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I have no idea what to do. What little insurance money she had left after her funeral expenses were paid went to pay for her footmarker, flowers and clothes to be buried in. I don't know what they want. She had no children and only 1 sister left. She had no house, or any assets.

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This sounds funky to me. Contact an attorney.
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Have you considered going directly to a Medicaid office and asking what the notice is about? I always find it helpful to talk directly to a human being, in person----and take notes: time of meeting, what was said, who you talked with, pertinent telephone numbers, everything. You might also take proof of your loved one's financial situation (bank statements, etc.).
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Hope it's not a scam. Does anyone know of a scam happening this way?
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I generally disagree with vstefans but am not surprised by his concern. If there were gifts, Medicaid would have caught that at the application stage and would have imposed a penalty period. I am unaware of any authority whereby they could seek recovery of a gift absent exploitation.
iglo572 had some very insightful comments.
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tgif - letter is probably a NOI - Notice of Intent - as in notice to file a claim or lein by the state on the assets or estate of a deceased medicaid recipient. When DRA (Deficit Reduction Act) was signed in 2005, it required all the states to have a defined recovery or "recoup" system (MERP) set into place. (Although estate recovery was able to be done by the states before Bush signed in DRA, recovery was pretty low to non-existent in some states). The NOI is sent out routinely to the estate of the person on Medicaid &/or to the person on file for Medicaid (as contact or for submitting the annual renewal or the DPOA). The notice is not a warm & fuzzy but more direct "sorry for your loss and she died with a tally of 61K for Medicaid paid for services" and should have some sort of statement in the letter that "it is cost effective to do a claim / lein" and a check is expected in X amount of time. Probably 2 page letter with a separate attachment that is a summary of Medicaid costs. There could be a 4 - 6 page questionnaire also included.

For my mom - died last year - the NOI with a multipage questionnaire was sent about 9 weeks after death. 2 identical mailings were sent of which 1 was addressed to me as I was the DPOA and contact on file and then another mailed "estate of". Just because it was addressed to me did not mean that I was responsible for repaying Medicaid, it was a "notice" of a debt of my mom's estate. Legal size envelope. Questionnaire very specific as to assets, eg. bank balance, tax assessor value on home, life insurance details and payable to whom; info on will, etc. and has a pretty tight timeframe to submit with documentation required if you are doing any exemptions or exclusions. It's my take that the questionnaire is done for both the state and the MERP contractor to determine IF there are exemptions or exclusions to recovery and the status for each heirs; what assets exist and probable value; IF there is a will and IF probate is likely to be opened; and IF it seems that its' cost effective to do a recovery either by placing a lien or becoming a claimant against the estate if family is indicating they are opening probate.

Quite a few states have turned MERP over to an outside contractor. I'd look carefully at the letter to see just who is sending it. If it's an outside contractor it should clearly show this on letterhead & or within the NOI.

If there is no estate, no assets, no property, no insurance policy that had the beneficiary to be the deceased estate, then any debts against the estate are basically out of luck. If she was on Medicaid, she was basically impoverished with no more than 2K in non-exempt assets to begin with. If she had no home or estate payable insurance, it makes sense that there could be no $$. If this is the situation, whomever was named executor in the will could send a certified letter stating that the elder died impoverished with no assets and it is your understanding that as such there was no need to open probate, be appointed executor as no assets to probate or funds to do so and you consider the matter closed.

? for you?, the insurance $ that was used for burial, the beneficiary…..was it indicated on the policy to go to named individuals (family, friends, executor)? OR was it to her estate?
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Maybe check in with a attorney; unless they have reason to believe that you were given ("gifted") assets of hers within the 5 or 10 year period, they should not be asking you to pay personally. Is the bill addressed to you or to her estate?
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Ignoring things from the government is never the best strategy. I would send them a formal letter detailing her financial circumstances and that her estate has no executor. Hopefully that will be the end of it.
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As long as you did not sign anything agreeing to be responsible for her debts you should have nothing to worry about. I would reply to the letter telling them what you have just told us and hopefully that will be the last you hear of it. It is probably just routine and they are hoping she won the lottery the day before she died.
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They sent an affidavit for a Medicaid claim along with the statement saying to pay with check or money order made payable to treasurer. I'm not even her executor. I am just the only one willing and able to even deal with this. She had nothing. Even her bed was borrowed. Should I try to pursue it? Or should I just ignore it unless I receive something else?
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Medicaid is probably required to send a statement. With no assets and no probate the statement is probably just an annoyance. Unless the state is billing you I would probably not lose sleep over this. If a probate is started the state will be entitled to notice.
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