Medicaid Reimbursement and Estate Claims

The Illinois State Bar Association's Trusts & Estates Section newsletter for November '06 contains a summary of the interesting case of Hines v. Department of Public Aid (850 N.E.2d 148 (2006)).  Hines is an Illinois Supreme Court case that discusses the following scenario:

Husband starts receiving Medicaid payments from Illinois in 1994.

Husband dies in 1997.

Upon Husband's death, Wife inherits his property as surviving joint tenant.

Wife dies in 2001.

May the Illinois Department of Public Aid successfully pursue a claim against Wife's estate for reimbursement of the Medicaid payments made to Husband?  The short answer is "no."  The longer answer involves a look at the Illinois Public Aid Code (305 ILCS 5/5-13) and 42 USC §1396p, a federal statute.  Essentially, the federal statute allows states to recover Medicaid payments from the estate of the person who received the payments but NOT from the estate of such person's spouse.  Illinois could pass a law defining a Medicaid recipient's estate to include property passing from the recipient to the surviving spouse via joint tenancy, but it hasn't yet done so.  I presume that's due to a "bad PR" problem -- "you're taking granddad's house!" -- but I suspect that, as state budgets get squeezed tighter, we're going to see states like Illinois push harder and harder for language allowing these reimbursements.