Does Medicaid Have to Be Paid Back?

Medicaid provides healthcare assistance to millions of people across the United States. While it offers crucial support, certain circumstances allow states to seek reimbursement for benefits provided. This process, known as Medicaid estate recovery, is a federally mandated program designed to help states recover some of the costs associated with specific types of care.

Medicaid Estate Recovery

Medicaid Estate Recovery Programs (MERP) are federally mandated under the Omnibus Budget Reconciliation Act of 1993, requiring states to recover certain Medicaid costs from the estates of deceased beneficiaries. This program primarily aims to recoup funds expended on long-term care services. Recovery efforts are initiated only after the Medicaid recipient has passed away.

The services subject to recovery primarily include long-term care, such as nursing facility services and home and community-based services (HCBS). This also extends to related hospital and prescription drug services received while an individual was institutionalized or receiving HCBS. States are required to pursue recovery for these costs if the recipient was 55 years of age or older when they received the services.

States also have the option to recover costs for all other Medicaid services provided to individuals aged 55 or older, beyond just long-term care. For beneficiaries under 55 years of age, states may elect to pursue recovery if they were permanently institutionalized, such as residing in a nursing facility or an intermediate care facility for individuals with intellectual disabilities. Routine medical care not associated with long-term care is not subject to recovery.

Assets Subject to Recovery

The term “estate” in the context of Medicaid recovery can vary by state, but it refers to property and assets owned by the deceased Medicaid recipient at the time of their death. Federal law mandates recovery from the probate estate, which includes assets that pass through a will or intestacy, requiring court supervision. Common examples of probate assets include solely owned bank accounts, vehicles, and real estate.

Many states have expanded their definition of “estate” to include non-probate assets, which transfer ownership outside of the probate process. These can include assets held in joint tenancy with rights of survivorship, assets with a designated beneficiary like certain life insurance policies, or assets transferred into a life estate. The deceased’s home is often the most significant asset targeted for recovery, even if it was exempt during the recipient’s lifetime for eligibility.

The specific types of assets subject to recovery differ significantly from state to state. While a home, bank accounts, and investments are frequently included, some states may also seek recovery from certain trusts or other financial instruments. The state’s claim cannot exceed the total amount of Medicaid benefits paid. For example, if $150,000 was paid in benefits and the estate is valued at $200,000, Medicaid can only recover up to $150,000.

Exemptions and Protections

Federal law provides mandatory exemptions that delay or prevent Medicaid estate recovery under specific circumstances. Recovery is prohibited while a surviving spouse is still living. The state cannot place a lien on a home or attempt to recover if the deceased beneficiary has a surviving spouse.

Recovery is also delayed if the deceased Medicaid recipient is survived by a child under the age of 21. Similarly, if there is a surviving child of any age who is blind or permanently and totally disabled, recovery efforts are deferred. In these situations, the state must wait until these protected individuals no longer meet the criteria, such as the minor child reaching age 21 or the disabled child passing away.

States may also offer optional exemptions and hardship waivers. An optional exemption, common in many states, is the “caregiver child” exemption, which may apply if an adult child lived with the Medicaid recipient for a specified period, typically two years, and provided care that delayed the recipient’s institutionalization. Heirs can apply for hardship waivers if recovery would cause undue hardship, such as leaving them without a home or the means to obtain basic necessities. The criteria for these hardship waivers are determined by each state and can be strict, often requiring clear evidence of financial distress.

How States Recover Funds

States typically identify deceased Medicaid recipients through data matches with vital records or other administrative databases. Once a recipient’s death is confirmed, the state agency responsible for Medicaid estate recovery will initiate the process to identify assets within the deceased’s estate. This often involves reviewing probate court filings.

The state then files a claim against the deceased’s estate during the probate process, similar to how other creditors submit claims. The executor or personal representative of the estate is formally notified of this claim, detailing the amount sought for reimbursement. The estate’s representative has an opportunity to respond to the claim, which may involve contesting the amount or applying for an available hardship waiver.

If an estate is not formally opened through probate, particularly if there are no significant assets that require a court process, some states may have alternative procedures to recover directly from certain assets, such as placing a lien on real property. Recovered funds are returned to the state’s Medicaid program, helping to offset the costs of providing services to other beneficiaries.