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PR 06705.053: Washington

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  • Effective Dates: 10/01/2008 - Present
  • Effective Dates: 07/26/2018 - Present
  • TN 7 (07-18)
  • PR 06705.053 Washington
  • A. PR 04-223 In the Matter of the Estate of Mary G. H~, a/k/a Mary H~, Case No. 02PR642, District Court, County of Arapahoe, State of Colorado
  • A. PR 18-043 State Agency Refusal to Honor an Administrative Wage Garnishment Order
  • Date: January 23, 2018
  • 1. Syllabus
  • Question: Can the State of Washington’s Department of Social and Health Services (DSHS) refuse to honor an administrative wage garnishment order that seeks to garnish money from payments to a healthcare provider for furnishing services to Medicaid beneficiaries?
  • Opinion: Yes. DSHS can refuse to honor the administrative wage garnishment order. Consistent with federal requirements for States’ use of federal Medicaid funds, the State of Washington’s Medicaid plan and state law require that payment for Medicaid services be made only to the provider (or recipient) of those services, except in specified circumstances not present here. In addition, federal agencies are authorized to issue administrative wage garnishment orders only to a debtor’s employer, and DSHS may have a valid basis to argue that it is not the healthcare provider’s employer.
  • 2. Opinion
  • QUESTION PRESENTED
  • Can the State of Washington’s Department of Social and Health Services (DSHS) refuse to honor an administrative wage garnishment order that seeks to garnish money from payments to a healthcare provider for furnishing services to Medicaid beneficiaries?
  • BRIEF ANSWER
  • Yes. DSHS can refuse to honor the administrative wage garnishment order. Consistent with federal requirements for States’ use of federal Medicaid funds, the State of Washington’s Medicaid plan and state law require that payment for Medicaid services be made only to the provider (or recipient) of those services, except in specified circumstances not present here. In addition, federal agencies are authorized to issue administrative wage garnishment orders only to a debtor’s employer, and DSHS may have a valid basis to argue that it is not the healthcare provider’s employer.
  • BACKGROUND
  • Medicaid Framework
  • The State of Washington participates in Medicaid, a joint federal-state program through which the federal government subsidizes the States’ provision of health care to needy individuals. 42 U.S.C. §§ 1396-1396w-5. The federal government pays States a specified percentage of program expenditures, and, in return, States pay their portion of costs and comply with the requirements of the Medicaid Act, 42 U.S.C. §§ 1396-1396w-5, and its implementing regulations, 42 C.F.R. §§ 430.0-430.104. Arkansas Dep’t of Health & Human Servs. v. Ahlborn, 547 U.S. 268, 275 (2006).
  • In order to participate in Medicaid, a State must submit to the federal government, and have approved, a “State plan” for medical assistance that describes the nature and scope of the State’s Medicaid program. 42 U.S.C. § 1396a(a), (b). The State of Washington adopted, and the federal government approved, a State plan1 under 42 U.S.C. § 1396a(a) and (b), which Washington administers through DSHS.2
  • The Medicaid Act sets out a “laundry list” of provisions that must be contained within a State plan. Alaska Dep’t of Health & Soc. Servs. v. Ctrs for Medicare & Medicaid Servs., 424 F.3d 931, 935 (9th Cir. 2005) (citing 42 U.S.C. § 1396a(a)). One such provision is an anti-assignment provision:
  • A State plan for medical assistance must–
  • . . . .
  • provide that no payment under the plan for any care or service provided to an individual shall be made to anyone other than such individual or the person or institution providing such care or service, under an assignment or power of attorney or otherwise . . . .
  • 42 U.S.C. § 1396a(a)(32). Except in limited circumstances, which are discussed below, the Medicaid Act thus prohibits payment under a State plan to anyone other than a provider or recipient of Medicaid services.
  • Administrative Wage Garnishment Order
  • The debtor, W~ (Debtor), is an individual provider of in-home personal care services to Medicaid beneficiaries in the State of Washington. Wash. Rev. Code § 74.39A.240(3) (definition of individual provider of long-term care services). DSHS pays individual providers, such as the Debtor, for the services they furnish to Medicaid beneficiaries. See Wash. Rev. Code §§ 74.04.015, 74.04.050, 74.39A.270, 74.39A.300. Individual providers of long-term care services, however, are not considered employees of DSHS. Wash. Rev. Code §§ 41.04.810 (individual providers are not employees of Washington State or any of its subdivisions), 41.56.113 (State is payor, not employer), 74.39A.270 (individual providers considered public employees solely for collective bargaining purposes). Instead, individual providers are considered employees of the Medicaid beneficiaries who receive their services. Wash. Admin. Code §§ 388-71-0505 (stating that the beneficiary “[e]stablishes an employer-employee relationship with the individual provider”), 388-71-0515(1) (beneficiary is individual provider’s employer).
  • Under the authority of the Debt Collection Improvement Act of 1996 (DCIA), Pub. L. 104-134, codified in part at 31 U.S.C. § 3720D, SSA issued an administrative wage garnishment order to DSHS to recover an overpayment of Social Security benefits paid to the Debtor. Administrative wage garnishment is a debt collection process that allows a federal agency, without obtaining a court order, to order an employer to garnish an employee’s wages. See 31 U.S.C. § 3720D; 31 C.F.R. § 285.11. DSHS refused to honor the garnishment order, however. According to DSHS, it pays the Debtor for furnishing Medicaid services using Medicaid funds, and Medicaid’s anti-assignment provisions (42 U.S.C. § 1396a(a)(32) and 42 C.F.R. § 447.10) as well as Washington State law (Wash. Rev. Code § 74.08.210)3 prohibit it from complying with an administrative wage garnishment order that would capture Medicaid funds. SSA’s Philadelphia Processing Service Center (PSC) contends that those laws do not apply to SSA because the federal law authorizing the agency’s use of administrative wage garnishment, 31 U.S.C. § 3720D, should be construed to apply notwithstanding Medicaid’s anti-assignment provisions. In support, the PSC quoted the provision in section 3720D stating that agencies may use administrative wage garnishment “[n]otwithstanding any provision of State law.” 31 U.S.C. § 3720D(a).
  • DISCUSSION
  • DSHS Can Refuse to Honor the Administrative Wage Garnishment Order Because Federal Law Requires that Medicaid Funds Be Paid to the Provider, Except in Specified Circumstances Not Present Here
  • DATE: May 20, 2004
  • The Medicaid Act provides that payments under a State plan may generally be made only to the provider or beneficiary of Medicaid services. 42 U.S.C. § 1396a(a)(32); see also 42 C.F.R. § 447.10 (implementing the anti-assignment provision). Consistent with the Medicaid law, section 4.21 of the Washington State Medicaid Plan provides: “Payment for Medicaid services furnished by any provider under this plan is made only in accordance with the requirements of 42 CFR 447.10.” Wash. State Health Care Authority, Medicaid State Plan, 68 (2017), available at: https://www.hca.wa.gov/assets/program/SP-Numbered-Pages-General-Program-Administration.pdf.
  • 1. SYLLABUS
  • Section 447.10 of Title 42 of the Code of Federal Regulations, in turn, “prohibits State payments for Medicaid services to anyone other than a provider or beneficiary, except in specified circumstances.” 42 C.F.R. § 447.10(a).
  • None of the “specified circumstances” in which payment for Medicaid services may be made to someone other than the provider (or beneficiary) would permit DSHS to comply with SSA’s administrative wage garnishment order. Those exceptions allow payment to be made to an employer, the facility where the care or service was provided, a healthcare organization, a business agent (such as a billing service), or a third party, for benefits such as health insurance. 42 U.S.C. § 1396a(a)(32)(A)-(D); 42 C.F.R. § 447.10(f)-(g). In addition, payment may be made in accordance with a reassignment from the provider to a government agency or pursuant to a court order. 42 U.S.C. § 1396a(a)(32)(B); 42 C.F.R. § 447.10(e).
  • Among the “specified circumstances,” only reassignment by the provider to a government agency or by court order potentially pertain to this situation. 42 U.S.C. § 1396a(a)(32)(B); 42 C.F.R. § 447.10(e); see also Digitech Computer, Inc., v. Trans-Care, Inc., 759 F. Supp. 2d 1030, 1032 (S.D. Ind. 2010) (holding that the Medicaid Act did not bar court-ordered garnishment of Medicaid payments). We assume that SSA complied with the notice provisions before initiating administrative wage garnishment proceedings. See 31 U.S.C. § 3720D(b)(2)-(5); 20 C.F.R. §§ 422.403–422.410 (outlining SSA’s notice requirements and procedures to initiate wage garnishment). If so, the Debtor was provided the opportunity, but did not agree, to enter into a repayment plan. Thus, a court order would be necessary to require DSHS to garnish the Debtor’s wages.
  • As noted above, the PSC contends that the federal law authorizing the agency’s use of administrative wage garnishment, 31 U.S.C. § 3720D, should be construed to apply notwithstanding Medicaid’s anti-assignment provisions. In support of this view, the PSC quoted the provision in section 3720D stating that agencies may use administrative wage garnishment “[n]otwithstanding any provision of State law.” 31 U.S.C. § 3720D(a); see also 31 C.F.R. § 285.11(b)(1) (“This section shall apply notwithstanding any provision of State law.”). However, Medicaid’s anti-assignment provisions are contained in federal law (42 U.S.C. § 1396a(a)(32) and 42 C.F.R. § 447.10), as well as in Washington’s State Plan, and nothing in section 3270D states or suggests that agencies may use administrative wage garnishment when doing so would conflict with other federal laws. See 31 U.S.C. § 3720D. The State-law preemption clause in section 3720D, therefore, does not provide a basis for concluding that DSHS must honor SSA’s administrative wage garnishment order. As explained above, if SSA wishes to garnish the Debtor’s wages, it appears that the agency must obtain a court order authorizing the garnishment.
  • DSHS may argue that Washington State law would prohibit it from complying with a court order directing garnishment of the Debtor’s wages. DSHS pays individual providers, such as the Debtor, for Medicaid services under Title 74 of the Revised Code of Washington. Wash. Rev. Code § 74.39A.300. Title 74 provides, in pertinent part: “. . . none of the money paid or payable under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of bankruptcy or insolvency law.” Wash. Rev. Code § 74.08.210. That would not be a strong argument by DSHS, however, because conflicting portions of Washington State law are preempted.4 See also Wash. Rev. Code § 74.08.260 (federal Social Security Act to control in event of conflict).
  • In sum, DSHS may properly refuse to comply with SSA’s administrative wage garnishment order. Garnishing from payments that DSHS makes to the Debtor without a court order (or voluntary reassignment from the Debtor) would conflict with federal requirements for Washington State’s use of federal Medicaid funds.
  • DSHS May Refuse to Honor the Administrative Wage Garnishment Order Because SSA Is Authorized to Issue such Orders Only to Employers, and DSHS May Not Be the Debtor’s Employer
  • DSHS also may decline to comply with the agency’s garnishment by arguing that DSHS is not the Debtor’s employer and, as a result, the agency lacks authority to order DSHS to garnish payments to the Debtor. The administrative wage garnishment statute, 31 U.S.C. § 3720D, and its implementing regulation authorize agencies to issue administrative wage garnishment orders only to a debtor’s “employer.” See 31 U.S.C. § 3720D(d), (f); 31 C.F.R. § 285.11(g)-(i), (o). The regulation defines “employer” as “a person or entity that employs the services of others and that pays their wages or salaries.” 31 C.F.R. § 285.11(c) (emphasis added). While DSHS may pay the Debtor for services she furnishes to Medicaid beneficiaries, under Washington State law individual providers are not considered employees of DSHS, and DSHS is not considered their employer. See Wash. Rev. Code §§ 41.04.810 (individual providers are not employees of Washington State or any of its subdivisions), 41.56.113 (State is payor, not employer), 74.39A.270 (individual providers considered public employees solely for collective bargaining purposes). Instead, Washington State law provides that an employee-employer relationship exists between the individual provider and the Medicaid beneficiary who receives the provider’s services. See Wash. Admin. Code §§ 388-71-0505 (stating that the beneficiary “[e]stablishes an employer-employee relationship with the individual provider”), 388-71-0515(1) (beneficiary is individual provider’s employer). Consequently, DSHS may have a valid basis for arguing that it is not the Debtor’s employer, and that for this reason, too, it may properly refuse to comply with SSA’s garnishment order.
  • CONCLUSION
  • DSHS can properly refuse to honor the administrative wage garnishment order because garnishing from payments that it makes to the Debtor would conflict with federal requirements for Washington State’s use of federal Medicaid funds. Further, DSHS might also be considered to not be the Debtor’s employer, meaning that SSA would not be authorized under 31 U.S.C. § 3720D to order DSHS to garnish payments to the Debtor. If SSA wishes to garnish the Debtor’s wages, the agency must obtain a court order.
  • B. PR 04-223 In the Matter of the Estate of Mary G. H~, a/k/a Mary H~, Case No. 02PR642, District Court, County of Arapahoe, State of Colorado
  • Date: May 20, 2004
  • 1. Syllabus
  • The opinion expands on the policy for recovery of an overpayment from an executor of an estate of a deceased debtor.
  • 2. OPINION
  • 2. Opinion
  • Issue
  • ISSUE
  • Whether the Agency may recover an overpayment in the amount of $22,574.00 from Vincent V. H~, Jr. (Mr. H~), the personal representative of the estate of Mary G. H~ (Mrs. H~)._1
  • Whether the Agency may recover an overpayment in the amount of $22,574.00 from Vincent V. H~, Jr. (Mr. H~), the personal representative of the estate of Mary G. H~ (Mrs. H~)._/1
  • DISCUSSION
  • Short Answer
  • Mr. H~ received notice of the overpayment prior to final distribution of the estate assets on April 21, 2004. Therefore, he is in violation of the Federal Priority Statute, 31 U.S.C. § 3713(b), and could be found personally responsible for repaying the overpayment. Referral of this matter to the Department of Justice (DOJ) for enforced collection, however, is premature because Mr. H~ did not receive proper notice of the overpayment. Specifically, the initial notice does not comport with Agency policy regarding overpayment notices, which includes informing the legal representative of the right to reconsideration and waiver of recovery, as well providing detailed information explaining the overpayment calculation. Because the December 14, 2004 notice (see Tab 3) is the only notice Mr. H~ has received regarding the overpayment, and this notice is deficient, we recommend the Great Lakes Program Service Center (GLPSC) reissue a notice that includes the requisite information noted in the Program Operations Manual System (POMS).
  • FACTS
  • According to information you have provided, at the time of her death, the decendent, Mrs. H~, owed $22,574.00 to the Agency for an overpayment of benefits due to excess income. In a notice date December 14, 2003 (see Tab 3), the GLPSC informed Claire D~ (Ms. D~), the attorney for the estate, that "[b]ased on [Mrs. H~] receiving a government pension, her Social Security benefits should have been reduced. Therefore[,] an overpayment of $22,574.00 resulted" (id.)_2 The notice also informed Ms. D~ that according to Agency records, she was appointed as executor of the estate, and that pursuant to 31 U.S.C. § 3713, she would become personally liable for the overpayment if the estate's debt to the United States was not satisfied first and there were insufficient funds to pay all debts. The notice did not include, for example, "the monthly amount, if any, which should have been paid, . . . the months for which the different amount should have been paid, and the amount which was paid for those months." POMS § GN 02201.009B.1. (What Notice Includes). Nor did the notice mention the right to reconsideration of the overpayment determination or the right to request waiver of recovery. See id.
  • According to information you have provided, at the time of her death, the decendent, Mrs. H~, owed $22,574.00 to the Agency for an overpayment of benefits due to excess income. In a notice date December 14, 2003 (see Tab 3), the GLPSC informed Claire D~ (Ms. D~), the attorney for the estate, that "[b]ased on [Mrs. H~] receiving a government pension, her Social Security benefits should have been reduced. Therefore[,] an overpayment of $22,574.00 resulted" (id.)_/2 The notice also informed Ms. D~ that according to Agency records, she was appointed as executor of the estate, and that pursuant to 31 U.S.C. § 3713, she would become personally liable for the overpayment if the estate's debt to the United States was not satisfied first and there were insufficient funds to pay all debts. The notice did not include, for example, "the monthly amount, if any, which should have been paid, . . . the months for which the different amount should have been paid, and the amount which was paid for those months." POMS § GN 02201.009B.1. (What Notice Includes). Nor did the notice mention the right to reconsideration of the overpayment determination or the right to request waiver of recovery. See id.
  • In a letter dated December 22, 2003 (see Tab 2), Ms. D~ informed the GLPSC that Mrs. H~ died on June 27, 2002, and that Mr. H~ was appointed personal representative of the estate on July 18, 2002. Ms. D~ also noted that following Mr. H~'s appointment as personal representative, a "Notice to Creditors" was published three times in a local newspaper, beginning August 1, 2002, and ending August 15, 2002, and the "[the Agency] did not file a claim within this time period . . ." (id.) Ms. D~ noted further that "the personal representative of the Estate of Mary G. H~ is denying the request by the Social Security Administration for repayment of $22,574.00," and that the estate would be closed 60 days from the date of her letter. Thus, despite the defective notice, Mr. H~, through the attorney for the estate, arguably requested reconsideration in December 2003, and the Agency has not responded to that request.
  • In a letter dated December 22, 2003 (see Tab 2), Ms. D~ informed the GLPSC that Mrs. H~ died on June XX, 2002, and that Mr. H~ was appointed personal representative of the estate on July 18, 2002. Ms. D~ also noted that following Mr. H~'s appointment as personal representative, a "Notice to Creditors" was published three times in a local newspaper, beginning August 1, 2002, and ending August 15, 2002, and the "[the Agency] did not file a claim within this time period . . ." (id.) Ms. D~ noted further that "the personal representative of the Estate of Mary G. H~ is denying the request by the Social Security Administration for repayment of $22,574.00," and that the estate would be closed 60 days from the date of her letter. Thus, despite the defective notice, Mr. H~, through the attorney for the estate, arguably requested reconsideration in December 2003, and the Agency has not responded to that request.
  • Statements from USBank, which are attached to the "Final Accounting-For Period From: July 24, 2002 To April 11, 2003" (see Tab 4) reflect that on December 31, 2002, the "customer," presumably, Mr. H~, withdrew $145,000 from a USBank account in the name of "The Estate of Mary H~." On March 26, 2004, approximately three months after he received notice of the overpayment through the attorney for the estate, Mr. H~, in his capacity as Trustee of the H~ Family Trust (the Trust), filed a "Receipt and Release" (see Tab 5), attesting that he had received cash in the amount of $146,362.98, and securities valued at $3,205.10 and $1,134.66 from himself as the personal representative of the estate. The "Receipt and Release" does not reflect the exact date Mr. H~ "contingently" distributed these assets to the Trust; however, as explained further below, the "final" distribution date, which in this case is April 21, 2004, is the relevant date for purpose of determining his liability for the overpayment under the Federal Priority Statute.
  • During a telephone conversation with Ms. D~ on April 19, 2002, she informed our office that Mr. H~ had distributed the assets to the Trust before he received notice of the overpayment from the Agency in December 2003. Ms. D~ also continued to assert that the Agency had missed the deadline to file a claim and had failed to prove the estate's liability for the overpayment. On April 21, 2004, Ms. D~ forwarded to our office a copy of the "Decree of Final Discharge" (see Tab 6) issued by the probate court, purportedly releasing and discharging Mr. H~ "from any and all liability arising in connection with the performance of [his] fiduciary's duties. . . ."
  • Legal Analysis
  • The Federal Priority Statute provides that, "A representative of a person or an estate . . . paying any part of a debt of the person or estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government." 31 U.S.C. § 3713(b). "The statute is to be 'liberally construed so as to effect the public purpose of securing debts owed to the United States.'" United States v. Idaho Falls Assocs. Ltd. P'ship, 81 F. Supp.2d 1033, 3713 (D. Idaho 1999) (quoting United States v. Whitney, 654 F.2d 607, 609 (9th Cir. 1981) (citing Bramwell v. United States Fid. & Guar. Co., 269 U.S. 483 (1926)); see also United States v. Moore, 423 U.S. 77, 81-86 (1975).
  • "'The basic elements of § 3713(b) and of its predecessor statutes is that (1) a fiduciary (2) make a distribution which (3) leaves the estate with insufficient funds to pay (4) a debt owing the United States where (5) the fiduciary had knowledge or notice of the debt due to the United States at a time when the estate had sufficient assets with which to satisfy the debt owing to the United States.'" United States v. Bartlett, 186 F. Supp.2d 875 (C.D. Ill. 2002) (citations omitted).
  • Mr. H~, as the personal representative for the estate, is a fiduciary. He distributed the assets of the estate to the H~ Family Trust, leaving the estate with insufficient funds to pay the overpayment. While Mr. H~ contends he had already distributed the estate assets to the Trust before he received notice of the overpayment, "[t]he distribution by [Mr. H~] prior to the closure of the estate was not a final distribution pursuant to a final decree, but a contingent distribution." Ferri v. Bowen, No. C-85-505-SPM, 1986 WL 373, at *2 (E.D. Wash. July 16, 1986) (noting that "[i]t is 'distribution' which is controlling"). The date Mr. H~ made a final distribution of the estate assets is the determining factor in this case with respect to his personal liability under the Federal Recovery Statute. See id. Therefore, even if Mr. H~ did distribute the assets of the estate into the Trust before he received notice in December 2003, he received notice of the overpayment prior to the closure of the estate in April 2004 and is in violation of the Federal Priority Statute. See id.
  • Mr. H~, through the attorney for the estate, also continues to dispute the Agency's right to recover the overpayment from the estate assets on the basis that the Agency missed the deadline to file a claim. However, "[a]s it undisputed that state probate nonclaim statutes do not bar claims of the federal government, the status of the probate proceedings cannot be deemed controlling." Id. (citing United States v. Summerlin, 310 U.S. 414 (1940)).
  • In construing the predecessor statute to 31 U.S.C. § 3713(b),[ ] the courts have uniformly held a personal representative liable who, having actual notice of the debt due the Government, distributed the estate pursuant to a decree of distribution without first paying the debt due the Government even though the Government had not submitted a claim in the probate proceedings.
  • United States v. Boots, 675 F. Supp. 550, 551 (E.D. Mo. 1987) (citations omitted). Mr. H~ has "the burden of proving the statute does not apply" to him. Ferri, 1986 WL 373, *2 (citing United States v. Cole, 733 F.2d 651, 654 (9th Cir. 1984)).
  • Mr. H~ also continues to dispute the validity of the overpayment, and therefore, may contest whether the Agency actually had a "claim," i.e., whether the estate was indebted to the Agency within the meaning of the Federal Priority Statute before the assets were finally distributed ._3 "The terms of the . . . statute are to be construed liberally so as not to frustrate its purpose in securing sufficient revenue for the payments of public debts." United States v. Moriarty, 8 F.3d 329 (6th Cir. 1993) (holding that "although the United States may be precluded by the applicable statute of limitations from brining an action for money damages, it continues to have a 'right to payment' against the debtor in this case and thus may enforce that right in other ways") (citing Bramwell v. United States Fidelity & Guar. Co., 269 U.S. 482, 487 (1926); United States v. State Bank of N.C., 31 U.S. (6 Pet.) 29, 34, 8 L.Ed. 390 (1832)). Furthermore, "[i]n interpreting the term 'claim' under the federal priority statute, we look for guidance to the Bankruptcy Code." Moriarty, 8 F.3d at 334 (citing United States v. Moore, 423 U.S. 77, 84 (1975)). "In the Bankruptcy Code, 'claim' is defined broadly as a 'right to payment, whether or not such right is reduced to judgment, . . . contingent, . . . [or] disputed. . . ." Moriarity, 8 F.3d at 334 (emphasis in original) (citing 11 U.S. C. § 101(5)). Here, we believe the estate's debt arose on or about September 27, 2002, the date the Agency discovered and manually posted Mrs. H~'s overpayment in its computer system. "Once a determination of overpayment is made, the overpaid amount is a debt owed to the United States Government." POMS GN 02201.001._4 See Memorandum, Florida - Recovery of Overpayment Incurred Subsequent to Chapter 7 Bankruptcy, CC IV (G~ & A~) to Assistant Regional Commissioner, Program Operations and Systems (May 5, 1993) (noting "[t]he debt to SSA is not created until [the beneficiary] reports the amount of her 1990 earnings or until as here, an investigation reveals that there were excess earnings for 1990).
  • Mr. H~ also continues to dispute the validity of the overpayment, and therefore, may contest whether the Agency actually had a "claim," i.e., whether the estate was indebted to the Agency within the meaning of the Federal Priority Statute before the assets were finally distributed ._/3 "The terms of the . . . statute are to be construed liberally so as not to frustrate its purpose in securing sufficient revenue for the payments of public debts." United States v. Moriarty, 8 F.3d 329 (6th Cir. 1993) (holding that "although the United States may be precluded by the applicable statute of limitations from brining an action for money damages, it continues to have a 'right to payment' against the debtor in this case and thus may enforce that right in other ways") (citing Bramwell v. United States Fidelity & Guar. Co., 269 U.S. 482, 487 (1926); United States v. State Bank of N.C., 31 U.S. (6 Pet.) 29, 34, 8 L.Ed. 390 (1832)). Furthermore, "[i]n interpreting the term 'claim' under the federal priority statute, we look for guidance to the Bankruptcy Code." Moriarty, 8 F.3d at 334 (citing United States v. Moore, 423 U.S. 77, 84 (1975)). "In the Bankruptcy Code, 'claim' is defined broadly as a 'right to payment, whether or not such right is reduced to judgment, . . . contingent, . . . [or] disputed. . . ." Moriarity, 8 F.3d at 334 (emphasis in original) (citing 11 U.S. C. § 101(5)). Here, we believe the estate's debt arose on or about September 27, 2002, the date the Agency discovered and manually posted Mrs. H~'s overpayment in its computer system. "Once a determination of overpayment is made, the overpaid amount is a debt owed to the United States Government." POMS GN 02201.001._/4 See Memorandum, Florida - Recovery of Overpayment Incurred Subsequent to Chapter 7 Bankruptcy, CC IV (G~ & A~) to Assistant Regional Commissioner, Program Operations and Systems (May 5, 1993) (noting "[t]he debt to SSA is not created until [the beneficiary] reports the amount of her 1990 earnings or until as here, an investigation reveals that there were excess earnings for 1990).
  • Thus, we believe that Mr. H~ is in violation of the Federal Recovery Statute and, therefore, liable in his personal capacity as the representative of the estate for the $22,574 overpayment. However, we caution that DOJ may be reluctant to initiate a recovery action_5 against Mr. H~ in his capacity as personal representative if the Agency cannot demonstrate he received proper notice of the overpayment.
  • Thus, we believe that Mr. H~ is in violation of the Federal Recovery Statute and, therefore, liable in his personal capacity as the representative of the estate for the $22,574 overpayment. However, we caution that DOJ may be reluctant to initiate a recovery action_/5 against Mr. H~ in his capacity as personal representative if the Agency cannot demonstrate he received proper notice of the overpayment.
  • The December 2003 notice that Mr. H~ received through the attorney for the estate (see Tab 3) does not comport with Agency policy. POMS GS 02201.009 (Notification of Overpayment) requires that written notice be sent and requires that the notice include the "[o]verpayment amount and how and when it occurred (i.e., the overpaid amount, the monthly amount, if any, which should have been paid, why the different amount was due, the months for which the different amount should have been paid, and the amount which was paid for those months)." The December 2003 notice simply states the following: "Based on [Mary G. H~] receiving a government pension, her Social Security benefits should have been reduced. Therefore[,] an overpayment of $22,574.00 resulted" (see Tab 3). Additionally, the notice must inform the claimant of the "[r]ight to reconsideration of the overpayment determination," as well as the "[r]ight to request waiver of recovery and the automatic scheduling of a personal conference if a request for waiver cannot be approved." Id. § GN 02201.009B.1. The December 2003 notice does not mention reconsideration or waiver.
  • POMS GN 02215.055, which specifically pertains to estates administered by a legal representative, states that "[a] legal representative must be notified of how and when an overpayment was made and the estate's liability for repayment." Moreover, these procedures also require the Agency to inform the legal representative of "[t]he right to reconsideration and waiver" and "[t]reat any protest/appeal of the estate's liability for repayment . . . as a request for reconsideration of that issue." Id. GN 02215.055 B.1.a.& e. Again, the notice Mr. H~ received through the attorney for the estate in December 2003 does not meet these requirements. "If notification is deficient (e.g., notice is not sent, . . . content is inadequate), a new notice must be sent." Id. § GN 02201.009B.8._6 Furthermore, as noted above, the Agency has not responded to Mr. H~'s request for reconsideration.
  • POMS GN 02215.055, which specifically pertains to estates administered by a legal representative, states that "[a] legal representative must be notified of how and when an overpayment was made and the estate's liability for repayment." Moreover, these procedures also require the Agency to inform the legal representative of "[t]he right to reconsideration and waiver" and "[t]reat any protest/appeal of the estate's liability for repayment . . . as a request for reconsideration of that issue." Id. GN 02215.055 B.1.a.& e. Again, the notice Mr. H~ received through the attorney for the estate in December 2003 does not meet these requirements. "If notification is deficient (e.g., notice is not sent, . . . content is inadequate), a new notice must be sent." Id. § GN 02201.009B.8._/6 Furthermore, as noted above, the Agency has not responded to Mr. H~'s request for reconsideration.
  • Thus, while the December 2003 notice was sufficient to alert Mr. H~ that the Agency has a claim against the estate,_7 this notice is insufficient for the purpose of establishing the estate's liability for the overpayment because it does not contain the requisite information.
  • Thus, while the December 2003 notice was sufficient to alert Mr. H~ that the Agency has a claim against the estate,_/7 this notice is insufficient for the purpose of establishing the estate's liability for the overpayment because it does not contain the requisite information.
  • CONCLUSION
  • For the reasons discussed above, we believe Mr. H~ could be found liable in his personal capacity under the Federal Priority Statute for the overpayment because he received sufficient notice of the Agency's claim prior to final distribution of the estate assets._8 However, we do not believe DOJ will institute recovery action if the Agency cannot prove the fact and amount of the debt, which will require to Agency to show that that it followed its internal policies with regards to notice of the overpayment._9 Therefore, we recommend the Agency reissue a notice to Mr. H~ in his capacity as personal representative that contains the requisite information noted in the POMS.
  • Deana R. E~-L~Regional Chief Counsel, Region VIII
  • By ___________________________ Yvette G. K~ Assistant Regional Counsel
  • For the reasons discussed above, we believe Mr. H~ could be found liable in his personal capacity under the Federal Priority Statute for the overpayment because he received sufficient notice of the Agency's claim prior to final distribution of the estate assets._/8 However, we do not believe DOJ will institute recovery action if the Agency cannot prove the fact and amount of the debt, which will require to Agency to show that that it followed its internal policies with regards to notice of the overpayment._/9 Therefore, we recommend the Agency reissue a notice to Mr. H~ in his capacity as personal representative that contains the requisite information noted in the POMS.
  • _1 On April 13, 2004, you submitted a "Notice of Hearing on Petition for Final Settlement and Distribution (Non-Appearance)" (see Tab 1), scheduled for April 20, 2004, to the Office of the General Counsel, Region V, in Chicago, Illinois, which referred the matter to our office because a Colorado State Court has jurisdiction over the probate proceedings. After consultation with the Colorado U.S. Attorney's Office, we did not send an attorney to the non-appearance hearing. We determined that since the assets had been "contingently" distributed, it was unlikely the court would delay the final settlement and distribution of the estate, and, if warranted, the Agency could refer this matter to the Department of Justice (DOJ) for a civil suit to recover the overpayment from Mr. H~ at the conclusion of the administrative proceedings.
  • _/1 On April 13, 2004, you submitted a "Notice of Hearing on Petition for Final Settlement and Distribution (Non-Appearance)" (see Tab 1), scheduled for April 20, 2004, to the Office of the General Counsel, Region V, in Chicago, Illinois, which referred the matter to our office because a Colorado State Court has jurisdiction over the probate proceedings. After consultation with the Colorado U.S. Attorney's Office, we did not send an attorney to the non-appearance hearing. We determined that since the assets had been "contingently" distributed, it was unlikely the court would delay the final settlement and distribution of the estate, and, if warranted, the Agency could refer this matter to the Department of Justice (DOJ) for a civil suit to recover the overpayment from Mr. H~ at the conclusion of the administrative proceedings.
  • _2 The GLPSC sent a similar notice to the probate court.
  • _/2 The GLPSC sent a similar notice to the probate court.
  • _3 Sections (a) and (b) of 31 U.S.C. § 3713 provide, in part, as follows:
  • _/3 Sections (a) and (b) of 31 U.S.C. § 3713 provide, in part, as follows:
  • (a)(1) A claim of the United States Government shall be paid first when-(b) the estate of a deceased debtor, in the custody of the executor or administrator, is not enough to pay all debts of the debtor.
  • _4 In this context, we believe "determination" is synonymous with "discovered," as opposed to the term of art, "initial determination," which requires written notice. See POMS GN 02201.009 ("When the debt is discovered, the fact, amount and liability for repayment must be communicated as soon as possible. If the overpayment is discovered because of an oral communication (telephone call or interview), the liability for repayment is communicated during the first oral contact. Written notice is always sent.")
  • _/4 In this context, we believe "determination" is synonymous with "discovered," as opposed to the term of art, "initial determination," which requires written notice. See POMS GN 02201.009 ("When the debt is discovered, the fact, amount and liability for repayment must be communicated as soon as possible. If the overpayment is discovered because of an oral communication (telephone call or interview), the liability for repayment is communicated during the first oral contact. Written notice is always sent.")
  • _5 POMS § GN 02215.170.A (Handling of Overpayment Claims for Referral to DOJ) notes that "[t]he ARC, POS is responsible for either reporting or not reporting an outstanding debt to the U.S. Department of Justice (DOJ) Central Intake Facility for possible civil suit." Referrals must be submitted to the Department of Justice on a "Certificate of Indebtedness" and a Claims Collection Litigation Report pursuant to the instructions set forth in the POMS. See id. § GN 02215.170B.4.
  • _/5 POMS § GN 02215.170.A (Handling of Overpayment Claims for Referral to DOJ) notes that "[t]he ARC, POS is responsible for either reporting or not reporting an outstanding debt to the U.S. Department of Justice (DOJ) Central Intake Facility for possible civil suit." Referrals must be submitted to the Department of Justice on a "Certificate of Indebtedness" and a Claims Collection Litigation Report pursuant to the instructions set forth in the POMS. See id. § GN 02215.170B.4.
  • _6 "Whenever there is a delay of more than 1 year between the time overpayment occurs and the time a determination is made (i.e., notice sent), a complete explanation and evidence to support the delay must be provided by the PC when the debt claim is referred to DOJ." POMS§ GN 02215.150.B.2.
  • _/6 "Whenever there is a delay of more than 1 year between the time overpayment occurs and the time a determination is made (i.e., notice sent), a complete explanation and evidence to support the delay must be provided by the PC when the debt claim is referred to DOJ." POMS§ GN 02215.150.B.2.
  • _7 "The knowledge requirement of ... 31 U.S.C. § 3713 may be satisfied by either actual knowledge of the liability or notice of such facts as would put a reasonably prudent person on inquiry as to the existence of the unpaid claim of the United States. To be chargeable with knowledge of such a debt, the executor must be in possession of such facts as to put him on inquiry." Bartlett, 186 F. Supp. 2d at 886-87.
  • _/7 "The knowledge requirement of ... 31 U.S.C. § 3713 may be satisfied by either actual knowledge of the liability or notice of such facts as would put a reasonably prudent person on inquiry as to the existence of the unpaid claim of the United States. To be chargeable with knowledge of such a debt, the executor must be in possession of such facts as to put him on inquiry." Bartlett, 186 F. Supp. 2d at 886-87.
  • _8 This opinion does not address recovery actions that could be taken against the beneficiaries (distributes) of the trust. "When an overpaid person (e.g., beneficiary or representative payee) dies, the person's estate becomes liable. If the estate is closed, the distributees or legatees are liable to the extent of the proceeds of the estate (or property attributable to such proceeds) which are in his/her possession when notified of the overpayment." POMS 02205.001.B.2.
  • _/8 This opinion does not address recovery actions that could be taken against the beneficiaries (distributes) of the trust. "When an overpaid person (e.g., beneficiary or representative payee) dies, the person's estate becomes liable. If the estate is closed, the distributees or legatees are liable to the extent of the proceeds of the estate (or property attributable to such proceeds) which are in his/her possession when notified of the overpayment." POMS 02205.001.B.2.
  • _9 To ensure that civil suit is not barred, the complaint must be filed within:
  • _/9 To ensure that civil suit is not barred, the complaint must be filed within:
  • a. Six years after the right of action accrues (i.e., within 6 years after the time an overpayment determination has been made); or
  • b. One year after a final decision has been rendered in an administrative proceeding (i.e., reconsideration, hearing, and/or review by the Appeals Council), whichever is later.
  • POMS § GN 02215.159B.2.
  • Footnotes:
  • [1]
  • . The Washington State Medicaid Plan is available online at https://www.hca.wa.gov/assets/program/SP-Numbered-Pages-General-Program-Administration.pdf.
  • [2]
  • . The Washington State Health Care Authority is the designated single state agency that administers the Medicaid program. Wash. Rev. Code § 74.09.530. DSHS administers and distributes the federal funds received by the State for public assistance and medical services programs. Wash. Rev. Code §§ 74.04.015, 74.04.050.
  • [3]
  • . “Grants awarded under this title shall not be transferable or assignable, at law or in equity, and none of the money paid or payable under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of bankruptcy or insolvency law.” Wash. Rev. Code § 74.08.210 (emphasis added).
  • [4]
  • . Preemption is the principle that federal law can supersede or supplant any inconsistent state law or regulation by virtue of the Supremacy Clause, U.S. Const., Art. VI. Black’s Law Dictionary (10th ed. 2014).
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