if any calls or legal documents are received, they must be referred immediately as well.

A. Estate Claim Native American Exemption

Federal law prohibits estate recovery from the property owned by Native Americans.

B. Estate Claim Statutory Exemptions

In certain circumstances, an AHCCCS estate claim shall be waived. These situations are referenced in Federal statute and are referred to as Estate Claim Statutory Exemptions. Exemptions may exist when the deceased ALTCS customer is survived by any of the following:

• A spouse,

• A child under age 21; or,

• A child of any age who meets SSA or SSI disability criteria and is blind or disabled.

C. Verification Required to Claim Statutory Exemption

To claim a statutory exemption, documentary proof must be provided. Such proof may include:

• A marriage license or death certificate to verify the relationship to a surviving spouse at the time of death;

• A certificate or other document which verifies the child's relationship to the ALTCS customer and that the child is under age 21;

• An SSA or SSI disability benefit award letter to verify that a surviving child is blind or disabled.

A. Undue Hardship and Partial Recovery Options

AHCCCS waives its claim when an heir or devisee to the estate meets all of the AHCCCS' Undue Hardship criteria. (Subsection B, below) 

If there is no qualifying Estate Claim Statutory Exemption and no quantifying undue hardship, AHCCCS will consider a Partial (reduction) of the estate claim. (Subsection C, below)

B. Undue Hardship Waiver

In some situations AHCCCS may waive its claim on a heir's share of an estate as described below:

IF. . .

AND. . .

THEN. . .

The estate contains real property

and

The heir owns a business located in the property

• The business has been in operation at the property for at least 12 months preceding the ALTCS customer's death; and

• The business provides more than 50% of the heir's livelihood; and

• Recovery would result in the heir's loss of livelihood

AHCCCS will waive its recovery claim

The estate contains residential real property,

and

The heir currently resides in the residence

• The heir lived in the real property at the time of the ALTCS customer's death; and

• The real property was the heir's primary residence for the 12 months immediately preceding the ALTCS customer's death; and

• The heir does not own another residence

The estate contains personal property only

• The heir's annual gross income (counting the members of the heir's immediate family, as appropriate) is less than the Federal Poverty Level (FPL); and

• The heir does not own a home, land, or other real property

AHCCCS will waive its recovery claim

The estate contains Both real and personal property

• The heir qualifies for an undue hardship

AHCCCS shall not grant an undue hardship waiver, but adjust its claim to the value of the personal property

C. Partial Recovery or Reduction

In some cases, AHCCCS may reduce the amount of an estate claim. This is called a partial recovery or reduction. When HMS notifies an estate of a claim, it also provides information indicating what factors are considered when deciding whether a partial recovery can be approved. These include:

• A financial and/or medical hardship;

• Whether the heir's household income is less than Federal Poverty Level (FPL);

• The value and type of assets held by the estate (real and personal);

• The amount of the claim;

• The claims of other creditor's and whether any property in the estate has been foreclosed on; and

• Any other factors which may relate to a fair and equitable determination.

D. Applying for a Waiver or Reduction of Claim

When an heir wishes to apply for an Undue Hardship waiver of estate claim or reduction of an AHCCCS' estate claim, the heir shall submit a written statement and provide all supporting documentation to HMS no later than 30 days from the date shown on the "Notification of the AHCCCS Claim Against the Estate." AHCCCS will make a decision on reducing its claim within 60 days of receiving the completed application for a reduction.

E. Grievance Procedure

The grievance and request for a hearing process is indicated on notices sent the personal representative of the estate. A grievance must be received by the Office of Administrative Legal Services (OALS) no later than 60 days from the date shown on the "Notification of the AHCCCS Claim Against the Estate" or the "Decision Notice Regarding the AHCCCS Estate Claim." Grievances must be submitted in writing to:

AHCCCS Administration

Office of Administrative Legal Services

Mail Drop 6200

P.O. Box 25520

Phoenix, Arizona 85002

A. TEFRA Liens

AHCCCS may impose a lien against the customer's real property, including the customer's home, after the customer becomes permanently institutionalized at a nursing home, mental health hospital, or other long term care medical facility. 

The purpose of the lien is to recover the cost of benefits provided upon the customer's death or upon a sale or transfer of an interest in the property. The lien is not enforced until one of these events occurs.

B. Permanently Institutiona1ized

Permanently institutionalized means the customer has resided in a long term care nursing facility for at least 90 consecutive days and continues to reside there and cannot reasonably be expected to be discharged and return to his or her own home.

C. Customers Who May be Subject to a TEFRA Lien

ALTCS customers who are age 55 and older and who are permanently institutionalized will have a lien imposed against their home or other real property unless an exception exists. (MS 1903.00.E)

D. When a Lien May be Removed

If a customer is discharged from a facility and returns to his or her own home on a permanent basis, the lien will be removed.

E. Exemptions to Filing a Lien:

A lien will not be placed against real property of Native Americans (members of federally recognized Indian tribes). 

A lien will not be filed if one of the following individuals is lawfully residing in the customer's home:

• The customer's spouse;

• The customer's child who is under age 21;

• The customer's child who is blind or permanently and totally disabled; or

• The customer's sibling who has an equity interest in the home and who was residing in the member's home for at least one year immediately before the date the customer was admitted to the nursing facility, an intermediate care facility for the mentally retarded, or an institution for mental disease.

F. Notice and Placement of a TEFRA Lien

Following notification that a customer has resided in an institution for 90 days or more, Health Management Systems (HMS) sends a Notice of Intent to File a Lien and a Questionnaire to the customer or the customer's authorized representative. 

If there is no response, or if HMS determines that the proper criteria have been met, HMS files a TEFRA Lien against the customer's home on behalf of AHCCCSA. 

Should a customer wish to contest the lien, he or she may file a request for a fair hearing within 30 days of receiving the Notice of Intent.

G. Changes After a TEFRA Lien has been Placed

No further action is taken by AHCCCSA after the lien has been filed until either:

• The customer dies;

• The property ownership is sold or transferred; or

• The customer returns home and the lien is removed.

H. Sale or Transfer of Property Against Which a Lien has been Placed

If the property is sold, the customer will need to repay AHCCCS for medical payments AHCCCSA has issued on the customer's behalf. The amount the customer will need to repay will be equal to the amount that AHCCCSA has paid. AHCCCS cannot collect more than the amount that AHCCCS has paid at the time the property is sold.

I. Non-enforcement of Liens

A lien will not be enforced (i.e. no action will be taken, and the lien will not be recovered) against any real property so long as the customer is survived by the customer's:

• Spouse,

• Child under the age of 21, or

• Child who is blind or permanently and totally disabled.

In addition, a lien will not be enforced against the customer's home if the customer is survived by:

• A sibling who resides in the deceased customer's home and who was living there for a least one year immediately before the date that the customer was admitted to the nursing facility, intermediate care facility for the mentally retarded, or institution for mental disease, or

• A child who resides in the deceased customer's home and who was living there for at least two years immediately before the date that the customer was admitted to the nursing facility, intermediate care facility for the mentally retarded, or institution for mental disease.