Medicaid provides health coverage administered by the state and federal government. It is available to the disabled, the impoverished elderly or low income individuals. It has broad coverage for hospital services, prescription drugs, long term care facilities, and much more. Each state operates Medicaid consistent with federal law. Federal law requires states to make efforts to recover Medicaid costs from your estate when you die.

What is Medicaid Estate Recovery?

When an individual becomes eligible for Medicaid, federal law requires that the state send the individual notice that Medicaid will try to recoup medical costs upon the recipient’s death. If the person was 55 years of age or older and receiving Medicaid benefits, each state is required to recoup its costs from the decedent’s estate.

How Does Medicaid Recovery Work?

The state will try to recover costs for Medicaid from the decedent’s estate or by putting a lien on the beneficiary’s property. As well, under certain conditions, the state may be entitled to the money remaining in a trust after the Medicaid recipient dies.

When a case is presented to probate court, the state is listed as a creditor for Medicaid recovery of costs expended for prescription drugs, nursing facility services, home related services and other Medicaid services.

The priority of claims is established by state law, which may allow the Medicaid recovery costs to be listed  as priority claims and the heirs to the decedent’s estate may be listed as secondary creditors.

What Types Of Properties May Be Used for Medicaid Recovery?

The state will file a claim in probate court related to the descendant’s estate. Importantly, each state may differ in how it defines the estate it will seek to recover from, but generally it will include real property and personal property.

For example, some states may try to recover assets that are owned individually and where there is no one who has been designated to receive property from the decedent. Other states may try to recover from an estate where the decedent had legal title or interest in the property at the time of death.

A second method of recovery is to place a lien on the real property of a person who received Medicaid coverage or a person who incorrectly received Medicaid benefits. A lien is a claim against real estate that may prevent the transfer or sale of the property unless the lien is paid.

In the case of Medicaid, the lien is the amount of the Medicaid payment. In some states, if the property is sold while the Medicaid beneficiary is alive, they will no longer be eligible for Medicaid and will have to repay the state for benefits paid. Further still, some states will remove the lien when the beneficiary dies while others will seek to recover on the lien even after the beneficiary dies.

Are there Circumstances in Which a State Cannot Recover?

To satisfy Medicaid recovery efforts, you may be forced to sell your property or assets. However, there are some circumstances in which a state’s recovery efforts may be limited.

Generally, property that will pass directly to joint owners and beneficiaries under a trust are excluded from probate assets. A properly set up trust can provide you with the right to continue to reside in your home for the rest of your lifetime.

As well, there might be limitations for recovery if there is a surviving spouse, a child who is under 21, or a blind or disabled child of any age. Furthermore, if there is a sibling who resided in the home for at least one year before the decedent was institutionalized and who has an equity interest in the shared home, the state may be precluded from recovery.

A state also may decline to recover costs for Medicaid in additional circumstances, including when a state chooses to waive recovery because the descendant’s heirs can prove that the recovery would cause an undue hardship or because it is too expensive to try to recoup repayment from the estate.

In fact, the law requires that each state must provide for these hardship exceptions. While each state decides for itself what constitutes undue hardship, federal law suggests finding hardship in two specific instances:

  1. Where the estate is of modest value; and
  2. Income-producing properties, such as farms and family businesses that are essential to supporting the surviving family members.

Should I Contact an Attorney If I am Facing Medicaid Recovery?

It is clear that states may employ their recovery efforts differently based on how broadly they define an estate and what their probate rules allow. If you are concerned about whether your state may recover from your estate for Medicaid benefits, consult with an attorney. Your attorney may be able to negotiate with the state to limit recovery against your estate or establish factors for a hardship extension.