Estate Recovery in Managed Care: Minnesota Supreme Court Authorizes Recovery of Actuarially Determined Capitation Amounts for Long-Term Care After Age 55

Introduction

In In re the Estate of: Joanne Mary Ecklund, 20 N.W.3d 351 (Minn. 2025), the Minnesota Supreme Court resolved a recurring and consequential question in Medicaid estate recovery under the Minnesota Medical Assistance Program (MMAP): when services are delivered through managed care, may the State recover from a decedent’s estate the actuarially determined portion of capitation payments attributable to long-term care services, or is recovery limited to the amounts the managed care organization (MCO) actually paid to providers?

The Court held that Minnesota’s estate-recovery statute, Minn. Stat. § 256B.15, subd. 2(a)(1), authorizes the Department of Human Services (DHS) to recover from a recipient’s estate the capitation amounts attributable to long-term care services rendered after the recipient turned 55, even if those actuarially determined amounts exceed what the MCO ultimately paid providers under negotiated rates. The decision reverses the court of appeals and clarifies that “medical assistance” in this context means the State’s payments for the costs of covered care and services, which include capitation payments, not merely fee-for-service provider remittances.

Parties included DHS and Hennepin County (appellants), the Estate’s personal representative (respondent), and an amicus brief from the National Academy of Elder Law Attorneys—Minnesota Chapter. Justice Thissen authored the opinion; Justices Procaccini and Gaïtas took no part.

Summary of the Opinion

The Court determined that the plain text of Minn. Stat. § 256B.15, subd. 2(a)(1), read together with the chapter’s definition of “medical assistance” (Minn. Stat. § 256B.02, subd. 8), permits DHS to recover from an estate “the amount of medical assistance” paid for specified long-term care services rendered to recipients age 55 or older. Because “medical assistance” is statutorily defined as payment of part or all of the cost of care and services, that term encompasses capitation payments. DHS therefore may recover the portion of capitation payments attributable to long-term care services, calculated by the State’s actuarial analysis, excluding overhead.

The Court rejected the Estate’s argument that recovery is limited to the amounts the MCO actually paid to providers ($8,806.84), and instead authorized recovery of $66,052.62—the actuarially determined long-term care portion of capitation paid by DHS to Medica on Ms. Ecklund’s behalf. The decision aligns with the CMS State Medicaid Manual, which directs states to recover the relevant capitation portion where a state elects to recover “some, but not all” services.

Holding: DHS may recover from a decedent’s estate the actuarially determined portion of capitation payments attributable to long-term care services provided after age 55. Judgment reversed and remanded to award DHS $66,052.62.

Factual and Procedural Background

Joanne Ecklund received MMAP benefits from 2006 until her death in 2021. From 2016 to 2021 she was enrolled in managed care through Medica. Under managed care, DHS paid Medica monthly capitation to cover anticipated costs for enrollees in a risk-adjusted “rate cell.” An actuarial analysis attributed $66,052.62 of the capitation payments to long-term care services for Ms. Ecklund (nursing facility, home- and community-based services, and related hospital and prescription drug services). Providers billed over $113,000 for her care; under Medica’s negotiated rates, Medica paid providers $8,806.84.

Hennepin County, on DHS’s behalf, filed an estate-recovery claim for $66,052.62 under Minn. Stat. § 256B.15, subd. 2(a)(1). The personal representative disallowed the claim, arguing DHS was limited to recovering the $8,806.84 actually paid by the MCO to providers. The district court and court of appeals agreed with the Estate. The Minnesota Supreme Court granted review and reversed.

Statutory Framework

Medicaid is a cooperative federal–state program overseen by CMS. Minnesota participates through MMAP. Federal law requires certain estate recovery, and Minnesota’s statute mirrors and incorporates this requirement. See 42 U.S.C. § 1396p; Minn. Stat. §§ 256B.15, 256B.22.

The specific limitation in Minn. Stat. § 256B.15, subd. 2(a)(1) allows DHS to recover only “the amount of medical assistance rendered to recipients 55 years of age or older that consisted of nursing facility services, home and community-based services, and related hospital and prescription drug services.” “Medical assistance” is defined in Minn. Stat. § 256B.02, subd. 8 as payment of part or all of the cost of enumerated care and services.

Precedents Cited and Their Influence

• Martin ex rel. Hoff v. City of Rochester and In re Schmalz: These cases frame Medicaid as cooperative federalism, requiring state compliance with federal Medicaid rules. This contextualizes the importance of aligning state estate recovery practices with CMS guidance.
• Atkins v. Rivera: Cited for the cooperative nature of Medicaid funding and administration, underscoring federal oversight.
• Pfoser v. Harpstead; In re SIRS Appeal by Nobility Home Health Care, Inc.; A.A.A. v. Minnesota DHS: These decisions restate Minnesota’s approach to statutory interpretation—start with plain meaning; if ambiguous, apply canons and, where appropriate, consider agency interpretations.
• Wayzata Nissan, LLC v. Nissan North America, Inc.: When a term is statutorily defined, courts apply that definition. This supports the Court’s reliance on the chapter’s definition of “medical assistance” as “payment” of the costs of care and services.
• Firefighters Union Local 4725 v. City of Brainerd and State v. Beganovic: Courts do not add limiting words to statutes. This undercuts the Estate’s attempt to read “actual provider payments” or “paid to the recipient” into § 256B.15.
• In re Estate of Butler and the last-antecedent canon; Thompson v. St. Anthony Leased Housing (Thissen, J., dissenting): Grammar canons aid interpretation but must be applied in context. The phrase “rendered to recipients” limits the class of recipients and services (age 55+ and long-term care categories), not the type of “payment.”
• State v. Wocelka; In re Cities of Annandale & Maple Lake (agency deference); State v. Serbus (consider consequences): If ambiguity exists, courts may consider agency interpretations requiring technical expertise and policy consequences, which favored DHS’s position and federal conformity.
• Schneider v. Children’s Health Care; Henry v. ISD #625: The Court notes instances where federal law may inform state-law interpretation pre-ambiguity when incorporated, though it declines to decide that question here.
• In re Estate of Trahan: Recognizes DHS’s MA Estate Recovery Manual instructing counties to recover the actuarially determined capitation portion; supports DHS’s longstanding practice.

Legal Reasoning

1) Plain-language analysis

The Court anchors its analysis in statutory text. “Medical assistance” means payment of part or all of the cost of covered services. Capitation is a form of payment authorized by statute and rule. Because § 256B.15, subd. 2(a)(1) authorizes recovery of the amount of “medical assistance” for specified services after age 55, and because DHS paid capitation to secure those services, the statute permits recovery of the capitation amounts attributable to long-term care services.

The Court emphasizes that nothing in § 256B.15 narrows “payment” to fee-for-service remittances or excludes capitation. By contrast, the Estate’s position would require reading in limitations not present—contrary to Minnesota’s interpretive canons.

2) “Rendered to recipients” limits recipients/services, not payment type

The phrase “rendered to recipients” does not require that payments be made directly to recipients (which almost never happens in MMAP). Instead, the phrase limits the class of recipients and the services for which recovery is available: recipients aged 55+ who received long-term care services (nursing facility, home- and community-based, and related hospital/prescription drug services).

3) “Cost of the care and services” is DHS’s cost, not “actual provider payments”

The Estate’s “actual cost” theory fails for multiple reasons:

• “Actual cost” is illusory: Providers billed $113,000+, but negotiated rates resulted in $8,806.84 being paid. Which is “actual”? The statute does not use “actual” at all.
• From the statute’s perspective, the relevant cost is DHS’s outlay to provide covered services. Under managed care, that is the capitation payment. The Court notes DHS sought only the benefit portion of capitation attributable to long-term care, excluding MCO overhead and margins.
• Risk adjustment means capitation is not personalized to a single recipient; it smooths costs across a population. Sometimes capitation exceeds provider payments; sometimes it is less. That is a design feature, not a fairness defect.

4) Even if ambiguous, agency/federal guidance and consequences resolve in favor of DHS

Assuming (without deciding) ambiguity, the Court finds DHS’s longstanding interpretation reasonable, technical, and aligned with explicit CMS guidance. The CMS State Medicaid Manual § 3810.6 requires recovery of capitation amounts, in whole or in part depending on a state’s election to recover “all services” or “some, but not all.” Minnesota elected the latter in 2016, so it must recover the actuarially determined portion attributable to long-term care services.

The Court also underscores consequences: rejecting capitation recovery would place Minnesota out of conformity with federal Medicaid policy, risking funding under 42 U.S.C. § 1396c.

5) Legislative history supports service-type limitation, not payment-type limitation

In 2016, Minnesota shifted from recovering “all services” to “some, but not all” services by limiting recoverable categories to long-term care and related hospital/prescription drug services. The amendment narrowed service categories, not payment types. Nothing in the statutory change suggests the Legislature intended to exclude capitation from “medical assistance.”

Impact and Significance

1) Estate recovery in managed care clarified

The Court establishes a clear rule: in MMAP managed care, DHS may recover from a decedent’s estate the actuarially determined portion of capitation attributable to long-term care services delivered after age 55. Recovery is not capped by the MCO’s actual provider remittances. This will standardize estate-recovery practices across counties and reduce litigation over the recoverable baseline.

2) Alignment with federal policy and funding stability

By aligning with CMS’s State Medicaid Manual, Minnesota preserves conformity with federal Medicaid requirements, protecting federal funding and reinforcing cooperative federalism in estate recovery.

3) Practical consequences for estates and planning

• Larger estate claims where negotiated provider payments are significantly below actuarially determined long-term care capitation amounts.
• Conversely, the opinion implicitly forecloses recovery above capitation when provider payments exceed capitation, because DHS’s cost is the capitation payment (though the Court does not decide that scenario, it treats capitation as the relevant cost baseline).
• Elder law counseling must account for potential recovery of capitation-attributable amounts, not only provider payments visible on MCO explanations of benefits.

4) Evidentiary expectations: actuarial support required

Counties/DHS must substantiate the long-term care portion of capitation via “the most appropriate actuarial analysis determined by the State.” Expect litigation around the methodology, periodization, accuracy, and documentation of those allocations. The Court approves the concept and its use here, particularly noting the exclusion of MCO overhead and margins in the amount claimed.

5) County practice, notices, and manuals

The decision validates DHS’s MA Estate Recovery Manual instruction to recover capitation-based amounts and references that DHS has long provided beneficiary notices indicating that “monthly payments to managed care plans for health care coverage” are subject to recovery. Counties should continue providing clear estate-recovery notices consistent with CMS and maintain robust records of actuarial allocations.

Complex Concepts Simplified

• Capitation payments: Fixed monthly amounts DHS pays to an MCO per enrollee to cover projected health-care costs for a population segment, adjusted by risk. They are not tailored to any single person’s exact utilization.
• Managed care vs. fee-for-service: Under managed care, DHS pays the MCO a capitation rate; the MCO builds networks and negotiates discounted rates with providers. Under fee-for-service, DHS pays providers directly for each service.
• Risk adjustment and rate cells: Enrollees are grouped into broad categories (rate cells), and capitation is set to reflect expected average costs for those categories.
• “Medical assistance” (Minn. Stat. § 256B.02, subd. 8): Statutorily defined as payment of part or all of the cost of covered care/services. This definition encompasses capitation payments.
• “Rendered to recipients”: In context, this phrase limits the class of recipients (age 55+) and the eligible service categories (long-term care and related hospital/prescription drugs). It does not require that payments be made directly to the individual recipient.
• Actuarial allocation: When only some service categories are recoverable, states must use actuarial methods to allocate a portion of capitation to those categories. Only the allocated “benefit” portion is claimed; overhead and margins can be excluded.
• Estate recovery policy: Reflects legislative policy that individuals use their own assets to pay their share of care costs during or after enrollment, consistent with federal and state law.

Practical Guidance

For DHS and County Agencies

• Continue asserting claims for the actuarially determined long-term care portion of capitation payments for decedents age 55+.
• Document the actuarial methodology, time frames, and the exclusion of overhead/margins. Provide clear, audit-ready support with each claim.
• Maintain and reference beneficiary notices informing enrollees that capitation amounts are subject to estate recovery, aligning with CMS § 3810.6.

For Personal Representatives and Heirs

• Expect claims based on actuarially determined capitation portions, not only MCO provider payments. Obtain and scrutinize the actuarial allocation underlying the claim.
• Potential defenses will center on the accuracy and reasonableness of the actuarial allocation and whether the services at issue fall within the recoverable categories (nursing facility, HCBS, related hospital/prescription drugs) and the 55+ time window.

For Elder Law Practitioners and Estate Planners

• Advise clients that managed-care capitation portions attributable to long-term care are recoverable after age 55, potentially in amounts exceeding visible provider payments.
• Integrate this exposure into planning strategies that comply with federal and state anti-avoidance rules. Monitor client transitions into managed care and long-term care utilization.

For Managed Care Organizations

• Expect continued or increased requests for data supporting actuarial allocations. Ensure coordination with DHS on service category mapping and documentation of benefit vs. overhead components.

For Courts and Litigators

• The legal question of “payment type” is settled: capitation attributable to long-term care is recoverable. Disputes will shift to evidentiary issues regarding actuarial allocation and service categorization.

Open Questions and Future Litigation Vectors

• Scope and standard for “most appropriate actuarial analysis”: What methodologies and tolerances are acceptable? What discovery is appropriate to test allocations?
• Boundary disputes on “related hospital and prescription drug services”: How are services categorized when episodes of care straddle long-term care and other acute care?
• Timing and notice: While the Court notes DHS’s historical notices, procedural challenges could arise in specific cases concerning the sufficiency and timing of beneficiary notice and claim perfection.
• When provider payments exceed capitation: The opinion frames DHS’s “cost” as capitation; future cases may address whether recovery is capped at capitation in high-utilization scenarios.

Conclusion

In a decision of first importance for Medicaid estate recovery in Minnesota’s managed-care environment, the Supreme Court holds that DHS may recover from a decedent’s estate the actuarially determined portion of capitation payments attributable to long-term care services furnished after age 55. By reading “medical assistance” according to its statutory definition—payment of the costs of care and services—the Court rejects a provider-payment-only approach, harmonizes state practice with CMS guidance, and underscores the Legislature’s policy that recipients use their assets to pay their share of care costs during or after enrollment.

The ruling provides clarity, predictability, and federal conformity. Practically, it raises the salience of actuarial documentation and service categorization in estate-recovery claims and requires practitioners to counsel clients with a realistic understanding that managed-care capitation, not just provider payments, drives recoverable amounts for long-term care services. With the court of appeals reversed, DHS is entitled to recover $66,052.62 from the Ecklund estate—an outcome that will reverberate across future estate-recovery cases and elder law practice statewide.

Case Disposition

Decision: Reversed. Relief: District court directed to award DHS $66,052.62 from the Estate. Court: Minnesota Supreme Court, A23-0210, filed May 7, 2025. Opinion by: Justice Thissen. Notes: Justices Procaccini and Gaïtas took no part.