Estate of Patricia Bacon v. Dept of Health and Human Services, 330260

Patricia Bacon was a Medicaid long-term care recipient; after her death the Department sought recovery from her estate under Michigan’s Medicaid estate recovery program.
Calvin Bacon, the personal representative, applied for a hardship (homestead) exemption; the Department denied the waiver based on BAM 120’s means test (income <200% poverty and resources ≤ $10,000).
The estate administratively appealed; the director upheld the denial. The estate then appealed to Macomb Circuit Court, which reversed, holding the Department exceeded its statutory authority by imposing the means test and by exempting an entire home rather than a portion.
The Court of Appeals granted leave and reviewed whether MCL 400.112g(3)(e) limited the Department’s ability to add eligibility criteria (like a means test) or whether the statute merely required the Department to seek federal approval for specified hardship categories.
The Court of Appeals concluded that prior published decisions (Ketchum Estate and In re Klein Estate) control: MCL 400.112g(3)(e) requires the Department to seek federal approval of certain hardship categories but does not preclude the Department from including additional requirements in the state plan or implementing regulations (such as a means test).
The Court of Appeals reversed the circuit court and remanded, holding the Department’s hardship definition and means test are within its discretion and consistent with federal approval of the state plan.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether MCL 400.112g(3)(e) creates an automatic statutory entitlement to exempt up to 50% of county average home value from estate recovery (i.e., prohibits additional eligibility requirements)	Bacon: statute mandates that the estate is entitled to an exemption for the portion of the homestead equal to or less than 50% of county average home price; Dept. may not impose a means test or redefine the exemption	Department: MCL 400.112g(3)(e) directs the Department to seek federal approval of specified hardship categories but expressly allows the Department to include additional requirements in the state plan and implementing policy	The Court: statute does not create an automatic entitlement; Department may adopt additional criteria and the state plan/BAM 120 were authorized and federally approved; prior precedent controls
Whether the Department’s means test and BAM 120 hardship definition exceed statutory authority	Bacon: means test looks to applicant rather than estate and exempts the whole home, exceeding MCL 400.112g(3)(e)	Department: the statute’s “includes, but not limited to” language permits additional measures; the state plan complied with MCL 400.112g(3)(e) and was federally approved	The Court: Department’s approach is permissible; Ketchum and Klein bind the court and support agency discretion to add requirements

Mackey v. Dep’t of Human Servs., 289 Mich. App. 688 (discusses Medicaid program structure and estate recovery)
Ketchum Estate v. Dep’t of Health & Human Servs., 314 Mich. App. 485 (holds MCL 400.112g(3)(e) allows department discretion to include requirements beyond listed items)
In re Klein Estate, 316 Mich. App. 329 (reaffirms that MCL 400.112g(3) directs seeking federal approval and does not create a statutory entitlement)
Spectrum Health Hosps. v. Farm Bureau Mut. Ins. Co. of Mich., 492 Mich. 503 (standard of review for statutory interpretation)
Mericka v. Dep’t of Community Health, 283 Mich. App. 29 (deference principles for circuit court review of agency factual findings)