If you receive health care covered by Medicaid, the cost of that care may have to be repaid from the assets you leave in your estate. According to the U.S. Department of Health and Human Services, Medicaid covers services provided to beneficiaries who do not have sufficient resources to pay the full cost of their health care, and these beneficiaries must meet strict limits on income and assets. One of the ways Medicaid finances this coverage is by recovering part of the cost from the beneficiaries’ estates.
There is a federal and state mandate to recover the costs of Medicaid covered health care from the beneficiaries’ estates. According to the 1993 Estate Recovery Mandate, the states must recover costs for nursing home or other long-term institutional care, home and community based services, hospital and prescription drug services while in a nursing facility or while receiving home or community based services. States have the option to recover any other items covered under the Medicaid State Plan.
Recoveries can be made from the estates of beneficiaries who were at least 55 years old when they received Medicaid benefits, or who were institutionalized, regardless of their age.
Costs must be recovered at a minimum from assets that go through probate, but can potentially be recovered from any estate assets. The order of payment of claims against assets that go through probate depends on state law. For example, burial costs, unpaid taxes and utility bills, and mortgages may have priority over recovery of Medicaid benefits. Also state homestead exemption laws may protect the family home from all debts, including Medicaid recoveries.
Whether Medicaid estate recovery can be made against assets that pass directly to survivors without going through probate depends on state law. These assets would include jointly held accounts, assets with right of survivorship, life estates, living trusts, and life insurance proceeds.
But there are restrictions on Medicaid recoveries from a beneficiary’s estate. States cannot make an estate recovery as long as the surviving spouse is living. And estate recoveries cannot be made from a surviving child who is under 21 or who is blind or permanently disabled. There are also protections for siblings and adult children who continue to live in the family home.
Federal law allows the states to pursue Medicaid estate recovery when the surviving spouse dies, when a surviving child becomes 21, or when a sibling or child moves out of the family home. How the estate recovery is pursued in these cases depends on the state. The states may also waive estate recoveries in cases of hardship or when it is not cost effective to make a recovery, for example when there is a small amount in the estate.
According to the U.S. Department of Health and Human Services Centers for Medicare & Medicaid Services, Medicaid beneficiaries are notified of the estate recovery program when they apply for Medicaid eligibility and in the annual redetermination process. And Medicaid beneficiaries who are in medical facilities receive a notice from the county Department of Social Services to inform them of any intent to place a lien on their real property in order to initiate an estate recovery procedure after their death.
Sources:
Estate Recovery, Centers for Medicare & Medicaid Services
Medicaid Estate Recovery, North Dakota Department of Human Services
Medicaid Estate Recovery, Texas Department of Aging and Disability Services
Medicaid Estate Recovery, U.S. Department of Health and Human Services