If a state has filed a Medicaid estate recovery claim against a parent's or spouse's estate, a hardship waiver is a formal request asking the state to give up its claim because collecting it would cause undue hardship. Federal law requires every state to have a process for these requests, but each state sets its own standards, forms and deadlines.
A letter from a state Medicaid agency asking to be repaid from the estate of someone you have just lost is a hard thing to open. It raises questions. Will the family home have to be sold? Does a sibling who lives there have to leave? Is there any way to ask the state to stop? This guide walks through five steps: reading the notice, testing the situation against a hardship standard, gathering documents, submitting the request and appealing a denial. It also covers the stages in order and where the process can become complicated.
Before You Start: What Estate Recovery Is and When a Hardship Waiver Applies
Estate recovery is the process a state Medicaid agency uses to seek repayment from a deceased Medicaid member's estate for the long-term-care services Medicaid paid for. Under 42 U.S.C. § 1396p(b)(1), a state must seek recovery in three cases. The first is an individual described in subsection (a)(1)(B), a person in a nursing facility or other medical institution who must spend all but a minimal amount of income required for personal needs on medical care and whom the state has determined, after notice and an opportunity for a hearing, cannot reasonably be expected to be discharged and return home; the state seeks recovery from the estate or upon sale of the property subject to a lien. The second is an individual who was 55 or older when the individual received the medical assistance; the state seeks recovery from the estate, but only for nursing facility services, home and community-based services, and related hospital and prescription drug services or, at the option of the state, any items or services under the State plan (but not medical assistance for Medicare cost-sharing or for benefits described in section 1396a(a)(10)(E)). The third is an individual who has received, or is entitled to receive, benefits under a long-term care insurance policy in connection with which assets or resources are disregarded in the manner the statute describes. Medicaid is the primary payer for long-term care services across the nation, according to Medicaid.gov.
The same statute builds in protections. Under 42 U.S.C. § 1396p(b)(2), recovery is delayed until after the death of a surviving spouse. It is also delayed while the member has a surviving child under 21 or a blind or disabled child of any age. These rules postpone recovery. They do not cancel it. Under 42 U.S.C. § 1396p(b)(3), each state must also set up procedures to waive recovery when it would cause an undue hardship. That requirement does not apply to recovery under paragraph (1)(C), the long-term care insurance case described above.
Each state runs its own estate recovery and hardship-waiver program, so the steps below describe the federal framework. The state's current rules decide the details. Three questions come first:
- whether the agency has issued a formal claim or notice
- whether the person asking is someone who will be affected by the recovery
- whether the deadline on the notice is still open
This page covers Medicaid for long-term care only. It does not cover Medicare, private long-term-care insurance or veterans' benefits.
Step 1: Gather the Estate Recovery Notice and Identify the Claiming Agency
The notice is the anchor for everything that follows. Under the CMS State Medicaid Manual, a state's procedures must give advance notice of a proposed recovery. They must also specify the method for applying for a waiver, the hearing and appeal rights, and the time frames involved.
Where a waiver request goes, and how long the response period runs, depend on the state's procedures and on the notice the state sends.
The word "estate" also needs a close look. Under 42 U.S.C. § 1396p(b)(4), the estate includes, at a minimum, the property that counts as the estate under state probate law. Probate is the court process for settling a person's affairs after death. A state may choose to use a broader definition, called expanded estate recovery. That definition can reach assets the person had an interest in at death that passed outside probate, through joint tenancy, tenancy in common, survivorship, a life estate, a living trust or another arrangement. Which definition applies depends on the state, except that the statute requires the broader definition for an individual described in paragraph (1)(C)(i).
Step 2: Determine Whether Your Situation Meets a Hardship Standard
This is the step where families learn whether their circumstances fit what the state will consider. Federal law requires a waiver process under 42 U.S.C. § 1396p(b)(3), but the statute has each state establish its procedures under standards the Secretary specifies, and it ties undue hardship to criteria the Secretary establishes. The State Medicaid Manual adds that a state has flexibility in implementing its undue hardship provision. A state's standards may be broader, narrower or organized differently than the federal examples.
The State Medicaid Manual states that the legislative history of the federal estate recovery provision calls for special consideration of cases in which the estate subject to recovery is one of the following. The first is an estate that is the sole income-producing asset of survivors with limited income, such as a family farm or other family business. The second is a homestead of modest value. The third covers other compelling circumstances. CMS suggests that states consider these examples but does not require states to adopt them. The manual also allows a state to limit a waiver to the period while the hardship continues, so a granted waiver is not necessarily permanent.
A delay and a waiver are different things. A delay under 42 U.S.C. § 1396p(b)(2) postpones the claim while a surviving spouse, a child under 21, or a blind or disabled child survives. A waiver, if a state grants one, sets the claim aside for the reasons and period the state's rules allow. A family protected by a delay may still face the claim later.
The State Medicaid Manual tells a state to describe its undue hardship policy in its State plan, so the state's own criteria are the ones that apply.
Step 3: Collect the Documents Your State Requires
The documents a state requires depend on that state's own procedures and hardship criteria. The State Medicaid Manual requires a state's procedures to specify the method for applying for a waiver, so the state's own form or instructions, where it has them, are the guide to what to submit.