Can Medicare Take Your House in Texas?

Many individuals are concerned that Medicare might seize their home, particularly in Texas. This apprehension often stems from a misunderstanding of how federal healthcare programs handle asset recovery. While Medicare, a federal health insurance program, generally does not seek reimbursement from a beneficiary’s estate, Medicaid, a joint federal and state program, does have provisions for estate recovery, especially for long-term care services. This article clarifies how asset recovery, specifically involving a home, functions in Texas, focusing on the state’s Medicaid Estate Recovery Program.

Understanding Medicare and Medicaid

Medicare is a federal health insurance program primarily for individuals aged 65 or older, and for younger people with certain disabilities. It covers hospital stays, doctor visits, and prescription drugs. Unlike Medicaid, Medicare does not have an estate recovery program and generally does not seek reimbursement from a beneficiary’s estate for medical services provided.

In contrast, Medicaid is a collaborative federal and state program designed to assist individuals with limited income and resources in covering medical costs. This program plays a significant role in funding long-term care services, such as nursing home care and home and community-based services. After a Medicaid recipient’s death, the program can seek reimbursement for these long-term care costs from the individual’s estate. The concern about a home being subject to recovery typically relates to Medicaid’s estate recovery provisions, not Medicare.

The Texas Medicaid Estate Recovery Program (MERP)

The Texas Medicaid Estate Recovery Program (MERP) is the state’s mechanism for recouping costs associated with certain Medicaid benefits. Federal law mandates that all states implement such a program, particularly for long-term care services. MERP recovers expenses for services like nursing home care, intermediate care facilities for individuals with intellectual disabilities, home and community-based services, and related hospital and prescription drug services. The state never seeks to recover more money than it paid for the services provided.

Individuals are subject to MERP if they received Medicaid long-term care services after age 55 or received institutional care at any age. In Texas, this applies to long-term care services received after March 1, 2005. When applying for Medicaid to cover long-term care, the state provides information about the MERP program. After a recipient passes away, the state may contact their heirs or estate representative to determine if a MERP claim should be filed.

Assets Subject to MERP in Texas

Under MERP, Texas can seek recovery from the “estate” of a deceased Medicaid recipient to reimburse costs for covered services. For MERP purposes, an estate generally includes all real and personal property owned by the deceased at the time of their death that is subject to probate. This encompasses assets such as houses, bank accounts, vehicles, and other possessions. The home often represents the primary asset in a Medicaid recipient’s estate, as other assets are typically limited to a low value for Medicaid eligibility.

A home’s value is assessed as part of the probate estate. If the property must go through probate to transfer ownership, it can become subject to a MERP claim. Assets that pass directly to a named beneficiary outside of the probate process are generally not included in the MERP estate. These non-probate assets can include life insurance policies with named beneficiaries, retirement accounts, payable-on-death bank accounts, or property transferred via a Transfer on Death Deed (TODD) or an Enhanced Life Estate Deed (Lady Bird Deed). While the state cannot directly “take” property, any claims against an estate, including MERP claims, must be satisfied before property can be distributed to heirs.

Exemptions and Waivers for MERP in Texas

Texas law provides specific situations where MERP recovery is exempt or can be waived, offering protection for certain assets, particularly the home. The state will not pursue a MERP claim if there is a surviving spouse. An exemption also applies if the deceased Medicaid recipient is survived by a child under 21 years of age or a child of any age who is blind or permanently disabled, as defined by Social Security requirements.

An additional exemption exists for an unmarried adult child who lived continuously in the Medicaid recipient’s home for at least one year before the recipient’s death. MERP claims may not be pursued if the estate’s total value is $10,000 or less, or if the total Medicaid costs are $3,000 or less. If the expense associated with selling the property would exceed its appraised worth, the state may also not pursue a claim.

Heirs can apply for an undue hardship waiver. The state may grant such a waiver if recovery would cause significant financial hardship for the heirs. Criteria for an undue hardship waiver include situations where the estate property has been a family business, farm, or ranch for at least 12 months, is the primary income source for heirs, and recovery would result in the loss of that income. A specific hardship waiver for a homestead may be available if the home’s value is less than $100,000 and the heirs’ combined income falls below 300% of the federal poverty level.

The MERP Notification and Claims Process in Texas

When a Medicaid recipient passes away, the Texas Health and Human Services Commission (HHSC), which administers MERP, is notified. The state then identifies potential estates for recovery. Within 30 days of learning of the death, MERP typically sends a “Notice of Intent to File a Claim” to the estate’s executor or heirs. This notice includes a questionnaire and a waiver request form.

Recipients of this notice generally have 60 days from the date on the notice to respond and submit any requests for exemptions or hardship waivers. Failing to respond can result in the state proceeding with its claim. The MERP claim is typically filed against the estate during the probate process. Texas law dictates the order in which claims against an estate are paid, with MERP claims being paid after certain expenses like funeral costs and estate administration expenses. Texas law generally requires claims against an estate to be made within four years of the decedent’s death. The estate’s representative or attorney can sometimes negotiate the claim amount, with possible deductions for necessary expenses like home maintenance costs or care that delayed institutionalization.