A few years ago I was visiting a friend and noticed the house beside him looked different. It had been vacant but was now occupied. I asked if he had a new neighbor? He told me his neighbor, an elderly man, had gone into a nursing home and passed away after a lengthy stay. The man’s son inherited his father’s house and moved in. About that same time another friend mentioned his grandfather’s health had declined to the point where he had to be moved into a nursing home until his death.
In both instances the families were not well off. Probably the only major asset each had was their home. In both cases the homes passed to heirs upon the death of their owners, who died in nursing homes paid for by taxpayers. Something else these two anecdotes have in common is they are not unique. Although states are required by federal law to seek recovery from the estates of people whose long-term care was paid by Medicaid, states’ efforts are not very aggressive. Kaiser Health News and National Public Radio reported on Medicaid long-term care estate recovery:
Federal law requires all states to have “estate recovery programs,” which seek reimbursements for spending under Medicaid, the joint federal and state health insurance program for people with low incomes or disabilities. The recovery efforts collect more than $700 million a year, according to a 2021 report from the Medicaid and CHIP Payment and Access Commission, or MACPAC, an agency that advises Congress.
States have leeway to decide whom to bill and what type of assets to target. Some states collect very little. For example, Hawaii’s Medicaid estate recovery program collected just $31,000 in 2019, according to the federal report.
Iowa, whose population is about twice Hawaii’s, recovered more than $26 million that year, the report said.
States often claim that efforts to recover funds spent on Medicaid long term care do not actually recover very much. They claim programs are not popular among voters. It is safe to say that recovery attempts are especially unpopular with families who turn to Medicaid without realizing the estate would have to pay up at a later date. Perhaps state Medicaid programs should better explain estate recovery before families seek to qualify their loved ones for Medicaid. A bill in Congress in 2022 sought to do away with Medicaid long-term care estate recovery. The bill garnered no Republican support and died in committee.
States have significant discretion about which assets to target for recovery. States can grant hardship exemptions, set limits on the size of estates and decide types of assets to recover. As mentioned earlier, some states are more aggressive than others. Those failing to recover funds spent by Medicaid on long-term care should bear the cost of their failed efforts.
Mark Warshawsky, an economist for the conservative American Enterprise Institute, argues that other states should follow Iowa’s lead in aggressively recouping money from estates.
Warshawsky said many other states exclude assets that should be fair game for recovery, including tax-exempt retirement accounts, such as 401(k)s. Those accounts make up the bulk of many seniors’ assets, he said, and people should tap the balances to pay for health care before leaning on Medicaid.
Private companies help states with recovery efforts, retaining a portion of what they recover. While Iowa recovered $30 million from 3,892 estates in 2022, it spent over $6 billion. More than half of the recovered funds go back to the federal government. Perhaps that’s why states are not as motivated as they could be.
One problem I can see is how to reward estates when a family member cares for a senior, keeping him or her out of a nursing home for months, possibly years longer than would be possible on their own. In some of these cases, the benefit is mutual, including shelter for the care giver and companionship for the family member receiving care. In other circumstances, the care provided is extensive, exhausting and requires leaving jobs and moving to provide care full-time.
Over the years several family members have required nursing home stays prior to their deaths. All were cash-pay and did not rely on Medicaid. Currently a family member is in a facility that costs about $11,000 a month, with that fee coming out of her assets. Long-term care is expensive no matter who is paying the bill. It only makes sense for states to recover what they can rather than safeguard inheritances at taxpayer expense.
4 thoughts on “Little Effort Goes into Estate Recovery for Medicaid Long Term Care”
About time you guys understood the power of the MSA
here is an in depth. explanation https://msa-medicare.com/msa-comparison
Thanks for this post. Medicaid estate recovery is a very thorny issue, with no easy answers.
According to two reform groups that I have followed, states have been barred from setting reasonable exemptions on recovery. West Virginia tried to exempt estates of less than $50,000 from recovery efforts, and so on.
(The two groups are Justice in Aging and National Health Law Program.)
There was a flurry in about 2000 about clever legal techniques, which allowed a wealthy senior to transfer assets to children and then qualify as poor for Medicaid assistance.
Estate recovery exemptions could still allow going after this phenomenon, and not hurt lower middle class heirs. It seems idiotic to me that such exemptions are apparently illegal. The states which do not pursue estate recovery at all probably agree with me.
The purpose of recovery laws was twofold:
a. to finance the LTC portion of Medicaid;
b. to incentivize the purchase of LTC insurance
The legislative history of Medicaid, Medicare, and the ACA is filled with these kinds of gimmicks that theoretically would reduce the cost to taxpayers. We would be much better off acting like Germany (for example), that decided to fund national LTC insurance and just raised payroll taxes by about 2%.
Finally, I will have to read the piece by Mark Warshawsky to see if he is grounded in reality. He sounds like a Dickensian prig who wants the return of poor houses, but I will have to check him out.
Warshawsky isn’t so bad – my apologies.
He points that most states do count retirement plan assets in determining Medicaid eligibility. California is the real outlier here. A senior can have $1 million in an IRA and still get Medicaid.
He repeats the old bromide that estate recovery will encourage the purchase of long-term care insurance. Sadly — and this is not his fault — the market for long-term care insurance has almost dried up. Few carriers even offer the product, and an applicant will be denied if they have any medical issues.
California seems to be a rather egregious case here. I wonder if California puts some kind of lien on assets like IRAs. The average nursing home stay is not that long but it can be. I have one family member who spent a decade in long term care.