No Undue Hardship Waiver for Medicaid Recipient's Estate that Sold House Before Waiver Was Requested

Reversing a trial court, a Michigan court of appeals holds that the estate of a Medicaid recipient is not entitled to an undue hardship exception to estate recovery applicable to estates with houses of modest value because the house had been sold before the hardship waiver was requested. Ketchum v. Department of Health and Human Services (Mich. Ct. App., No. 324741, March 1, 2016).

Wilma Ketchum received Medicaid benefits until her death. After she died, her house was sold for less than half the average value of other houses in the county. The state filed a claim to recover Medicaid benefits paid on her behalf. Ms. Ketchum's estate denied the claim, arguing that it was entitled to a hardship waiver. Under state law, an undue hardship exists if the estate consists of a home of modest value. State regulations provide that hardship waivers are temporary and expire when the reason for the waiver no longer exists.

The state denied the estate's request for a hardship waiver because the house had been sold before the waiver was requested. The estate appealed, and an administrative law judge ruled in favor of the state. The trial court reversed, holding that state law required an exemption for houses valued at equal to or less than 50 percent of the average price of a home, and that regulations limiting that exemption were not valid. The state appealed.

The Michigan Court of Appeals reverses, holding that the undue hardship waiver did not apply because the house had been sold. According to the court, once a house has been sold and "turned to cash, the condition that caused the undue hardship, the presence of a home of modest value, no longer exists and the ability to obtain an undue hardship waiver necessarily expires."

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