In the case of Hoffman, Trustee v. Connecticut Department of Income Maintenance et al., 1988, the U.S Supreme Court ruled that a state's claim for reimbursement from an estate for medical assistance costs paid on behalf of a deceased Medicaid recipient is limited to the portion of the estate composed of assets or resources considered in determining the recipient's eligibility for such aid. The court held that federal law preempts any state law allowing recovery from other parts of an estate. This decision was based on interpretation and application of Title XIX (Medicaid) provisions under Social Security Act which limits states' ability to recover funds only to those assets included as part "of individual’s estate" when calculating their initial eligibility for Medicaid benefits.

In the dissenting opinion for Hoffman v. Connecticut Department of Income Maintenance, Justice Blackmun argued that the majority's decision was inconsistent with previous Supreme Court rulings and federal bankruptcy law. He contended that the state's claim should not be considered a tax because it did not serve a revenue-raising purpose but instead functioned as a penalty to discourage hospitals from overcharging patients. Furthermore, he disagreed with the majority's assertion that this case was different from other cases in which states were required to return funds obtained through unlawful means. In his view, allowing states to keep unlawfully obtained money would undermine public confidence in government institutions and violate principles of fairness and justice. Finally, he criticized the majority for failing to provide clear guidance on how courts should distinguish between taxes and penalties in future cases.