Medicaid is a program jointly funded by state and federal governments that provides health insurance to low-income seniors, adults, children, pregnant women, and people with disabilities. Medicaid can also cover long-term care services costs for qualifying individuals. The cost of long-term care can be expensive, and in some cases, after a Medicaid participant passes away or becomes permanently institutionalized, Medicaid may try to recover money it spent providing care for that person. It’s possible that Medicaid can take your house through estate recovery if you were 55+ years of age and received Medicaid-covered long-term care services.
There are exceptions to the estate recovery rule, which also may vary by state. Here’s what you need to know about Medicaid estate recovery, including who it applies to, what it means for Medicaid participants and their families, and what to do if you need guidance on your specific situation.
What is estate recovery?
Medicaid estate recovery is a process that helps states recover the health care costs they spent on a Medicaid participant after the person’s death. The federal government requires all states to attempt to recover these costs. The state may place an estate claim on some assets of the Medicaid participant to reimburse the state for costs it paid for certain services. Medicaid will send a notice to the estate representative or heirs after the Medicaid participant’s death stating that the program intends to file a claim. It may also require a response by the estate to be submitted back to the state.
The rules for estate recovery are determined at the federal level, so many often work relatively the same from state to state. However, states can have certain state-specific processes so they can adjust or remove the requirement of an estate recovery claim under certain circumstances. Some examples of a state not recovering funds could be if the recovery of assets would cause undue hardship to the survivors or heirs.
Who is subject to estate recovery?
Estate recovery applies to Medicaid beneficiaries who are 55 and over and have received certain services, like nursing home care or home- and community-based long-term care, and related hospital and prescription drug services during the time they had Medicaid coverage.
After the individual passes away or is permanently institutionalized, Medicaid may attempt to recoup costs spent on care during their lifetime. States may include other Medicaid services in their estate claims but can only recover up to the amount paid for the Medicaid participant’s care.
How does Medicaid estate recovery work?
If there is money in the beneficiary’s estate after they pass away, the state will attempt to recover the cost of care from the estate. An estate is the property a person owns when they die. Money, jewelry, land, cars, bank accounts, and houses are examples of property that might be included in someone’s estate. The federal government empowers states to recoup the cost of hospitalizations, nursing home care, home- and community-based care, and prescription medication through a claim against the recipient’s estate.
Medicaid estate recovery options are limited. For example, if the recipient’s estate is insolvent, meaning the value of the person’s estate is lower than their debts, the state cannot pursue the recipient’s spouse, children, or other heirs to repay the cost of care. Additionally, if the recipient is married when they die, the state cannot collect assets protected by the rule against causing spousal impoverishment.
What assets in an estate are subject to estate recovery?
When a person dies, often a representative, executor, or the person’s heirs will need to legally manage the property and debts of the deceased person, also referred to as their estate. The deceased person’s estate includes several different assets from which the Medicaid program can recover costs to satisfy an estate recovery claim. Examples are:
- Homes.
- Vehicles.
- Bank accounts.
Some states may also include any other real property, like land and natural resources on land, and personal property, like antiques, artwork, furniture, and machinery, as well as intangible personal property like stocks or patents and other assets that the Medicaid participant has any legal title or interest in at the time of their death. This could also include assets to be inherited by a survivor or heir. Additionally, some states place a lien on assets even if the Medicaid participant, age 55 or over, is still living.
Can Medicaid take your house through estate recovery?
A state may place a lien on the recipient’s property to recover the cost of care. Liens are legal claims against property to ensure the satisfaction of a debt. Liens ensure that state Medicaid programs receive repayment for the costs of care that beneficiaries receive during their lifetime. The state may not enter an estate claim on the Medicaid participant’s estate in the following circumstances:
- The surviving spouse is living in the house.
- A blind or disabled child of any age remains in the house.
- A child under the age of 21 continues to live in the house.
- The recipient’s sibling has an equity interest in the house, and they lived in the house for at least one year before the recipient moved into a nursing home.
Estate claims may also be deferred based on other state-specific criteria.
Once the above conditions no longer exist, the state Medicaid program may enter a claim on the deceased Medicaid participant’s estate. Some states, like Pennsylvania, do not have a limit on the time they may take to recover assets. Other states limit the time that a Medicaid program has to file an estate claim. For example, Texas limits it to four years after the participant’s death, and Florida’s limit is one year.
My spouse is covered by Medicaid. Will I lose my house if they pass away first?
If you live in the home when your spouse passes away, Medicaid will not take your house because it is exempt from the estate recovery process as long as you remain living in the house. Each state handles repayment requirements differently. The California Medicaid agency, for instance, does not attempt to include the home in its estate recovery process if the spouse who does not receive Medicaid outlives the recipient spouse. The Medicaid repayment requirement may be deferred until the surviving spouse dies in states like Oregon.
I live in a Medicaid-funded nursing home, and my spouse lives in our house. Will I lose my house if they pass away first?
If your spouse passes away at home and you live in a nursing home, Medicaid may demand that you sell your home. The profits from the sale of your house are added to your Medicaid assets. Medicaid requires that its recipients’ assets not exceed a set amount. After your house sells, you may lose your eligibility for Medicaid. The proceeds from the sale are used to pay off your debt. This is called spend-down. Once you have spent down your assets, you can reapply for Medicaid.
I am single, and my adult children live in my home. Will Medicaid take my house after I die?
If you live with your adult children in your home and one of your children is blind or disabled, your house is exempt from estate recovery. On the other hand, if none of your adult children has a disability, then Medicaid may force the sale of your house after you die to reimburse Medicaid for the expenses it fronted during your lifetime.
I am single, and I live in my home alone. Will Medicaid take the house after I die?
If the home equity you have in your house is below a certain amount, Medicaid cannot take your house if you continue to live in it. Home equity is the amount of money you own in your house outright. The limits on home equity vary by state. After your death, the state will seek reimbursement for home- and community-based services from the sale of your home.
What if an estate claim would create hardship for my family?
Medicaid programs must have a process for a Medicaid participant’s family or heirs to apply for an undue hardship, but they can set their own criteria for what constitutes a hardship. Examples of undue hardship might be:
- If the asset is a primary income-producing asset of the survivors, such as a family farm or business.
- If the estate subject to recovery is a home of modest value, an amount that can vary greatly depending on factors like the home’s value and the heir’s income.
- If the applicant of the undue hardship has income or resources below a certain threshold, which again can vary widely.
Can I move assets out of my name to avoid estate recovery?
Moving assets out of your name can be a risky move. Your Medicaid eligibility may be negatively affected if you try to avoid estate recovery. Transferring assets may also prevent your heirs or estate representatives from applying for an undue hardship. Before a Medicaid participant enters a long-term care facility, it is essential to understand the consequences of an asset transfer completely.
Who can I talk to about estate recovery?
Estate recovery can be confusing and has serious legal implications for Medicaid participants and their families. To learn more about how your specific situation might be affected, consult with your state’s Medicaid program or the state’s Medicaid Third-Party Liability office. Contact an elder law or estate attorney specializing in Medicaid for legal guidance.
