In a unanimous decision filed Monday, November 20, 2023, the Minnesota Court of Appeals affirmed a district court opinion that limits medical assistance claims against estates to only the amount of long-term-care services that were actually provided to the decedent.

Under Minnesota law, the State of Minnesota can recover “the amount of medical assistance rendered to recipients 55 years of age or older that consisted of nursing facilities, home and community based services, and related hospital and prescription drug services.” Minn. Stat. § 256B.15, subd. 2(a). The underlying policy justification for this practice is to make sure that those who receive medical assistance “use their own assets to pay their share of the cost of their care.” Id. at subd. 1(a).

Background

In Estate of Ecklund, the decedent, Joanne Ecklund, had been enrolled in Minnesota’s medical-assistance program and received benefits through Medica, a managed care organization. During Ecklund’s lifetime, Minnesota’s medical-assistance program made “capitation payments” to Medica to cover the cost of Ecklund’s care.

A “capitation payment” is similar to an insurance premium. Under its medical-assistance program, Minnesota makes capitation payments to participating managed care organizations for each recipient of medical assistance by considering price and utilization data from the medical assistance populations. In exchange for these payments, the managed care organizations take on the financial risk of providing medical assistance services, and negotiate with various healthcare providers to secure discounts for covered services.

A byproduct of the State of Minnesota’s method of paying capitation payments to managed care organizations is that, depending on the medical assistance recipient, the amount the managed care organization receives in capitation payments might be more or less than the amount the managed care organization actually pays for covered services received by the recipient.[1]

This was certainly the case for Ecklund. Upon her death, Hennepin County attempted to recover $66,052.62 in capitation payments that the State had paid to Medica for her long-term care services. However, despite the fact that Medica had received capitation payments of $66,052.62 for Ecklund’s care, it had only paid $8,806.84 to Ecklund’s care providers for services that she had actually received.

This was where the dispute arose. Ecklund’s estate argued that by only allowing the State to recover “the amount of medical assistance rendered” to medical assistance recipients, the estate recovery statute was unambiguously clear that Hennepin County could only recover the amount of services that had actually been provided to Ms. Ecklund, or $8,806.64. Conversely, Hennepin County argued that capitation payments were included as “payments” within the definition of medical assistance such that it could recover the entire amount of capitation payments paid to Medica, in this case $66,052.62. For the purposes of the estate recovery statute, “Medical assistance” is defined as “payment of part or all of the cost of the care and services identified [as covered services] in section 256B.0625, for eligible individuals whose income and resources are insufficient to meet all of this cost.” Minn. Stat. § 256B.02, subd. 8 (2022).

The Decision

The Court of Appeals rejected Hennepin County’s argument for two primary reasons. First, while Hennepin County attempted to argue that capitation payments were included as payments within the definition of medical assistance, the word “capitation” never actually made an appearance in the definition of medical assistance, or in Minnesota’s estate recovery statute as a whole, even though the term was listed in other Minnesota medical assistance statutes. Given that the legislature referenced capitation payments in other medical assistance statutes but left the term out of the estate recovery statute, the Court of Appeals assumed this was an intentional omission and found that it would be inappropriate for it to infer capitation payments into the definition of “medical assistance” where the legislature had declined to do so.

Second, the Court of Appeals noted that, while capitation payments enabled and required a managed care organization to pay for covered services, the capitation payment itself was not the cost of covered services, nor the payment of that cost. Given that “medical assistance” was defined as “payment of part or all of the cost of care and services…”, to find that medical assistance included capitation payments would be an unreasonable interpretation of the definition.

Instead, the Court agreed with Ecklund’s estate, who contended that the statutory language allowing Minnesota to recover the “amount of medical assistance rendered to recipients” required an interpretation that only allowed the State to recover the cost of long-term-care services that had actually been provided to Ecklund, or $8,806.64. This reading of the statute was not only clearer and more concise than Hennepin County’s interpretation, but also served the legislature’s policy goal of ensuring recipients paid “their share of the cost of their care.” Minn. Stat. § 256B.15, subd. 1(a).

Implications of the Ruling

The most immediate impact of this ruling is that it drastically changes the amount an estate could be responsible for when it comes to a decedent that has received medical assistance. In Ecklund’s case, the difference between the amount of capitation payments made on Ecklund’s behalf, and the amount of services actually received by Ecklund was $57,245.98. If the State is attempting to recover the cost of medical assistance from an estate, going the extra mile to determine how much was actually paid out for services versus the amount of capitation payments could yield significant savings.

From a more long-term perspective, this ruling increases the likelihood that changes will be made to the Minnesota estate recovery statute. Look for proposals that allow the State to recover not only the cost of the services rendered, but also capitation payments made on behalf of medical assistance recipients.

[1] As a hypothetical example, suppose Minnesota paid a capitation payment of $1,000 to a managed care organization each month to care for a medical assistance recipient. In one month, the recipient may only require $500 worth of services, in which case the managed care organization would receive a $1,000 capitation payment, but only need to use $500 of it, generating a $500 surplus. However, if the recipient required $2,000 worth of services the next month, the managed care organization would still only receive the $1,000 capitation payment from the State. In this case, the managed care organization would need to cover the $1,000 shortfall between the $2,000 worth of services required by the recipient, and the $1,000 capitation payment received from the State.