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 Facts on Medicaid Estate Recovery
- If you reject Medicaid and end up with big hospital bills, debt collection will demand payment plus interest; they will want to collect starting 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’s use of 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 (nursing facility services, home and community-based services, and related hospital and prescription drug services) for those over 55 and not for everyone who qualifies for Medicaid in general. Read the update from Center for Medicaid and Medicare Services for clarification.
- Since 1965 when Medicaid was signed into law, states were permitted to recover the cost of care given after age 55. This was expanded and reinforced in the Omnibus Budget Reconciliation Act of 1993 and is enforced to different extents in different states.
- State’s will typically only seek reimbursement for long-term care, but they may seek reimbursement for any service related to care under the law.
- If you are institutionalized, the state can go after your assets while you are living although you must not have a 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. It was part of a 1993 federal law. However, since more people now have coverage due to Medicaid expansion, this is relevant for all of 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 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.
- People who are 55+ should consider the estate recovery laws if their state enforces these laws, and they would use Medicaid but also have an estate they wish to protect (in such a case it may make sense to hold private insurance to avoid relying on Medicaid).
Why Is there An Estate Recovery Law? Isn’t That UnAmerican?
Long-term care (nursing facility services, home and community-based services, and related hospital and prescription drug services) is expensive, and Medicaid is a state obligation. Every dollar spent on long-term care is a dollar less for state budgets. Most states 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 a constant debate over 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 their state rules but never enforce the law. Aside from estate recovery being in conflict with the way in which Americans view their country, and the way states view their role, it requires a lot of state spending to go after any estate.
State spending on debt recovery should be addressed. 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. Medicaid expansion was rejected by many states who saw expansion as an extra expense.
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 simpler if this law, which goes mostly unenforced, were removed from the books. Maybe the GOP could deal effectively with that rather than focusing entirely on “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. You can get supplemental insurance for Medicare or hold a private plan if you don’t qualify for Medicare yet!
- Make sure to project an income of between 100% – 400% and use Marketplace cost assistance instead of Medicaid if you can.
- 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 to recoup the costs, that paying back for the care you used isn’t the most unfair thing if you have no surviving spouse and your children are grown.
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