Category: Probate
Tags: Medicaid, medicare

Medicare Claim Matter in Probate Estate Removed to Federal Court

Posted on: August 13th, 2010
Probate and Estate Administration Matters Are Generally Handled in the State Courts – But Not Always, As One NC Executor Recently Found Out
Probate – the process of filing a deceased person’s will and administering the estate – is generally considered a matter exclusively for state courts. Federal courts are limited in the types of actions they can hear, and the “probate exception” generally excludes probate matters from the federal courts. The Supreme Court held in one case that the federal courts have no authority to “interfere with the probate proceedings or assume general jurisdiction of the probate or control of the property in the custody of the state court.” Markham v. Allen, 326 U.S. 490, 494 (1946). However, the probate exception does not necessarily exclude all probate-related matters from federal court, as one Executor of a North Carolina estate recently discovered.
Anchor In November 2002, Perry Brown, Sr. was injured in a car accident. Mr. Brown was hospitalized and Medicare made payments totaling $100,802.39 for his medical care. These payments were conditional and were subject to reimbursement if insurance proceeds were received to cover those medical expenses. Three years later, Mr. Brown died and his son was appointed the Executor of his estate. State Farm Automobile Insurance Company, which insured the at-fault driver in the 2002 accident, paid $130,000 to the Wake County Clerk of Superior Court in what is called an “interpleader” action. The Wake County Superior Court filed an Order Allowing Interpleader on July 31, 2007, in which it held $100,802.39 to reimburse Medicare subject to Medicare showing satisfactory proof of its lien, and released the remaining $29,197.61 to Mr. Brown’s estate.
Medicare is given 60 days from the date of judgment to provide proof of its lien. Medicare did not respond within 60 days, but the Court continued to hold the money. On August 26, 2009, the Executor of the Estate mailed a copy of the Order to the Centers for Medicare and Medicaid Services in Durham, NC, but Medicare claims it did not receive the letter. On February 16, 2010, Brown’s estate filed an action in state court seeking a declaratory judgment determining that Medicare’s claim was extinguished. Medicare argued that it never received proper notice of the judgment because State Farm did not serve them with the complaint filed in the 2007 interpleader action.
An action against Medicare is an action against the United States, and federal law grants the federal courts jurisdiction to hear claims when the United States is a party to interpleader actions. So, the United States moved the case to federal court. The Executor attempted to move it back to state court on several grounds. One such ground was that the probate exception applied. The federal court found, however, that it could resolve the dispute without assuming general jurisdiction over Brown’s estate. In its findings, the court noted that the probate exception is “judicial”, not “constitutional”, meaning that it was created by the courts rather than in the text of a statute or the Constitution. In this case, the court found a basis to hear the case under federal statutes, which overrode the judicially-created probate exception.
Thanks to Kristin L. Burrows for this post.
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