Douglas County v. Lindgren (Minn., 7th Jud. Dist., No. 21-CV-09-477, August 4, 2010)

A Minnesota court rules that federal Medicaid law preempts a conflicting state law that authorizes the state to seek recovery of correctly paid medical assistance benefits from third parties. Douglas County v. Lindgren (Minn., 7th Jud. Dist., No. 21-CV-09-477, August 4, 2010).

After Marlys Lindgren was admitted to a nursing facility, her daughter, Alexandra, applied to the Douglas County Medicaid office for long-term care benefits on her behalf. The application was approved, although a penalty period was imposed on Mrs. Lindgren's receipt of benefits because she had transferred her home to her children, Alexandra and Bruce, for less than fair market value during the look-back period. The nursing home sought a waiver of the denial, claiming that a denial of benefits would lead to an undue hardship on Mrs. Lindgren, whose bills were not being paid and was facing eviction. The county approved the waiver and Mrs. Lindgren received $53,893.30 in medical assistance benefits before she died on October 13, 2009.

The county then sued Alexandra and Bruce, seeking to recover the medical assistance benefits it had paid on their mother's behalf. In doing so, the county relied on a state law that authorized recovery from the transferee of an asset in cases where a penalty period resulting from an uncompensated transfer was waived by the agency. Alexandra and Bruce countered that the state law was preempted by federal Medicaid law, which prohibits states from seeking recovery of correctly paid medical assistance benefits. The county and the Lindgrens filed competing motions for summary judgment.

The District Court for the 7th Judicial District of Minnesota grants Alexandra and Bruce's motion for summary judgment, concluding that the Minnesota law authorizing recovery against third parties of correctly paid medical assistance benefits conflicts with, and is thus preempted by, federal Medicaid law. Addressing the county's policy arguments, the court agrees that when the Medicare Catastrophic Coverage Act of 1988 was enacted, Congress was concerned about people transferring assets for less than fair market value. However, the court opines, "[Congress] addressed the issue by requiring a period of ineligibility for those who did. It did not leave open the possibility for states to create separate claims against third parties for medical assistance correctly paid."