in Re Rasmer Estate ( 2016 )

STATE OF MICHIGAN
COURT OF APPEALS
In re Estate of IRENE GORNEY.
DEPARTMENT OF HEALTH AND HUMAN FOR PUBLICATION
SERVICES, February 4, 2016
9:00 a.m.
Plaintiff-Appellant,
v No. 323090
Huron Probate Court
ESTATE OF IRENE GORNEY, LC No. 13-039597-CZ
Defendant-Appellee.
In re Estate of WILLIAM B. FRENCH.
DEPARTMENT OF HEALTH AND HUMAN
SERVICES,
Plaintiff-Appellant,
v No. 323185
Calhoun Probate Court
DANIEL GENE FRENCH, Personal LC No. 2013-000992-CZ
Representative for the Estate of WILLIAM B.
FRENCH,
Defendant-Appellee.
In re Estate of WILMA KETCHUM.
DEPARTMENT OF HEALTH AND HUMAN
SERVICES,
Plaintiff-Appellant,
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v No. 323304
Clinton Probate Court
ESTATE OF WILMA KETCHUM, LC No. 14-028416-CZ
Defendant-Appellee.
In re Estate of OLIVE RASMER.
DEPARTMENT OF HEALTH AND HUMAN
SERVICES,
Plaintiff-Appellant,
v No. 326642
Bay Probate Court
RICHARD RASMER, Personal Representative of LC No. 14-049740-CZ
the Estate of OLIVE RASMER,
Defendant-Appellee.
Before: JANSEN, P.J., and CAVANAGH and GLEICHER, JJ.
GLEICHER, J.
In these consolidated appeals, the Department of Health and Human Services (DHHS)
seeks recovery of Medicaid benefits paid on behalf of the decedents. Specifically, the DHHS
submitted claims in the probate courts to collect the value of the decedents’ homes upon their
deaths. The estates responded that the DHHS had provided inadequate notice of its estate
recovery plans, and violated their rights to due process. The probate courts denied the DHHS’s
collection attempts in all four underlying actions.
On appeal, the DHHS contends that it complied with statutory notice requirements by
informing the decedents of estate recovery provisions in annual “redetermination” applications
beginning in 2012, and that the judicial process sufficed to meet due process requirements. This
Court recently resolved certain issues raised here in the DHHS’s favor in In re Estate of Keyes,
310 Mich. App. 266; 871 NW2d 388 (2015).1 Accordingly, we must reverse in part the probate
courts’ orders to the extent they conflict with this precedent, and remand for further proceedings.
1
The Keyes estate has filed an application for leave to appeal this Court’s decision in the
Michigan Supreme Court. That Court has yet to take action on the application.
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The estates, however, raised additional challenges to the DHHS’s collection efforts which
are issues of first impression for this Court. We hold that the DHHS would violate MCL
400.112g(5) and the decedents’ rights to due process by taking property to cover a Medicaid
“debt” incurred before the program creating the debt was approved and implemented. We
therefore affirm the probate courts’ decisions in relation to recovery claims for sums expended
between July 1, 2010, and the July 1, 2011 implementation of the MMERP.
I
“In 1965, Congress enacted Title XIX of the Social Security Act, commonly known as
the Medicaid act. This statute created a cooperative program in which the federal government
reimburses state governments for a portion of the costs to provide medical assistance to low-
income individuals.” Mackey v Dep’t of Human Servs, 289 Mich. App. 688, 693; 808 NW2d 484
(2010) (citation omitted). In 1993, Congress required states to implement Medicaid estate
recovery programs. 42 USC 1396p(b). In 2007, the Michigan Legislature passed 2007 PA 74,
which added MCL 400.112g though MCL 400.112k to the Michigan Social Welfare Act, MCL
400.1 et seq. This legislation empowered the DHHS to “establish and operate the Michigan
Medicaid estate recovery program [MMERP] to comply with” 42 USC 1396p. MCL
400.112g(1). MCL 400.112g(5) required approval by the federal government before the
MMERP would be “implement[ed].” Michigan finally received approval from the federal
Centers for Medicare & Medicaid Services (CMS) for its program (referred to as a State Plan
Amendment) on May 23, 2011, and the department circulated instructions to implement the plan
on July 1, 2011. Keyes, 310 Mich. App. at 268; Letter from CMS, May 23, 2011, available at
(accessed
December 28, 2015). The CMS letter approved this State Plan Amendment in May 2011. The
letter attached a form titled “Transmittal and Notice of Approval of State Plan Material.” The
form indicated that the CMS “received” Michigan’s “Proposed Policy, Procedures, and
Organizational Structure for Implementation” of a Medicaid estate recovery program on
September 29, 2010, approved it on May 23, 2011, and, as to the CMS, deemed July 1, 2010 the
“effective date” of Michigan’s recovery program. See Letter from CMS; Swanberg & Steward,
Medicaid Estate Recovery Update What You Need to Know Now, 93 Mich B J 28, 28 (May
2014); Murphy & Johnson, Estate Planning with the Advent of Estate Recovery, 21st Annual
Drafting Estate Planning Documents, The Institute of Continuing Legal Education (January 19,
2012), available at http://www.icle.org/contentfiles/partners/seminarmaterials/2012CR6535/
0122A6535-1.pdf> (accessed December 28, 2015).2
In the current cases, the decedents began receiving Medicaid benefits after the September
30, 2007 passage of 2007 PA 74. It is undisputed that the initial Medicaid applications (form
DHS-4574) filed by the decedents, or a personal representative on their behalves, contained no
2
As we discuss in greater detail later in this opinion, the “effective date” for the CMS’s purposes
is not the date that our Legislature identified as the pertinent starting point for the DHHS’s
recovery efforts. MCL 400.112g(5) provides that the DHHS “shall not implement a Michigan
medicaid recovery program until approval by the federal government is obtained.”
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information about estate recovery. However, it is also undisputed that in order to remain entitled
to Medicaid benefits, each applicant was required to resubmit a form DHS-4574 annually for a
“redetermination” of eligibility. Each new DHS-4574 contained a section entitled
“Acknowledgments,” which the applicant certified that he or she “received and reviewed.”
At some point during 2012, all four decedents’ personal representatives submitted a
DHS-4574 as part of the redetermination process. Beginning in 2012, the acknowledgment
section of the form included the following provision:
I understand that upon my death the Michigan Department of Community
Health [now the DHHS] has the legal right to seek recovery from my estate for
services paid by Medicaid. MDCH will not make a claim against the estate while
there is a legal surviving spouse or a legal surviving child who is under the age of
21, blind, or disabled living in the home. An estate consists of real and personal
property. Estate Recovery only applies to certain Medicaid recipients who
received Medicaid services after the implementation date of the program. MDCH
may agree not to pursue recovery if an undue hardship exists. For further
information regarding Estate Recovery, call 1-877-791-0435.
As with previous applications and redeterminations, each decedent’s personal representative
signed the statement affirming that he or she had received and reviewed the acknowledgments,
which included the provision on estate recovery.
Following each decedent’s death, the DHHS served claims on the estate seeking to
recover the amount the department had paid in Medicaid benefits since July 1, 2010. In each
case, the estate denied the claim and the DHHS filed suit in probate court. The estates argued
that because the decedents had not received proper notice about estate recovery when initially
enrolling in the Medicaid program, the DHHS had failed to comply with statutory notice
requirements and violated their due process rights. The estates further contended that the DHHS
violated their rights by seeking recovery of benefits dating back to July 1, 2010, one year before
the MMERP was approved by the federal government, and approximately two years before any
notice was provided to the recipients. This precluded recovery, the estates contended. In all four
cases, the probate court rejected the DHHS’s claims for recovery against the estates. In Docket
No. 323090, the court entered a judgment in the estate’s favor after a bench trial. In Docket
Nos. 323185, 323304, and 326642, the courts summarily dismissed the DHHS’s claims.3 The
DHHS now appeals.
II
We review de novo a trial court’s decision on a motion for summary disposition, issues of
statutory interpretation, and whether a party has been afforded due process. Elba Twp v Gratiot
Co Drain Comm’r, 493 Mich. 265, 277; 831 NW2d 204 (2013); Keyes, 310 Mich. App. at 269-
3
In Docket No. 326642, however, the court did not resolve the due process issue.
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270. As noted, many issues in these appeals were raised and decided by this Court in Keyes.
Therefore, we are not writing on a clean slate.
III
The estates challenged the adequacy and effectiveness of the notice provided in the final
paragraph of the multipage redetermination application. The notice provisions of the MMERP
are found at MCL 400.112g(3)(e) and 400.112g(7), and instruct:
(3) The department of community health shall seek appropriate changes to
the Michigan medicaid state plan and shall apply for any necessary waivers and
approvals from the federal centers for medicare and medicaid services to
implement the [MMERP]. The department of community health shall seek
approval from the federal centers for medicare and medicaid regarding all of the
following:
* * *
(e) Under what circumstances the estates of medical assistance recipients
will be exempt from the [MMERP] because of a hardship. At the time an
individual enrolls in medicaid for long-term care services, the department of
community health shall provide to the individual written materials explaining the
process for applying for a waiver from estate recovery due to hardship.
* * *
(7) The department of community health shall provide written information
to individuals seeking medicaid eligibility for long-term care services describing
the provisions of the [MMERP], including, but not limited to, a statement that
some or all of their estate may be recovered.
In Keyes, 310 Mich. App. at 272-273, this Court examined these provisions and held:
We conclude that the timing provision of MCL 400.112g(3)(e) does not
apply in this case. MCL 400.112g(3)(e) provides that “[a]t the time an individual
enrolls in medicaid for long-term care services, the department of community
health shall provide to the individual written materials explaining the process for
applying for a waiver from estate recovery due to hardship.” Read in isolation,
this provision appears to support the estate’s position. But we may not read this
provision in isolation. [State ex rel] Gurganus [v CVS Caremark Corp], 496 Mich
[45, 61; 852 NW2d 103 (2014)].
Subsection (3)(e) is part of the larger Subsection (3), which requires the
Department to seek approval from the federal government regarding the items
listed in the subdivisions. In this case, [as in the current appeals], the estate does
not assert that the Department failed to seek approval from the federal
government concerning the estate recovery notice. Rather, the estate asserts that
it did not personally receive a timely notice.
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The Act contains a second provision concerning notice, and this provision
has different language. MCL 400.112g(7) provides that “[t]he department of
community health shall provide written information to individuals seeking
medicaid eligibility for long-term care services describing the provisions of the
[MMERP], . . .” When the Legislature includes language in one part of a statute
that it omits in another, this Court presumes that such an omission was
intentional. Polkton Charter Twp v Pellegrom, 265 Mich. App. 88, 103; 693
NW2d 170 (2005). Subsection (7) applies to the estate’s case because the estate
alleges that [the decedent] did not receive sufficient notice of estate recovery.
Subsection (7)’s language is similar to that in Subsection (3)(e), but there is one
major difference—timing. Subsection (3)(e) states “at the time an individual
enrolls in medicaid,” while Subsection (7) states that the Department must
provide a notice when an individual “seek[s] medicaid eligibility[.]” We presume
the Legislature’s decision not to use the word “enrollment” in Subsection (7) was
intentional.
The facts underlying the current matters are largely indistinguishable from those
underlying Keyes. Ms. Keyes also first enrolled in Medicaid sometime after September 30,
2007, and was not notified at that time of the estate recovery program. Just as in the current
appeals, Ms. Keyes’ personal representative did not receive notice of the recovery program until
filing an application for redetermination of eligibility in 2012. Just as here, the DHHS did not
highlight the change on the form or provide additional materials “explaining and describing
estate recovery and warning that some of [the decedent’s] estate could be subject to estate
recovery.” Id. at 273. In Keyes, this Court held that the inclusion of the new paragraph in the
form’s acknowledgements section “sufficiently notified [the decedent] that her estate could be
subject to estate recovery.” Id. The statutes have not been amended since Keyes and still do not
demand a separate notification or that the new provision be highlighted in any manner.
Accordingly, we are bound to hold that the notice in these matters was statutorily sufficient and
the probate courts erred in concluding otherwise.
IV
The Ketchum Estate also asserts that the DHHS sought recovery in violation of MCL
400.112g(4), which precludes the department from “seek[ing] Medicaid estate recovery if the
costs of recovery exceed the amount of recovery available or if the recovery is not in the best
economic interest of the state.” In support of this argument, the estate contends that its sole asset
was a home sold for $30,000, and that the estate’s value was whittled away by funeral expenses,
administration costs, and certain exempted items.
We note that the probate court did not consider this issue on the record and the estate’s
appellate argument is cursory. The statutes provide no guidance on the application of MCL
400.112g(4). MCL 400.112j(1) gives the DHHS authority to “promulgate rules for the
[MMERP].” The Bridges Administrative Manual, BAM 120, p 7, provides: “Recovery will only
be pursued if it is cost-effective to do so as determined by the Department at its sole discretion.”
The Legislature did not direct the DHHS to act “at its sole discretion” and we located no DHHS
publication describing how such determinations are made.
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That the cost-effectiveness decision is made at the department’s “sole discretion” does
not preclude all judicial review. For example, the prosecution, another limb of the executive
branch, has sole discretion to determine whether to charge a juvenile as an adult and whether to
proceed with charges against a suspect. See MCL 712A.2d(1); People v Morrow, 214 Mich. App.
158, 165; 542 NW2d 324 (1995). Even so, the judiciary may review the prosecutor’s decisions
where they are “unconstitutional, illegal, or ultra vires or where the prosecutor has abused the
power confided in him.” People v Gilmore, 222 Mich. App. 442, 457-458; 564 NW2d 158
(1997).
A record was not created in the probate court from which we can determine whether the
DHHS’s decision to seek recovery from Mrs. Ketchum’s de minimus estate was unconstitutional,
illegal, ultra vires, or an abuse of power. Accordingly, to the extent that we reverse the probate
court’s summary disposition order, the estate may wish to raise this issue again. At this time,
however, we discern no ground to grant relief.
V
The estates in these consolidated appeals have also raised a multipronged due process
challenge.
A
This Court rejected a due process challenge identical to one prong, related to notification
at the time of enrollment, in Keyes, 310 Mich. App. at 274-275:
The Fourteenth Amendment to the United States Constitution and Article
I, § 17 of the Michigan Constitution provide that the state shall not deprive a
person of life, liberty, or property without due process of law. Elba Twp, 493
Mich. at 288. Where a protected property interest is at stake, due process
generally requires notice and an opportunity to be heard. Hinky Dinky
Supermarket, Inc v Dep’t of Community Health, 261 Mich. App. 604, 606; 683
NW2d 759 (2004). Due process is a flexible concept and different situations may
demand different procedural protections. Mathews v Eldridge, 424 U.S. 319, 334;
96 S. Ct. 893; 47 L. Ed. 2d 18 (1976). The fundamental requirement of due process
is the opportunity to be heard “at a meaningful time and in a meaningful manner.”
Id. at 333. The question is whether the government provided “notice reasonably
calculated, under all the circumstances, to apprise interested parties of the
pendency of the action and afford them an opportunity to present their
objections.” In re Petition by Wayne Co Treas, 478 Mich. 1, 9; 732 NW2d 458
(2007) (quotation marks and citation omitted).
In this case, the trial court determined that applying the Medicaid recovery
act would violate Esther Keyes’s right to due process because she did not receive
notice of estate recovery at the time that she enrolled, as required by MCL
400.112g. However, we have already determined that MCL 400.112g does not
require notice at the time of enrollment. Further, the trial court’s decision
improperly conflated statutory notice issues with the notice issues involved in due
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process. In this case, the estate was personally apprised of the Department’s
action seeking estate recovery, and it had the opportunity to contest the possible
deprivation of its property in the circuit court. It received both notice and a
hearing, which is what due process requires. See Hinky Dinky Supermarket, Inc,
261 Mich. App. at 606.
Relying on Keyes, we are required to reject the estates’ due process challenges based on
the lack of notice in the original application. The decedents in these appeals received the same
notice as Ms. Keyes. The estates had the same opportunity to contest the estate recovery claims
in the probate court, and therefore received the notice and opportunity to be heard required to
satisfy due process.
B
In a second prong, the estates suggest that they had a due process right to the continuation
of the favorable Medicaid law that allowed decedents to receive benefits from the state without
having to repay them. “[N]o one has a vested right to the continuation of an existing law.” Van
Buren Charter Twp v Garter Belt Inc, 258 Mich. App. 594, 633; 673 NW2d 111 (2003). The
Legislature changed the law to require that the benefits received be repaid to the state upon the
death of the recipient from the recipient’s estate. Standing alone, this change in law did not
deprive the decedents of their rights to due process. See Saxon v Dep’t of Social Servs, 191 Mich
App 689, 700-702; 479 NW2d 361, lv den 439 Mich. 880 (1991) (observing that the Legislature
can change welfare laws without violating due process).
C
Under a third prong, the estates contended that the DHHS violated their rights to due
process by seeking to recover benefits expended since July 1, 2010, when the DHHS did not
notify them of the recovery program until 2012. Had the decedents been notified at or before the
initiation of the recovery program, the estates contend, they could have considered their estate
planning options and decided whether to continue receiving Medicaid assistance or to preserve
their estate. In its appellate brief, the Keyes Estate challenged the DHHS’s attempt to
retroactively recover Medicaid benefits expended since July 1, 2010, citing MCL 400.112g(5).
This Court omitted any consideration of that issue in Keyes. Therefore, this is an issue of first
impression.
The DHHS asserts that upon a decedent’s death, his or her property rights are
extinguished. As the DHHS does not seek recovery until the beneficiary’s passing, that person is
never deprived of his or her property rights, negating any potential due process challenge. The
decedent’s heirs have only an expectation of inheriting, not a vested right. And MCL 700.3101
restricts and limits an individual’s power to divest his or her property by will by requiring the
estate to settle the rights of creditors first. Accordingly, until creditors such as the DHHS are
paid, the heirs have no property right to assert, the department contends.
We first note that the estates erroneously identified the date on which their due process
rights were violated. MCL 400.112g(5) provides that the department “shall not implement a
[MMERP] until approval by the federal government is obtained.” Federal government approval
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was not obtained until May 23, 2011. Accordingly, the DHHS and its predecessor could not
“implement” a program until that date. The statute does not define “implement” and we must
resort to the dictionary to give this term meaning. Merriam-Webster’s Collegiate Dictionary
(11th ed), p 624, defines “implement” as “[c]arry out, accomplish; esp: to give practical effect to
and ensure of actual fulfillment by concrete measures” and “to provide instruments or means of
expression for.” The DHHS did not “implement” the MMERP until it circulated instructions to
its employees to begin seeking recovery from estates. This occurred on July 1, 2011, after the
CMS approved the plan. However, the DHHS could not “implement” the MMERP before the
federal government approved it. The DHHS sought “to give practical effect” to its recovery plan
by making it “effective” July 1, 2010. This violated MCL 400.112g(5).4
Moreover, the DHHS incorrectly posits that the personal representative cannot raise a due
process challenge to the department’s actions. “Explicit in our state and federal caselaw is the
recognition that an individual’s vested interest in the use and possession of real estate is a
property interest protected by due process.” Bonner v City of Brighton, 495 Mich. 209, 226; 848
NW2d 380 (2014). “[T]he property interests protected by procedural due process extend well
beyond actual ownership of real estate, chattels, or money.” Bd of Regents of State Colleges v
Roth, 408 U.S. 564, 571-572; 92 S. Ct. 2701; 33 L. Ed. 2d 548 (1972). As noted by the DHHS, the
right to inherit is not a definite right; it is an expectancy. See In re Finlay Estate, 430 Mich. 590,
600-601; 424 NW2d 272 (1988). However, when the personal representatives of the estates
denied the DHHS’s claims, they were not acting to protect their inheritance interests. Rather, the
personal representatives stepped into the shoes of the decedents and fought to protect the
interests held by the decedents during their lives, and thereby to settle the decedents’ estates in
accordance with their wills or the law. See MCL 700.3703. The decedents had a right to
coordinate their need for healthcare services with their desire to maintain their estates. The right
to dispose of one’s property is a basic property right; one of the “strand[s]” in the “ ‘bundle’ of
property rights,” which includes “the rights ‘to possess, use and dispose of it.’ ” Loretto v
Teleprompter Manhatten CATV Corp, 458 U.S. 419, 435; 102 S. Ct. 3164; 73 L. Ed. 2d 868 (1982).5
4
The federal government permits retroactive application, but does not prevent states from
enacting statutes restricting the implementation of their recovery plans until after federal
approval. See 42 CFR 447.256(c) (“Effective date. A State plan amendment that is approved
will become effective not earlier than the first day of the calendar quarter in which an approvable
amendment is submitted in accordance with [42 CFR 430.20 and 42 CFR 447.253].”).
5
Respectfully, the partial dissent conflates the respondents’ right to challenge the DHHS claims
for recovery of estate assets with respondents’ “standing” to raise a separate, substantive due
process claim. The personal representatives contend that the DHHS violated the MMERP both
by applying it retroactively and by failing to provide the decedents notice of its intent to do so.
The MMERP does not force elderly, care-dependent citizens into forfeiting estate assets. Rather,
the MMERP is supposed to provide accurate notice to Medicaid applicants of the parameters,
rules, and scope of the estate recovery program so that applicants may make reasoned and
informed decisions whether to accept benefits. Respondents in these cases seek to prevent estate
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In In re Estate of Burns, 131 Wn2d 104; 928 P2d 1094 (1997), the Washington Supreme
Court was faced with a due process challenge to the recovery of Medicaid benefits expended
before that state’s recovery program took effect. The Court noted that those “recipients who
know of the new legal consequence . . . have the choice whether to accept the benefits knowing
that recovery may be had from their estate.” Id. at 117. It was “realistic” that an individual
would consider the financial effects before accepting Medicaid, the Court continued, because
that state’s Medicaid program covers medical expenses for even minor health concerns. A
person might choose to forego a minor procedure to preserve his or her estate. Id. “However,
recipients of benefits paid before enactment of the statutory provisions would have had no such
choice. Application of the statutory provisions in their cases therefore would . . . result in the
unfairness for which courts traditionally have disfavored retroactivity.” Id.
Similarly, in Estate of Wood v Arkansas Dep’t of Human Servs, 319 Ark. 697; 894 S.W.2d
573 (1995), the Arkansas Supreme Court considered the propriety of recovering Medicaid
benefits expended before that state’s Medicaid recovery program was enacted. That Court did
not treat the challenge as a constitutional issue. Even so, the Court determined that the recovery
program “create[d] a new legal right which allows DHS to file a claim against the estate of a
deceased,” thereby affecting a vested property right held by the Medicaid beneficiary. Id. at 701.
Changing the nature of Medicaid from “an outright entitlement” to “a loan” “effect[ed] . . . the
nature of the ownership of the DHS payments made on her behalf.” Id. at 702. Therefore, the
Arkansas Court held that the recovery program could not be applied retroactively.
The same unfairness exists here. By applying the recovery program retroactively to July
1, 2010, the Legislature deprived individuals of their right to elect whether to accept benefits and
encumber their estates, or whether to make alternative healthcare arrangements. The Legislature
impinged on the decedents’ rights to dispose of their property. Despite that the DHHS does not
try to recover until the individual’s death, that person’s property rights are hampered during his
or her life. Between July 1, 2010, and July 1, 2011, the date on which the plan was actually
“implement[ed],” the decedents lost the right to choose how to manage their property. Taking
their property to recover costs expended between July 1, 2010 and plan implementation would
therefore violate the decedents’ rights to due process. Accordingly, to the extent that the probate
courts disallowed the DHHS’s claims for that period, we affirm.
We affirm in part, reverse in part, and remand for further proceedings consistent with this
opinion. We do not retain jurisdiction.
/s/ Elizabeth L. Gleicher
/s/ Mark J. Cavanagh
recovery based on the DHHS’s failure to follow the rules. This is no different than challenging
the claim of an estate creditor because it was untimely filed or otherwise legally deficient.
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