Q. If I enroll in the new expanded Medicaid program, when I die and try to leave something to my kids, can the government attach those assets to repay the benefits I received?
A. When I first started getting questions like this a few weeks back, I figured it was just another Obamacare urban legend like many others I’ve heard.
It isn’t, although at this point the possibility of the government snatching your house out from under your heirs is more theoretical than real and should not stop you from enrolling in Medicaid if your income qualifies you for it.
But the fact remains that unless they come to their senses (or the federal government tells them to stop), of the 25 states plus the District of Columbia that are expanding Medicaid to cover all low-income households, at least 10 are planning to try to get their money back when beneficiaries die. I know this because I’ve spent the last couple of weeks chasing down information from those states and have heard back from all but three of them.
But here’s the kicker: You’ll only be subject to this grab, called “estate recovery,” for the years you were on expanded Medicaid and 55 or older.
The 10 states that told me they do plan to go after your estate’s assets are: California, Colorado, Iowa, Massachusetts, Nevada, New Jersey, New York, North Dakota, Ohio, and Rhode Island.
If you live in one of these 11 states, you don’t need to worry: Arizona, Arkansas, Hawaii, Kentucky, Michigan, Minnesota, New Mexico, Oregon, Vermont, West Virginia, and Washington. They said they’re going to leave you alone.
Illinois and Maryland are still trying to figure out what to do, and I’m still waiting for answers from Connecticut, Delaware, and the District of Columbia.
(If you don’t live in any of these states and have a low income, you have an even bigger problem than the prospect of estate recovery, which is the complete lack of any affordable health insurance option because your state chose not to expand Medicaid to cover you.)
What’s happening in those 10 states is beyond unfair, because younger Medicaid beneficiaries will face no such threat, and neither will people who get tax credits to lower the cost of premiums for private coverage they’ve purchased through their state’s Health Insurance Marketplace.
Why is this happening now?
It all goes back to a federal law passed in 1993 that required states to seek reimbursement from the estates of people whose nursing home bills were being paid by Medicaid. This is a completely different type of Medicaid than the program that was created by the new health care law. First of all, to get it, you have to be sick or disabled enough to need long-term care. Second, you must have already “spent down” most of your assets, although not your home if there’s a spouse or disabled adult child still living there.
Unfortunately the 1993 law allowed states the option of getting money back from the estates of people over 55 who were receiving any type of Medicaid, and a number of them did just that—although, again, the actual number of people involved was pretty small because up until now, it’s been difficult if not impossible for regular healthy but poor adults without young children to get on Medicaid in any capacity.
Fast forward to 2010 and the major expansion of Medicaid in the new health care law. It said absolutely nothing about how estate recovery might work with this new group, which probably includes some people with assets such as a home or retirement account, despite having a low income. This is by design; there is no asset test for expanded Medicaid.
“I kind of think the issue was overlooked for the expansion population,” Kristina Moorhead, state legislative representative for AARP, one of the few groups that’s been paying attention to this issue, said.
But the laws and regulations are still on the books. Without guidance from the federal government, which several state representatives told me they would really, really like to have, state Medicaid administrators are trying to fit this new and much larger group of beneficiaries into their existing system, whatever it may be. (A federal spokesman said guidance will be coming "soon" and added pointedly, that in the meantime "states that have chosen to put these laws in place can take action to address this.")
Estate recovery is not going to go well, said Judith Solomon, a Medicaid expert at the Center on Budget and Policy Priorities, a Washington research organizaton. “It takes effort to do this,” she said. “You have to track people.” That’s easy to do if you’re chasing after people who are living out the end of their lives in a nursing home, but not so easy in the case of people who might be on Medicaid for a few years in their early 60s, switch to Medicare at 65, sell their house and move to another state, and die at 85 having never been on Medicaid again.
Moreover, even if the states do manage to hunt people down and seize part of their estates, they’re going to have to send the money they collect straight back to the federal government, which is financing 100 percent of the cost of the expansion for the first three years, and 90 percent thereafter, Moorhead said.
Yet “for every dollar they spend to recover, the federal government reimburses them 50 cents,” she said. “I don’t know if it makes sense for states to spend money to recover funds they can keep nothing of.”
So should you take Medicaid or not?
Absolutely yes, even if you live in one of the states that may raid your estate when you die. If your income qualifies you for Medicaid, you aren’t eligible to get tax credits to buy private insurance. Going without health insurance is a terrible idea, can land you in huge debt that could well force you to raid your assets right away, and make it difficult if not impossible to get timely care if you should fall seriously ill.
Also, in all but a handful of states, expanded Medicaid is being delivered through private insurance companies that are paid a premium for each enrollee, so the most your estate would have to pay back is the cost of that premium.
Finally, I have serious doubts that states will really follow through on this once the public figures out what's going on. My evidence comes from the state of Washington, which had been advising its newly enrolled Medicaid recipients that if they were 55 or older, the state “may recover from your estate assets you own at the time of death.” That is, until the Seattle Times wrote articles about it and people started refusing to sign up for Medicaid. The state Medicaid agency issued an emergency rule rescinding the policy at warp speed.
But even if your state doesn't change its mind, there will probably be ways to protect your heirs, according to Morris Klein, a Maryland lawyer who serves on the public policy steering committee of the National Academy of Elder Law Attorneys. Since each state runs estate recovery slightly differently, you should consult an elder law attorney.
Got a question for our health insurance expert? Ask it here; be sure to include the state you live in. And if you can't get enough health insurance news here, follow me on Twitter @NancyMetcalf.