Updated: Aug 31, 2021
This column first appeared in the San Antonio Express News and other Hearst Newspapers on October 12, 2018.
Dear Mr. Premack: My mother recently passed in the state of Texas. She did have a life insurance policy of $10k, and she did have a small amount of cash in a bank account. We have used the life insurance for burial. Will we be subject to MERP? How do we find out? – MG
Dear Mr. Premack: Is a home mortgage, whether a regular mortgage or reverse mortgage, paid before a MERP claim? - SB
MERP is the Medicaid Estate Recovery Program, a facet of the Medicaid program that has existed since 2005. Whenever any person applies for Medicaid benefits (for instance, to help pay for a nursing home) that person is informed, in writing, about MERP and its processes. Eventually, when the Medicaid recipient dies, MERP’s task is to recover for the state whatever it can legally recover, as reimbursement for the taxpayer’s assistance.
The MERP regulations set out a variety of situations under which MERP cannot pursue a claim. For instance, if there is a surviving spouse then MERP cannot pursue a claim. After the state is informed of the death of the Medicaid beneficiary, MERP’s collection agent – called HMS – sends a letter to someone close to the decedent (like the person who indicated on the Medicaid application that they should be contacted). The letter asks whether there are any circumstances which would cause HMS to cease pursuing a claim. If such a reason exists and is reported, HMS will indeed cease.
Legally, there are two sides to the MERP process. First is the official yet preliminary correspondence in which HMS as a collection agency tries to bully the family into paying. This is not yet the “claim” and is not yet legally enforceable. Second is the actual claim which must be filed by MERP in probate court. They must do so within certain time limits, and if there is no probate then they have no legal forum in which they can enforce their claim.
One of MERP’s regulations states that their claim must be cost effective for the state to take action. By definition, if the estate has value below $10,000 then MERP will not pursue a claim. Also, they may not include in their calculations the value of any life insurance policy that was payable to a third party (like the children) instead of being paid to the decedent’s estate. So, the answer for MG above is that you will be pestered with MERP’s preliminary correspondence, that they should not have a legal claim, and that since there will be no probate, they have no way to legally enforce a claim.
Another MERP regulation is that, when they do bring a claim in probate court, their claim must be classified along with all other claims received by the Executor. A secured claim, like a home mortgage or reverse mortgage, takes priority over the MERP claim. The bank will get its money because it has a lien against the house to enforce its claim. MERP cannot place liens. So, the answer for SB above is that the loan gets paid before MERP gets paid.
Whenever a loved one dies, who was a Medicaid beneficiary, it is a good idea for the Executor and immediate family to consult with a Certified Elder Law Attorney about probate and about the MERP process as it applies in their situation.
Paul Premack is a Certified Elder Law Attorney with offices in San Antonio and Seattle, handling Wills and Trusts, Probate, and Business Entity issues. View past legal columns or submit free questions on legal issues via www.Premack.com.