Federal Law Does Not Preempt California’s Undue Hardship Law

A California appeals court rules that federal law does not preempt California’s undue hardship law, which requires that hardship waiver applicants show a “substantial hardship” and meet at least one of six specific criteria for such a showing. Murchison v. Murchison (Cal. Ct. App., 3rd Dist., No. C084936, Jan. 28, 2021).

Beulah Murchison received Medi-Cal (Medicaid) benefits. After she died, the state filed a claim against her estate to recover Medi-Cal benefits paid on her behalf. The notice of the claim included information on how to file a hardship waiver. The hardship waiver application requires a showing of “substantial hardship,” and state regulations list six criteria for determining whether a substantial hardship exists.

Beulah’s daughter, Carrie Murchison, filed a hardship waiver, but she did not satisfy any of the six criteria. The state denied the waiver, and Carrie filed a petition in court, arguing that limiting the circumstances comprising substantial hardship to six specific criteria conflicted with federal law. The trial court denied the petition, and Carrie appealed.

The California Court of Appeal affirms, holding that California’s undue hardship law is not preempted by federal law. According to the court, federal law makes clear that states have flexibility in implementing the undue hardship waiver and the state “in exercising that federally authorized flexibility, could reasonably conclude that an ‘undue hardship,’ for purposes of waiving the estate recovery requirements, means one that is ‘substantial.’” The court also concludes that there is “no basis for concluding that California was required by federal law to include general equitable considerations in its criteria for hardship waivers.”

For the full text of this decision, go to: https://www.courts.ca.gov/opinions/nonpub/C084936.PDF

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