Can Medicaid Take Your Home?

The Medicaid expansion brought about by the Affordable Care Act could increase situations that would allow Medicaid to seize property of a deceased recipient to reimburse the cost of his/her care. Is your home vulnerable? Read on for details.

The History

Since the Medicaid program began in 1965, it has permitted states to recover costs from the estates of deceased recipients who were over age 65 when they received benefits and who had no surviving spouse, minor child, or adult disabled child. The 1965 Medicaid law also gave states permission to impose liens on property in the estates of deceased Medicaid recipients. Post-death liens prevent the estate from being settled and the property distributed to the recipient’s heirs before all claims against it, including Medicaid’s, are satisfied.

Until 1993, estate recovery was optional for states. But in 1993, Congress made estate recovery mandatory. A provision in the Omnibus Budget Reconciliation Act of 1993 (OBRA ‘93) requires state Medicaid programs to seek recovery of benefits paid for nursing facility services, home and community-based services, and related hospital and prescription drug services for beneficiaries age 55 and older. They also have the option of recovering payments for all other Medicaid services provided to these individuals, except Medicare cost-sharing paid on behalf of Medicare Savings Program beneficiaries.

The Problem

The Affordable Care Act (ACA) itself does not mandate estate recovery. Instead, the ACA expanded the pool of potential Medicaid recipients age 55 and older, subjecting them to a previously enacted law. Call it the law of unintended consequences.

To help lower-income individuals meet the ACA’s health insurance coverage requirement, it allows states to provide Medicaid eligibility, effective January 1, 2014, for individuals under 65 years of age with incomes up to 133 percent of the federal poverty level (FPL). Individuals seeking coverage on the affordable insurance exchanges who qualify can enroll in Medicaid. However, if you are eligible for Medicaid, you can’t receive a government subsidy to buy private health coverage. You can enroll in Medicaid, pay full price for a private market plan or go without coverage and pay a fine. You can also apply for a hardship exemption. The IRS says it will exempt people who are eligible for the Medicaid expansion but live in states that don’t offer it.

People who are under age 55 needn’t worry. but if you are age 55 or older, enrolling in Medicaid could make you subject to estate recovery. This means that if you have assets but little income, enrolling in Medicaid could end up costing your family your home.

Federal officials recently urged states not to apply the estate recovery rules to residents who sign up for Medicaid to meet the ACA’s insurance requirements. Washington and Oregon have already amended their recovery laws to exempt new Medicaid enrollees, which would limit recovery to recipients of nursing home and other long-term care services in these states. However, the states of California, Colorado, Iowa, Massachusetts, Nevada, New Jersey, New York, North Dakota, Ohio and Rhode Island have said they will pursue estate recovery. This means Medicaid enrollees in those states could be subject to estate recovery for ordinary medical expenses paid by Medicaid, not just nursing home and other long-term care expenses.

States may not recover from the estate of a deceased Medicaid enrollee who is survived by a spouse, a child under age 21, or a blind or disabled child of any age. States also must establish procedures for waiving estate recovery when recovery would cause an undue hardship. Still, if you have assets to protect and live in one of the ten states that plan to pursue Medicaid recovery for new enrollees, we suggest you discuss your situation with an estate planning attorney before enrolling in Medicaid.

Expanded Medicaid Coverage not Available in Many States

When the ACA was passed, it required states to provide Medicaid coverage for adults between ages 18 and 65 with incomes up to 133 percent of the federal poverty level, regardless of their age, family status or health. A later U.S. Supreme Court ruling made the Medicaid expansion voluntary for the states. As a result, 24 states have opted not to expand their Medicaid programs. They are Alabama, Alaska, Florida, Georgia, Idaho, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Carolina, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin and Wyoming. In these states, therefore, you have fewer worries about Medicaid estate recovery. However, many adults with incomes below 100 percent of the federal poverty level fall into a coverage gap. They have incomes too high to qualify for Medicaid under their state’s current rules. But their incomes are too low to qualify for subsidies to buy private coverage in the health insurance marketplace.