What Is Medicaid Estate Recovery

Is Property That I Own In Another State Exempt From Recovery

Any property you own that is part of your estate, regardless of location, may be subject to estate recovery.

I want to will my home to my children. Can the state still take it?

The state cannot take your property. All claims against an estate, including MERP claims, must be paid before property can be distributed as stated in a will. The heirs can choose to use other funds to pay the claim if they don’t want to sell the home.

What are the actual incomes which represent 300 percent of the federal poverty level?

How Does Medicaid Estate Recovery Work

When an individual passes away, their estate pays back any debts before the remainder can be distributed to heirs. The estate typically includes financial assets and property, such as a home, automobiles, savings accounts, and retirement accounts.

If the individual was a Medicaid enrollee and recipient, any recovery efforts will also be paid out of the estate. However, MERP cannot do anything if the enrollee had no remaining assets at the time of their debt. The state cannot seek repayment from the recipients heirs, for example.

If the enrollee has a spouse living in the same care community, they are protected. The spousal impoverishment provision of MERP protects assets worth up to $130,380 in combined resources.

How Much Is Subject To Recovery

At a minimum, states must recover amounts spent by Medicaid for long-term care and related drug and hospital benefits, including Medicaid payments for Medicare cost sharing related to these services. However, they have the option of recovering the costs of all Medicaid services paid on the recipients behalf. The majority of states recover spending for more than the minimum of long-term care and related expenses.19

States can waive estate recovery when it is not cost-effective, as defined by the State and made public through their official State Medicaid plan.20 How states interpret the Federal guidance with respect to this issue varies. Some may waive recoveries of very small estates or make case-by-case determinations. For example, they may waive recovery when the recovery effort itself would be costly because asset ownership is complicated or legally ambiguous, or the asset is hard to reach for some other reason.

Recoveries may not exceed the total amount spent by Medicaid on the individuals behalf at or after age 55.21 Nor may they exceed the amount remaining in the estate after the claims of other creditors against the estate have been satisfied in the order of payment of debt delineated by state law.

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What Is An Estate

An estate is property, such as money, a house, or other things of value that a person leaves to family members or others when he or she dies. MERP does not apply to all property that a person may own.

Examples of property that the state will not collect on include:

• Life insurance policies that name a person to receive the payment.
• Bank accounts that are paid on death to another person.

What Is Medicaid Estate Recovery

Medicaid is a government program that can help eligible seniors pay for nursing home care. If youre helping an aging parent navigate Medicaid because they dont have long-term care insurance or you think youll need it yourself someday, its important to understand how the program works. For instance, you should be aware that the Medicaid Estate Recovery Program may be used to recoup costs paid toward long-term care. Medicaid estate recovery is intended to help make the program affordable for the government, but it can financially impact the beneficiaries of Medicaid recipients. Make sure youre handling this kind of situation in the wisest possible way by consulting a financial advisor.

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Special Estate Recovery Provisions For Persons With Long

Since 1988, five states have collaborated with the insurance industry in the Partnership for Long-Term Care, a project sponsored by the Robert Wood Johnson Foundation to increase private insurance coverage for long-term care.30 The program aims to design and evaluate new strategies to increase the number of policies offered at affordable prices and to provide prospective buyers with assurances about the quality and reliability of the policies offered. These new features would complement other incentives for buying long-term care insurance — e.g., more and better long-term care choices avoiding the need for Medicaid assistance or being a burden on ones children and tax advantages or credits on Federal and some state income tax.

Evidence on whether these plans really produce Medicaid savings in the states that have implemented them is preliminary but positive. One profile of Partnership insurance buyers found that persons with assets in the $100,000-$400,000 range — a group frequently targeted by Medicaid estate planners — were more likely to buy long-term care insurance under the Partnership program than persons who were either poorer or richer, so it is quite likely that the program will eventually shift the burden of long-term care costs for at least some people in this group from Medicaid to private insurance.32

Pros And Cons Of Estate Recovery

Proponents of more extensive and aggressive Medicaid estate recoveries argue that Medicaid is a chronically strapped program for the poor, and that estate recovery shifts some of the burden of paying for long-term care from the taxpayer to the estates of deceased recipients. States can then spend their share of recovered funds to preserve or expand their Medicaid coverage of services for needy populations,38 although they are not required to do so.

Opponents of Medicaid recoveries argue that the practice is unfair in that it mainly affects people of very modest means, while sparing those who are able to access advice on estate planning techniques that shelter assets. Further, it clashes with broadly held cultural values on the sanctity of intergenerational legacies.39 Others argue that the threat of estate recovery causes people to forego Medicaid funded services when they need them or discourages adult children from seeking Medicaid for an ill parent, whose health or functional abilities may deteriorate as a result. This avoidable decline in health status may lead to higher medical costs later on.40

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Are There Any Exceptions To Merp

Yes. MERP does NOT apply where there is:

• a surviving spouse, or a surviving child under 21 years of age
• a surviving child of any age who is blind or has a disability
• an unmarried adult child residing continuously in the Medicaid recipients homestead for at least one year before the recipients death or
• a surviving child of any age who is blind or visually impaired and is totally disabled as defined by Social Security requirements.

Additionally, MERP does NOT apply where:

• the value of the estate is $10,000 or less
• the recoverable amount of Medicaid is $3,000 or less
• the cost of selling the property would be equal to or greater than the property’s value.

Prohibitions On Medicaid Estate Recoveries

Estate recovery is prohibited in certain instances when Federal law deems that the needs of certain relatives for assets in the estate take precedence over Medicaid claims.22

States are prohibited from making estate recoveries:

• During the lifetime of the surviving spouse .
• From a surviving child who is under age 21, or is blind or permanently disabled , no matter where he or she lives.
• In the case of the former home of the recipient, when a sibling with an equity interest in the home has lived in the home for at least 1 year immediately before the deceased Medicaid recipient was institutionalized and has lawfully resided in the home continuously since the date of the recipient’s admission.
• In the case of the former home of the recipient, when an adult child has lived in the home for at least 2 years immediately before the deceased Medicaid recipient was institutionalized, has lived there continuously since that time, and can establish to the satisfaction of the State that he or she provided care that may have delayed the recipients admission to the nursing home or other medical institution.

Federal guidance implies that states can recover when the surviving spouse dies, or a childs protected status is lost, or when a protected relative moves out of the home.23 However, a number of states waive their future right to recovery altogether, others defer it, and yet others use a mix of approaches based on the specifics of each case.24

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I Received A Notice Of Intent To Recover Medicaid Payments From My Deceased Mothers Property Is This Legal

Yes. The Texas Department of Aging and Disability Services can make a claim for reimbursement for certain Medicaid benefits for recipients who were 55 years or older at the time of death. Through the MERP program, DADS will send a Notice of Intent to File a Claim within 30 days of the date MERP learns of the death. The Notice will include a program overview, questionnaire, and waiver request form that must be returned within 60 days of the date on the Notice.

Can I Ask Merp To Waive The Claim

Yes. If collection would result in an undue hardship, you can apply for a hardship waiver. A hardship waiver might be granted if:

• the property is a homestead, and gross family income of heir is below 300% of the federal poverty level
• it would cause the heirs of the deceased Medicaid recipient to lose their primary source of income
• it would cause the deceaseds heirs to be eligible for public or Medicaid benefits, or would render the heirs ineligible for benefits they already receive
• the property subject to the claim produces at least 50% of the heir livelihood.
• the deceased person received Medicaid benefits because he or she was a victim of a crime or
• Other compelling reasons to grant a waiver, as determined by DADS.

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Which Assets Are Subject To Medicaid Estate Recovery

With that said, this all still comes down to state law. While in some states, it may be possible for a sick person to be broke enough on paper to qualify for Medicaid, it may not be possible to convert every asset owned by the recipient from a nonexempt asset into an exempt assetit depends on how aggressive the state’s Medicaid estate recovery laws are.

What may be an exempt asset in one state may not be an exempt asset in another state. This means that, unfortunately, it is impossible to even give a broad and general list of what may or may not be exempt.

Those who are concerned with protecting assets from Medicaid estate recovery are best served by consulting an elder law attorney in the state where the sick person lives to determine which assets of the sick person will be exempt, and which are likely to be recovered by state authorities.

Medicaid Estate Recovery Program

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The Medicaid Estate Recovery Program is a process initiated by state governments in the United States for recovering payments made under the Medicaid program to its beneficiaries. The government recovers the sum of payments from the estate at the time of death of the program beneficiary.

The moral justification for the process has been stated as if youre receiving a public benefit and the state is trying to support you, you should give back if you are able.”

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Are There Circumstances In Which A State Cannot Recover

To satisfy Medicaid recovery efforts, you may be forced to sell your property or assets. However, there are some circumstances in which a states recovery efforts may be limited.

Generally, property that will pass directly to joint owners and beneficiaries under a trust are excluded from probate assets. A properly set up trust can provide you with the right to continue to reside in your home for the rest of your lifetime.

As well, there might be limitations for recovery if there is a surviving spouse, a child who is under 21, or a blind or disabled child of any age. Furthermore, if there is a sibling who resided in the home for at least one year before the decedent was institutionalized and who has an equity interest in the shared home, the state may be precluded from recovery.

A state also may decline to recover costs for Medicaid in additional circumstances, including when a state chooses to waive recovery because the descendants heirs can prove that the recovery would cause an undue hardship or because it is too expensive to try to recoup repayment from the estate.

In fact, the law requires that each state must provide for these hardship exceptions. While each state decides for itself what constitutes undue hardship, federal law suggests finding hardship in two specific instances:

What Happens If I Give Away Or Transfer My Assets Before Moving Into A Nursing Home

Giving away resources for no compensation, or refusing to accept income, or reducing income you could receive before moving into a nursing home may result in:

• A penalty against you for not paying for nursing facility or ICF/IID facility services when you were able to do so or
• A decision by the state that you are ineligible for waiver program services or state supported living center services.

The state may “look back” up to 60 months before you applied for nursing home, ICF/IID or waiver services to determine when your income was reduced, and resources were transferred.

PLEASE NOTE, HHSC and its staff, including its attorneys, are prohibited from giving legal advice or recommending specific actions to the public. Anyone in need of legal advice or assistance with estate planning has the option to contact or retain an attorney of that person’s choice. Please contact your local Area Agency on Aging for additional resources.

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Medicaid Recovery In Personal Injury Cases

In Florida personal injury cases, if Medicaid paid medical expenses related to the personal injury case, Medicaid can recover such amounts upon personal injury settlement or verdict from the medical recovery portion of the personal injury case . Medicaid need not wait for the Medicaid recipient to pass away to recover from the personal injury settlement or verdict proceeds.

What Medicaid Estate Recovery Means For Heirs

The most significant impact of Medicaid estate recovery for heirs of Medicaid recipients is the possibility of inheriting a reduced estate. Medicaid eligibility assumes that recipients are low-income or have few assets to pay for long-term care. But if your parents are able to leave some assets behind when they pass away, the recovery program could shrink the estate that passes on to you.

Its also important to note that while Medicaid estate recovery rules disavow you personally from paying for your parents long-term care costs, filial responsibility laws do not. These laws, though rarely enforced, allow healthcare providers to sue the children of long-term care recipients to recover nursing care costs.

So even if Medicaid doesnt take anything away from your parents estate after they pass away, a nursing home could still sue you personally to recover money paid toward the cost of their care. The care facility has to be able to prove that you have the means to pay but this could add a wrinkle to your financial picture if youre responsible for wrapping up a deceased parents estate.

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How To Avoid Medicaid Estate Recovery

Strategic planning can help you or your loved ones avoid financial impacts from Medicaid estate recovery.

For example, you may consider purchasing long-term care insurance for yourself for encouraging your parents to do so. A long-term care insurance policy can pay for the costs of nursing home care so you can avoid the need for Medicaid altogether.

If youre interested in long-term care insurance for yourself or an aging parent, compare the cost for premiums against the benefits the policy pays out. If youre unsure whether you or a parent may need long-term care at all, you might consider a hybrid policy that includes both long-term care coverage and a life insurance death benefit.

Another option for avoiding Medicaid estate recovery is removing as many assets as possible from the probate process. Married couples, for example, can accomplish that by making sure all assets are jointly owned with right of survivorship or using assets to purchase an annuity that transfers benefits to the surviving spouse when the other spouse passes away.

Its important to understand which assets are and are not subject to probate in your state and whether your state allows for an expanded definition of recoverable assets for Medicaid. Talking to an estate planning attorney or an elder law expert can help you to shape a plan for protecting assets.