When navigating the complexities of long-term care financing, Medicaid often feels like a lifeline. A vital program that ensures your loved one receives the necessary medical support when savings run low.
However, what many families don’t realize is that this essential benefit can come with a significant, and often unexpected, long-term cost: Estate Recovery. This legal process allows state Medicaid programs to seek reimbursement from a senior’s estate after their death, potentially affecting the inheritance they intended to leave.
Understanding how Medicaid estate recovery works is not about fearing the program, but about planning wisely to protect your family’s legacy while still accessing the care your loved one needs. Let’s demystify this process, explore what assets are at risk, and discuss proactive steps you can take.
When Medicaid Wants Its Money Back
Medicaid is a program that provides health coverage for people with limited income and assets.
It helps low-income seniors by covering services not covered by Medicare, such as nursing home care and personal care services.
If your senior is on Medicaid, you need to know that after their death, the state Medicaid program can try to collect money from their estate, which is basically their remaining assets.
For many seniors, their estate is their house.
Collecting money pays the state back for the cost of the person’s care. It’s called estate recovery.
Why Does Medicaid Try to Claw Back Money?
The federal government has a policy requiring all states to seek to recover costs from individuals who obtained certain types of Medicaid coverage during their lifetimes.
All states seek to recover long-term care costs, such as home health services and hospitalizations, incurred while in nursing homes. Some states also seek to recover regular Medicaid costs.
How States Recover Medicaid Costs
Laws in every state are different, but there are basically two different ways to recover costs:
- Asking the deceased person’s estate to pay them back.
- Putting liens on the deceased person’s property so they’ll collect money from the sale of the property.
States Can’t Always Recover Medicaid Costs
In these four cases, states aren’t allowed to recover their Medicaid-paid costs.
Surviving spouse
The person’s spouse is still alive, regardless of where they live.
Minor, blind, or disabled child
There’s a surviving child under 21 who is blind or disabled. It doesn’t matter where that child lives.
Sibling caregiver
A sibling who lived in the home for at least 1 year before the person’s move to a facility. They continue to live in the house and hold partial or full ownership.
Child caregiver
A child who lived in the home for at least two years before moving to a facility. They continue to live there and can demonstrate that the care they provided delayed the person’s need to enter a facility.
Some People Can Get Recovery Waived
States may elect not to seek repayment when the aging adult’s heirs demonstrate that taking the money would cause undue hardship. That’s usually when the heirs have limited income.
The Amount that’s Recovered is Limited
There’s a limit on how much money the state can recover. States can’t recover more than Medicaid spent on seniors aged 55 or older.
Also, states can’t recover more than what’s left in the estate after other creditors are fully paid. So, if the estate runs out of money, the state can’t get anything else back.
Final Thoughts About the Medicaid Estate Recovery Program
Medicaid Estate Recovery is a complex intersection of healthcare law and financial planning, but it doesn’t have to be a source of panic or a surprise. Forewarned is forearmed. By understanding the rules in your state, you can engage in thoughtful conversations with an elder law attorney to explore legal strategies, like proper use of exempt assets, spousal protections, or, in some states, estate recovery waivers.
Proactive planning helps you honor your loved one’s wishes for care and legacy. Remember, the goal is to use the benefits your loved one is entitled to for their health and comfort, while taking informed, legal steps to preserve what matters most to your family. Seeking professional guidance is the key to navigating this challenging landscape with confidence and clarity.
You might also like:
5 Medicare Myths
Get Trusted Medicare Advice for Free
What Happens When Someone Dies Without a Will
About the Author
Connie is the founder of DailyCaring.com and was a hands-on caregiver for her grandmother for 20 years. (Grandma made it to 101 years old!) She knows how challenging, overwhelming, and all-consuming caring for an older adult can be. She also understands the importance of support, especially in the form of practical solutions, valuable resources, and self-care tips.
