Summary
Medicaid Estate Recovery Programs are how states get paid back by Medicaid Long Term Care beneficiaries after their deaths. Medicaid Long Term Care pays for nursing homes and in-home care for low-income people who are older or have chronic illnesses, and after their death Medicaid Estate Recovery Programs are required by law to try and collect reimbursement for that care. Medicaid estate recovery rules vary by state, but all states have a Medicaid Estate Recovery Program.
This article discusses whether Medicaid can “take one’s home” after the Medicaid beneficiary passes. To learn if a home is at risk while the beneficiary is living, use our interactive “Can Medicaid Take My Home tool”.
After a Medicaid Long Term Care beneficiary dies, the Medicaid Estate Recovery Program (MERP) in their state is required by law to seek reimbursement for the long term care that beneficiary received through Medicaid. Trying to collect money already paid for healthcare is sometimes referred to as “clawback.” This Medicaid clawback includes the costs of nursing home care, in-home care and services provided through Home and Community Based Services (HCBS) Waivers or Aged, Blind and Disabled Medicaid, and any prescription drug or hospitalization costs related to long term care. In some states, the MERP will attempt to collect reimbursement for Medicaid expenses not related to long term care.
When someone has been on Medicaid at the end of their life, the home is usually the last remaining thing of value after death, and MERPs will try to collect reimbursement through the home. That process is detailed below. However, MERPs can also try to collect via other assets, including:
– Cash
– Money in checking and savings accounts
– Remaining funds in Qualified Income Trusts
– Remaining funds in irrevocable funeral trusts
– Items of value including vehicles
Medicaid estate recovery rules provide protection for surviving spouses of Medicaid beneficiaries. First of all, states are not allowed to collect reimbursement for Medicaid long term care costs if the deceased beneficiary has a surviving spouse. This applies to all 50 states and the District of Columbia, including “expanded recovery” states where MERPs may attempt to collect reimbursements from the surviving spouse’s assets after the surviving spouse has passed away. And Medicaid is not allowed to put a lien on a home and collect reimbursement through the sale of the home if the beneficiary’s surviving spouse lives there. More details on how Medicaid estate recovery rules handle beneficiary’s homes and expanded recovery states can be found below.
After a beneficiary dies, a family member will usually get a letter from the Medicaid Estate Recovery Program (MERP) in the state where beneficiary was receiving long term care declaring the MERPs intention to seek reimbursement for that long term care. As mentioned above, some states will also try to collect reimbursement for Medicaid expenses not related to long term care, but the state can not try to collect more than it paid out through Medicaid.
It is also possible, depending on the state, that the deceased Medicaid recipient’s family members or personal representative are required to notify state offices when the recipient dies.
In 27 states, Medicaid Estate Recovery Programs only seek reimbursement from the deceased beneficiary’s “probate estate.” These are known as “probate-only” states. Probate assets are assets that are held in name by the deceased Medicaid beneficiary only and that would be passed on in a Will and Testament. But probate assets do not include joint assets like life insurance policies, bank accounts or retirement accounts that have been legally designated POD (pay on death), TOD (transfer on death) or the like.
In 24 states, the MERP can also go after assets that do not go through probate. These are known as “expanded recovery” states. Expanded recovery states can also try to collect reimbursement via assets held by the beneficiary’s spouse after the spouse passes away.
The comparison table at the bottom of this article shows which states are probate-only and which use expanded recovery.
Without Medicaid planning strategies, the home is not exempt from Medicaid payback rules after death. This can be somewhat confusing since the home might have been exempt from Medicaid’s asset limit while the Medicaid beneficiary was alive. Here’s the catch: the rules and strategies that made the home exempt while the beneficiary was alive are not the same rules and strategies that will make the home exempt when the beneficiary is deceased.
For details on how to protect the home from Medicaid estate recovery, including asset protection trusts and Ladybird Deeds, click here.
Medicaid estate recovery has been required by law in every state since the 1993 passage of the Omnibus Budget Reconciliation Act. Prior to OBRA, a state could choose not to be reimbursed when a Medicaid recipient passed away.
How Medicaid estate recovery rules and clawback apply to one’s home can vary quite a bit by state. Some states won’t use MERP if the home is valued below a certain amount. Texas, for example, does not try to be reimbursed from a recipient whose estate is valued below $10,000, while Georgia’s limit is $25,000.
Medicaid can put a lien on a recipient’s home as part of the estate recovery process, but not every state will do this. A lien prevents the sale of the home until all of the homeowner’s debts are paid. This means a Medicaid recipient can’t transfer ownership of a home before death to prevent it from being used to pay back state Medicaid.
A lien will be filed by the state after the recipient moves out, as long as they are not expected to ever move back in. The lien gets lifted if the recipient moves from the home, or if the home is sold to pay back Medicaid.
Medicaid cannot put a lien on a home if any of the following people still live there:
– The recipient’s spouse
– Recipient’s child who is under 21
– Recipient’s child who is disabled or blind
– Recipient’s sibling with partial ownership
The process of selling a home and collecting debts via MERPs will often be contracted to an agency outside Medicaid, like a Health Management Service (HMS). The home is put up for sale with a MERP claim on it. Once a buyer is found, the MERP claim must be addressed before the sale can close.
Information on if, and how, states use liens in estate recovery can be found in the comparison table at the end of this article.
Every state has a Medicaid Estate Recovery Program and will use it to be reimbursed for Medicaid Long Term Care costs unless certain exceptions apply.
These are the reasons a state Medicaid office will choose not to use MERP to recover costs of Long Term Care:
– The recipient’s spouse is still alive.
– The statute of limitations has expired (See below for more on statutes of limitations).
– The deceased has a child under 21.
– The deceased has a blind or disabled child.
– The sibling exemption applies: This means the sibling has an equal interest in the deceased’s home, but the sibling must have lived there for more than a year before the recipient moved into a nursing home.
– The recipient’s adult child lived in the home for at least two years, serving as caregiver, before the recipient moved into a nursing home (Caregiver child exception).
All states also offer Undue Hardship Waivers. These waivers are granted, and estate recovery is prevented, if the heirs of the deceased Medicaid recipient will face undue hardship because of the state’s Medicaid estate recovery claim. Every state is allowed to use it’s own definition of undue hardship, but there are federal guidelines, as well. These federal guidelines declare that undue hardship exists if losing the estate subject to recovery would lead the heir to require state assistance; or if inheriting the estate would mean the heir no longer needed state assistance; or if the estate is the sole income producing asset of surviving heir; or the estate is a homestead worth 50% or less of the average price of a home in the county; or if there are other compelling reasons.
State-specific details on Undue Hardship Waivers for every state can be found in the comparison table at the end of this article.
Statutes of limitations regarding Medicaid Estate Recovery Programs cap the amount of time Medicaid offices have to seek reimbursement from a recipient’s estate after their death. Not every state has a statute of limitations for its MERP. Pennsylvania is one of these. For states that do have a a statute of limitations for their MERP, it’s usually one year, as is the case in Florida. Some states, like Texas, use different kind of limitations – Texas’ MERP won’t seek reimbursement if the cost of Medicaid services provided was less than $3,000, or if the estate is worth less than $10,000. As for Texas’ MERP timing limitations, Texas’ MERP will seek reimbursement any time before the estate is closed (meaning it has all been inventoried, distributed, taxes paid, and all other obligations satisfied), or any time within four months of receiving notice the estate has been closed.
In the probate-only states listed above, MERPs must seek their reimbursement in the same timely manner any other creditor of the deceased is required to follow under the probate laws of that state. If a lien (also discussed above) was put on a house by the state’s MERP, the state may have longer to collect reimbursement, depending on the lien laws of the state.
Marital status also plays a role when it comes to statute of limitations for Medicaid estate recovery.
For married couples with one Medicaid beneficiary and one non-beneficiary (commonly known as the Community Spouse) where the Medicaid beneficiary dies first, states can not seek reimbursement while the Community Spouse is living. Some states will try to collect reimbursement after the Community Spouse dies, but some states never seek reimbursement if there is a surviving Community Spouse at the time of the beneficiary’s death.
The Community Spouse dying before the Medicaid beneficiary is a less common situation, but it can happen, and couples should plan for that possibility. If they don’t plan, the Medicaid beneficiary could become financially ineligible for Medicaid if they inherit the Community Spouse’s assets. In probate-only states, Community Spouses can do this by making sure none of their assets are left to the Medicaid beneficiary or go to probate. If that’s not an option, or if no planning was done, a Certified Medicaid Planner can help the Medicaid beneficiary implement strategies to spend their new inheritance on Medicaid-allowed goods and services so they can avoid gaps in coverage and eventually return to Medicaid eligibility.
Medicaid payback rules don’t change if both spouses are enrolled in Medicaid Long Term Care, or for single individuals.
Since statutes of limitations vary by state, and sometimes within the state depending on the situation, we recommend consulting with an Elder Law Attorney or Certified Medicaid Planner to find out if there any statutes of limitations or exemptions that might apply to your situation.
Information about Medicaid Estate Recovery Program limitations and exemptions by state can be found in the comparison table in the next section.
How Medicaid payback rules and clawback apply to one’s home can vary quite a bit by state. Some states won’t use MERP if the home is valued below a certain amount. Texas, for example, does not try to be reimbursed from a recipient whose estate is valued below $10,000, while Georgia’s limit is $25,000.
Incomplete Data – We are currently updating this table and expect it to contain all 50 states in the very near future. (Oct. 2023).
Please reference the bullets that follow to explain what each table column contains.
| Medicaid Estate Recovery – State by State Differences | ||||||
| Estate Scope | Spousal Recovery | Liens Allowed | Hardship Waivers | Exemptions/ | ||
– The estate must be worth $5,000 or more for the state to attempt recovery
– Interest and income derived from Tribal Land, property located on a Native America reservation, and any reservation payments are all exempt from recovery.
Also, Medicaid Estate Recovery is delayed if the recipient had a surviving child under 21 or a disabled or blind child of any age.
Certain Native American resources and incomes are exempt from recovery in Ohio.
If a lien is used on a home for recovery, $6,000 (less the value of any prepaid burial insurance policies) from the sale of the home is set aside to cover funeral and burial expenses for the deceased Medicaid recipient.
Extended exemptions are provided to American Indians and Alaskan Natives.