Deed Protection and Medicaid Eligibility
Medicaid imposes stringent limits on income and assets of recipients, consistent with its mission to provide a health care safety net for the poor and for those whose personal resources are insufficient to pay the full cost of care. In order to fulfill this mission, Medicaid also recovers expenses paid on behalf of recipients from their estates under certain circumstances. Medicaid is the largest source of funds for institutional long-term care expenses. It pays nearly half of the total amount spent on nursing homes, followed, respectively, by out-of-pocket funds of long-term care consumers, Medicare, private long-term care insurance, and other public and private funding sources.
Unless they are among the minority who have long-term care insurance, individuals contemplating paying thousands of dollars out-of-pocket every month for long-term nursing home care face the possibility of exhausting all available assets and using up their lifetime savings before being able to qualify for Medicaid. Not surprisingly, a web search on “Medicaid estate planning” yields thousands of results offering advice on a variety of strategies to qualify for Medicaid while preserving assets and savings for heirs.
Federal guidance implies that states can recover when the surviving spouse dies, or a child’s protected status is lost, or when a protected relative moves out of the home. However, a number of states waive their future right to recovery altogether, others defer it, and yet others use a mix of approaches based on the specifics of each case.
It is up to each state to develop and disseminate information to help the public understand the rationale and necessity for Medicaid estate recovery, as well as the rights of both the State and the recipient. For this reason, considerable variation exists in the level of resources each state commits to this process. The state Medicaid agency must decide how to keep it understandable, while providing all the essential points, and how to accommodate the variety of individual circumstances. Decisions must also be made regarding what level of detail beneficiaries and their families can absorb or when is the best time to provide information about estate recovery — an event that may occur long after the application process. Even when a state provides comprehensive estate recovery information at the most suitable time, people may be overwhelmed by the complexity of the decisions they must make during the application process, which may take place over a fairly short and emotionally difficult period of time.
At a minimum, states must recover amounts spent by Medicaid for long-term care and related drug and hospital benefits, including Medicaid payments for Medicare cost sharing related to these services. However, they have the option of recovering the costs of all Medicaid services paid on the recipient’s behalf. The majority of states recover spending for more than the minimum of long-term care and related expenses.
Recoveries may only be made from the estates of deceased recipients who were 55 or older when they received Medicaid benefits or who, regardless of age, were permanently institutionalized. However, states may exempt recipients if their only Medicaid benefit is payment of Medicare cost sharing (i.e., Medicare Part B premiums).