In 1993, the federal government passed legislation allowing States to seek reimbursement from Medicaid recipient’s estates the value of benefits paid to the Medicaid recipient after the age of 55 or when the recipient was in nursing home care. This law is commonly referred to as Estate Recovery.
Many of the family members who open a probate estate for a deceased loved one rarely realize that if their loved one received Medicaid benefits during their lifetime, Medicaid can file a claim against the Estate and lay claim to much – if not all – of the Estate’s assets. This is because in order to qualify for Medicaid, certain low-income eligibility requirements must be met. If the applicant can show that they meet low-income requirements, the State provides them with “free” medical care. However, what the government gives, it can also take away. In the instance where a deceased Medicaid recipient’s estate contains substantial assets, Medicaid can make a demand against the estate assets to be repaid for services it provided during the decedent’s life.
In Missouri, Medicaid is treated like a “taxing authority” under the probate code and does not have to file its claim against the Estate within the non-claims statute. In Kansas, Estate Recovery contractors have six months from the date of death to file their claim against the Estate (or force open an Estate if the family does not do so).
There are very few exceptions to Estate recovery per federal law. Each State’s policy in following those exceptions is different. The State may not recover the value of Medicaid benefits provided if the decedent was married at the time of death or left minor or disabled dependents. If married at the time of death, the value of decedent’s Medicaid benefits may be recovered from the spouse’s estate. Additionally, if recovery would cause financial hardship to the heirs, recovery may also be waived – however, this is onerous to prove.
The Affordable Care Act (commonly referred to as “Obamacare”) does not contain an estate recovery provision, but it does expand Medicaid coverage to millions of previously uninsured Americans. In this way, the ACA has greatly expanded the reach of the Estate recovery program across the country and many recipients are shocked to discover that their healthcare coverage comes with a price. This tends to affect many Americans over the age of 55, but too young to begin receiving Medicare benefits (which can begin as early as age 65 or if the applicant has a disability), especially those who may be self-employed, such as farmers and ranchers.
Additionally, some states are looking to limit estate recovery to address the argument that many Medicaid recipient’s heirs cannot afford estate recovery because it essentially perpetuates the cycle of poverty. California is leading the trend by introducing legislation that would limit estate recovery. California is but one of a handful of states that permits estate recovery not just for nursing home care over the age of 55, but also for recovery of hospital and doctor’s visits, a catastrophic blow to many Medicaid recipients in California, who own their own homes – and whose homes are subject to estate recovery confiscation upon death. California is looking to limit recovery to what Missouri and Kansas residents face: recovery only of nursing home care after the age of 55. “It’s a recognition that Medicaid isn’t actually free and that public programs do have a cost,” a Medicaid representative in California said, adding that this year the program will cost the nation more than $500 billion.
The bottom line is that if your loved one is considering Medicaid coverage (or Medicaid expansion coverage under the ACA) the family should visit a skilled elder law or estate planning attorney to discuss the implications of estate recovery. If the family is considering opening a probate estate for a deceased loved one who was a Medicaid recipient, the family should fully explore their options for probate with a skilled probate attorney.