A case has been decided that could lead to major changes in the field of Medicaid planning and elder law.

I previously reported on the Oregon Court of Appeals decision in Nay v. Department of Human Services. That decision has been affirmed by the Oregon Supreme Court, and the Department of Human Services has withdrawn the rules, which had been challenged.

First, some background: Medicaid is a taxpayer-funded program, which provides financial assistance for long-term care (foster home care and nursing home care) for persons who meet certain eligibility requirements based on need. The Medicaid assistance program depends in part on seeking reimbursement from recipients’ estate assets, when permitted under the applicable rules.

The State generally has a claim for reimbursement for benefits paid, collectible against all assets in which the Medicaid recipient has an interest at the time of his or her death.

The State administrative rules were amended in 2008 to attempt to allow the State to also recover against the estate of a spouse of a Medicaid recipient. Under the expanded definition of “estate” in the 2008 rules, the State was allowed to recover against the spouse’s estate to the extent the spouse received property or assets from the Medicaid recipient within 60 months before the date of the Medicaid application.

Under the 2008 rules, such “inter-spousal transfer,” which occurred within 60 months before the Medicaid recipient’s date of application for Medicaid benefits, would bring the spouse’s assets within the reach of the State’s claim upon the spouse’s death.

In the case of Nay v. Department of Human Services, the Court of Appeals found that the 2008 administrative rules were invalid because they purported to allow the State to engage in estate recovery from assets transferred to the spouse, i.e., assets in which the deceased Medicaid recipient “had no legal interest at the time of his or her death.” The court concluded that the State exceeded its statutory authority by including the inter-spousal transfer in the class of transfers from which the State may recover.

The State petitioned for review of the case by the Oregon Supreme Court. The Supreme Court has now affirmed the Court of Appeals decision. The language in the State’s administrative rules, which was challenged, has since been removed.

This important development in Medicaid law could mean a significant change in elder law planning going forward.

Bruce Coalwell has been an attorney in Roseburg since 1981 and is a shareholder in the law firm of Dole Coalwell, P.C.

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