The Basics of Medicaid Estate Recovery

June 4, 2021

Medicaid is a health insurance program for low-income individuals funded by federal, state and county funds. Certain children, elderly, blind and/or disabled who are U.S. citizens, nationals, permanent residents, or legal aliens may be eligible to receive payouts from Medicaid. The financial requirements to qualify are complicated with many nuances.

One such trap in which to be wary is a practice referred to as Medicaid Estate Recovery. Under current federal laws, each state is required to attempt to collect back any money spent. In other words, while Medicaid will pay out for long-term care, this right of estate recovery, will come back with claims against your estate when you die to recover the money spent for your care prior to death. If you did not take proper steps to protect your home, it may have to be sold when you die to repay the state for the Medicaid services given.

For example, a widow lives in a home valued at $65,000 and has $1000 in her bank account. Due to illness, she moves into a skilled care facility and lives there for the last year of her life. When she dies, the Medicaid program makes a claim against her estate for $75,000 based on the amount spent for her care. The estate pays the claim by selling the house and taking any money left in her bank account. Her adult children do not inherit a dime and lose the opportunity to reside in the family home.

Several advocacy groups are speaking out against this practice and requesting Congress to eliminate the Medicaid Estate Recovery requirements. They argue that only a small fraction of the money spent is actually recovered but it causes tremendous hardship on the nation’s poorest families. Recent data shows that only 0.55 percent of the total Medicaid spending is recovered from estate recovery programs.

These advocacy groups call for the elimination of this requirement so that low-income families can begin to retain wealth and pass it on to future generations. Under the current laws, families remain poverty-stricken and this leads to exacerbated wealth gaps, especially in families of color.

In March 2021, Medicaid and CHIP Payment and Access Commission (MACPAC) submitted a report to Congress outlining the three primary ways they recommend changing the current laws. Entitled “Medicaid Estate Recovery: Improving Policy and Promoting Equity”, the report lists these 3 recommendations for change:

1. Allow Medicaid Estate Recovery to be optional by each state.

2. Allow states to pursue only the cost of care, not the amount of capitation payment, when the cost of care is less.

3. Amend hardship waivers to bar estate claims against A) a sole income-producing asset of a Medicaid recipient’s heirs; B) homes of modest values; and C) any estate less than a specified threshold value.

We will continue to follow the updates on Medicaid Estate Recovery as Congress considers these issues moving forward. At Stouffer Legal, we care about our seniors and monitor the issues that impact them and their families. For more information on elder law services in the Greater Baltimore area, contact our office for a consultation. You can schedule an appointment by calling us at (443) 470-3599 or emailing us at office@stoufferlegal.com.

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