Estate Recovery and Liens
State Medicaid programs must recover certain Medicaid benefits paid on behalf of a Medicaid enrollee. For individuals age 55 or older, 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.
Expanded Medicaid’s fine print holds surprise: ‘payback’ from estate after death
By Carol M. Ostrom
The Seattle Times, December 15, 2013
With an estimated 223,000 adults seeking health insurance headed toward Washington’s expanded Medicaid program over the next three years, the state’s estate-recovery rules, which allow collection of nearly all medical expenses, have come under fire.
Medicaid, in keeping with federal policy, has long tapped into estates. But because most low-income adults without disabilities could not qualify for typical medical coverage through Medicaid, recovery primarily involved expenses for nursing homes and other long-term care.
The federal Affordable Care Act (ACA) changed that. Now many more low-income residents will qualify for Medicaid, called Apple Health in Washington state.
But if they qualify for Medicaid, they’re not eligible for tax credits to subsidize a private health plan under the ACA, which requires all adults to have health insurance by March 31.
Some 55- to 64-year-olds, who may have taken early retirement or who were laid off during the recession, have found themselves plunged into a low-income bracket. Unlike Medicaid recipients in the past — who were required to reduce their assets to qualify — they’re more likely to have a home or other assets.
For health coverage through Medicaid, income is now the only financial requirement.
Around the country, the issue has sizzled away in blogs and commentaries from both right and left.
Medi-Cal Recovery Frequently Asked Questions (FAQ)
California Advocates for Nursing Home Reform (a nonprofit 501(c)(3) advocacy organization)
California’s Medi-Cal applicants and beneficiaries are often confused about their rights regarding Medi-Cal and are particularly concerned that the state will “take” their homes after they die if they received Medi-Cal benefits.
I. Can the State Take my Home If I Go on Medi-Cal?
The State of California does not take away anyone’s home per se. Your home can, however, be subject to an estate claim after your death. For example, your home may be an exempt asset while you are alive and is not counted for Medi-Cal eligibility purposes. However, if the home is still in your name when you die, the State can make a claim against your estate for the amount of the Medi-Cal benefits paid or the value of the estate, whichever is less. Thus, if your home or any part of it is still in your name when you die, it is part of your “estate” and can be subject to an estate claim.
III. What Happens After I Die If I Received Medi-Cal?
After the Medi-Cal beneficiary’s death, the State can make a claim against the estate of an individual who was 55 years of age or older at the time he or she received Medi-Cal benefits or who (at any age) received benefits in a nursing home, unless there is a surviving spouse or a minor, blind or disabled child. Thus, if there are any assets left in the estate of the deceased beneficiary, Medi-Cal will seek to be reimbursed for benefits paid. It is important to note that, even if you received Medi-Cal at home, any benefits paid while you were 55 years of age or older will be subject to Medi-Cal recovery.
IV. How Much Can the State Recover?
Managed Care: Estate claims can be much higher if the beneficiary is enrolled in managed care. When a managed care beneficiary dies, the estate will receive a claim for the total amount paid by Medi-Cal to the managed care plan, regardless of how much the actual services cost the managed care plan.
IX. How Do I Avoid an Estate Claim?
The best way to avoid an estate claim is to leave nothing in the estate. Most Medi-Cal beneficiaries leave nothing but a home. If the property is transferred out of the beneficiary’s name during life, the state cannot place a claim. Any transfer of real property can have tax consequences that may outweigh a Medi-Cal estate claim. Currently, there are a number of legal options (irrevocable life estates, occupancy agreements, certain types of trusts) available to avoid probate, avoid tax consequences and avoid estate claims. Anyone considering a transfer of real property should consult an attorney experienced in the Medi-Cal rules and regulations.
By Don McCanne, M.D.
States are required to recover the costs of certain benefits from the estates of Medicaid beneficiaries who received them. That is not new. What is new is that the Affordable Care Act requires everyone to be insured (with exemptions for hardship, immigration status, etc.), and, if individuals are eligible for Medicaid based on income, they are not allowed to use subsidies to purchase plans in the exchanges. Since plans outside of the exchanges are unaffordable for individuals with low incomes that qualify them for Medicaid, they are pretty much stuck with enrolling in Medicaid.
Since Medicaid eligibility is determined by income and not by assets, those who were able to purchase a home and build other assets, but have retired at 55 or reduced their incomes for other reasons, are now becoming part of a large pool that states can tap to recover Medicaid expenditures. The states will be taking over estates that the deceased had intended would go to their heirs.
The rules are complicated enough such that individuals concerned about this potential transference to the state are advised to consult with an attorney. Just what we need. More excessive administrative costs tacked onto our wasteful system of health care financing.
Another annoyance is that many states are now forcing their Medicaid patients into managed care organizations. Even though the individuals may not have utilized much health care, the rules require that the entire capitated payments made to the managed care organizations be recovered from the estate. How ironic. The individual doesn’t want managed care but is forced into it, doesn’t use it, and then his heirs must pay through reduced value of the estate the full managed care premiums of a program the deceased would have avoided by remaining in the fee-for-service Medicaid program.
As with so much in the Affordable Care Act, these issues are not simple. Let’s look just at how we finance health care, and how we tax estates.
If we had a single payer national health program, it would be financed equitably based on ability to pay. You would not have the situation we have now in which Medicaid spending is reimbursed by the estate whereas Medicare spending is not. Everyone would contribute through progressive financing of the universal risk pool, and everyone would receive benefits based on medical need.
With the highly inequitable distribution of income and wealth that has taken place within the past few decades, we have an imperative to establish fairness in providing the government with the necessary revenues to fulfill its functions. We have largely agreed that income taxes need to be progressive, though many believe that we need tax policies that would have very high income individuals contribute more than is their current obligati on.
But the issue of the Medicaid Estate Recovery Program should make us look at how we tax wealth. Although most believe that very wealthy individuals should pay higher estate taxes, we have here a situation in which individuals with very small estates are having to pay what is, in essence, an estate tax in the form of recovered Medicaid expenses. How is that fair?
This is one more example of why we need to totally separate the funding of our health care system from the delivery of health care services. A single payer national health program – an improved Medicare for all – would do precisely that.]]>