If you are 55 or older and receive Medicaid, the state can use estate recovery and liens to recover any and all Medicaid costs, but the practice is rare. Let’s look at the facts and myths behind Medicaid estate recovery, who it applies to, and the involvement (or non-involvement of the ACA).

The gist. This was blown out of proportion as a way to deter people from signing up for Medicaid. After reading CMS clarifications, looking at past laws, and reading other sources we strongly feel: This is about long-term care provided by Medicaid, and not covered by Medicare, not those who qualify for Medicaid based on MAGI under ObamaCare. For instance you are on Medicare and due to being institutionalized you need $100,000 in long-term care not covered by Medicare and thus paid for by Medicaid. The state is then supposed to collect that (if you aren’t survived by a spouse, kids, or a disabled child). This isn’t about Joe-the-citizen who enrolled in Medicaid under Medicaid expansion and had their estate taken by “big Government”. In practice state’s rarely enforce this rule as it’s costly and is just about as popular with your state legislators as it is with you. Only 10 of the 50 states even enforce the law, still the law is enforced and this shouldn’t be dismissed.

The Facts on Medicaid Estate Recovery

  • If you reject Medicaid and end up with big hospital bills. Debt collection will go after payment plus interest and they start tomorrow, not after you and your spouse have passed and your children turn 21. Over 60% of bankruptcies in the US are due to unpaid medical bills. While Medicaid using estate recovery is rare in most states, debt collection for unpaid hospital bills isn’t.
  • The rule is meant to apply to long-term care and not for those who qualify for Medicaid based on MAGI (which is everyone qualifying for Medicaid under the Affordable Care Act, but not older Americans who need long term care and qualify based on that). (read update from Center of Medicaid and Medicare Services for clarification).
  • Since 1965 when Medicaid was signed into long states could recover the costs of care given from 55 on, this was expanded and reinforced in the Omnibus Budget Reconciliation Act of 1993, but is enforced to different extents in different states.
  • State’s typically will only seek reimbursement for long-term care, but can seek reimbursement for any service related to that care under law.
  • If you become institutionalized they can go after your assets while you are living (although you must have no spouse or children and liens must be removed if you recover).
  • This IS NOT part of ObamaCare (the Affordable Care Act), and wasn’t directly impacted by the Affordable Care Act. It doesn’t affect tax credits… However, since more people now have coverage and Medicaid is expanded this is pretty relevant for those over 55 with Medicaid.
  • This includes those on Medicare who use Medicaid for long-term care. Medicare only covers the first 100 days of long-term care.
  • Medicaid recovery of estates and liens is rare in practice, some states essentially refuse to participate in the program. Despite the law mandating it, only 10 states have indicated a willingness to pursue the recovery of health care costs from estates (As of 2005).
  • Federal law includes protections for family members. For example, states can’t recover costs from a deceased person’s estate during the lifetime of that person’s surviving spouse, or from a surviving child under age 21, or from a child who is blind or has a disability (regardless of age). – Learn more from FamiliesUSA.org

Why Is there An Estate Recovery Law? Isn’t That UnAmerican?

Long term care is expensive, and Medicaid is covered by the state. Every dollar spent on long term care is a dollar less for state budgets. Most state’s didn’t enforce this rule, or only enforced it for expensive long-term care, however in 1993 a new law mandated that all states must start enforcing the law.

There is constant tug of war on this and today some states (like Washington and Oregon) have changed their rules to limit estate recovery to Medicaid costs related to long-term care.  Most other states haven’t changed state rules, but simply never enforce the law. In truth, aside from being really out-of-touch with how America views it’s country and how states view their role, it requires a lot of state spending to go after the estate in the first place.

This is something that should be and must be addressed as coverage expands, unfortunately it was not addressed in the ACA. It would have been hard to ask states to expand Medicaid while at the same time asking them to stop recovering tax dollars spent through Medicaid on long-term care. That would have been two big hits to state budgets at once. As it stood Medicaid expansion was heavily rejected by many states.

GAO, March 7, 1989: “GAO believes the Congress should consider making mandatory the establishment of programs to recover the cost of Medicaid assistance provided to nursing home residents of all ages either from their estates or from the estates of their surviving spouses.” – read more at factcheck.org

How to Avoid Estate Recovery

It would be nice if this law, which goes mostly unenforced anyway, was removed from the books (maybe the GOP could focus on that rather than “repeal-repeal-repeal”). In the meantime here is how you can avoid Medicaid estate recovery.

  • Don’t use Medicaid for long term care if you are 55 or older.
  • Make sure to project an income of between 100% – 400% and use Marketplace cost assistance instead of Medicaid.
  • Use supplemental Medicare for long-term care.
  • Consider life insurance set-up to fund long-term care.
  • Accept that if you do need long-term care, and the state comes after your estate, and you have no surviving spouse, and your children are grown, that paying back the care you used isn’t really the most unfair thing ever.

Comment From AARP

AARP, June 2005: “OBRA ’93 allows recovery for “any items or services under the state plan,” going beyond what is required by federal law (nursing facility services, home- and community-based services, and related hospital and prescription drug services). Twenty-five states reported recovery of “all other items under the state plan”; 10 states recover “some other items”; 10 states do not recover for any other services beyond what is required; and 1 state was DK/NR. A few states reported specific additional items for recovery as follows: ambulance, funeral, and burial costs (Illinois); costs of technological assistance such as motorized wheelchairs and readers for eye gestures (Kansas); transportation, dental services, and other services (Minnesota, New Jersey); physical therapy (Nevada); durable medical equipment, dental and vision services (Ohio); and PACE (Program of All-Inclusive Care for the Elderly) (Tennessee).” – read more at factcheck.org

Excerpt on Medicaid Estate Recovery On Medicaid.Gov

“States are required to seek recovery of payments from the individual’s estate for nursing facility services, home and community-based services, and related hospital and prescription drug services. States have the option to recover payments for all other Medicaid services provided to these individuals, except Medicare cost-sharing paid on behalf of Medicare Savings Program beneficiaries.

Under certain conditions, money remaining in a trust after a Medicaid enrollee has passed away may be used to reimburse Medicaid. States may not recover from the estate of a deceased Medicaid enrollee who is survived by a spouse, child under age 21, or blind or disabled child of any age. States are also required to establish procedures for waiving estate recovery when recovery would cause an undue hardship.

States may impose liens for Medicaid benefits incorrectly paid pursuant to a court judgment. States may also impose liens on real property during the lifetime of a Medicaid enrollee who is permanently institutionalized, except when one of the following individuals resides in the home: the spouse, child under age 21, blind or disabled child of any age, or sibling who has an equity interest in the home. The states must remove the lien when the Medicaid enrollee is discharged from the facility and returns home.” – Medicaid.Gov