A Minnesota appeals court holds that a lower court did not have subject matter jurisdiction over a case, brought by the trustee of a trust who was arguing the state had no right to recover Medicaid benefits, because the trustee did not exhaust his administrative remedies. Hammerberg v. Harpstead (Minn. Ct. App., No. A21-1106, April 11, 2022).
Leonard and Margaret Schubert created an irrevocable trust and transferred property into it. The trust provided that the Schuberts had the right to income from the trust and that upon their death, the trustee would transfer the trust property to their children. Ms. Schubert began receiving Medicaid benefits. After Mr. and Ms. Schubert died, the state asserted a claim on the trust property to recover benefits paid on behalf of Ms. Schubert. The trustee requested that the state release the claim, but the state refused.
The trustee sued the state, arguing that the estate recovery statute does not apply because Ms. Schubert did not have an interest in the trust property at the time of her death. The state filed a motion to dismiss, claiming that the court did not have subject matter jurisdiction because the trustee did not exhaust his administrative remedies. The trial court denied the motion to dismiss because the trustee could challenge the estate recovery law in court and the trust was not a Medicaid recipient subject to the administrative hearing process. The state appealed.
The Minnesota Court of Appeals reverses, holding that the trial court did not have subject matter jurisdiction because the trustee had not exhausted his administrative remedies. The court rules that although there is an exception to the requirement to exhaust administrative remedies for challenges to the estate recovery law, that exception does not apply here because the trustee is not challenging the law but rather how the law was applied. According to the court, the estate recovery statute does not limit the administrative process to Medicaid recipients; anyone with an interest in property subject to a lien can request a hearing. Therefore, the court holds that “the trustee of the trust that owns the property subject to the lien, is not excluded from the estate-recovery statute’s administrative-hearing process merely because neither he nor the trust were recipients of [Medicaid] benefits.”
For the full text of this decision, go to: https://mn.gov/law-library-stat/archive/ctapun/2022/OPa211106-041122.pdf