I went to stay with an old friend and his family for the 4th of July holiday weekend a few years ago. The house next door was a little overgrown because my friends’ neighbor had gone into a nursing home. A year or so later I was back visiting for the weekend when the neighbor’s son was moving into the house after his father died. I heard a similar story with a neighbor of mine, when both parents spent time in a nursing home before they died. When the last parent died their only asset was a house, which was later sold, and the proceeds split among their offspring. In both cases I wondered why the state was in the business of protecting inheritances for families who turned to Medicaid for their parents’ long-term care.
Medicaid estate recovery is a contentious issue. The New York Times recently wrote about “When Medicaid Comes After the Family Home,” saying:
Federal law requires states to seek reimbursement from the assets, usually homes, of people who died after receiving benefits for long-term care.
Then NYT wrote about the following anecdote:
The letter came from the state department of human services in July 2021. It expressed condolences for the loss of the recipient’s mother, who had died a few weeks earlier at 88.
Then it explained that the deceased had incurred a Medicaid debt of more than $77,000 and provided instructions on how to repay the money. “I was stunned,” said the woman’s 62-year-old daughter.
The quandary in the above anecdote was not that Medicaid had paid for nursing home care. The mother had long-term care insurance. The state’s beef was that the woman’s daughter had moved in with her, receiving a small stipend to take care of her mother. Her daughter had taken advantage of a state program that was intended to incentivize family members to care for their aging loved ones in the home as long as possible. Essentially, Medicaid had paid for her daughter to care for her mother in the home and Medicare now wanted that money back. That sounds unfair and wrongheaded.
The prospect of such clawbacks prevents some low-income older adults from receiving necessary care, even if they’re eligible.
On the other hand, the prospect of estate recovery undoubtedly discourages some families from turning to Medicaid until they absolutely have to, and that’s a good thing.
Medicaid estate recovery is unpopular. State don’t like going after Grandma’s house, but the federal government makes them. States argue that it doesn’t really recover enough to justify the effort. Representative Jan Schakowsky (D-IL) hopes to do away with estate recovery:
“This is a really harmful and cruel program,” Ms. Schakowsky said. “And it’s not working. The cost of actually trying to get the money could exceed any money that would be returned.”
The New York Times explained:
…an independent agency that advises the federal government and states on Medicaid issues reported in 2021 that states collected $733 million through estate recovery in the fiscal year of 2019.
That amounts to only about one half of a percent of Medicaid’s long-term-care expenditures, according to the agency, MACPAC, the Medicaid and CHIP Payment and Access Commission. Only eight states collected more than 1 percent of expenditures.
Medicaid should not be in the business of protecting inheritances for people who turn to state Medicaid programs to pay for their parents’ long-term care. The problem is: how do you structure these programs in such a way to reward family members who save the state money by caring for their mothers and fathers at home? How do you incentivize offspring to help their parents to stay in the family home months, possibly years longer than they otherwise would be able to?
Years ago, the federal government created a program called The Partnership for Long Term Care, where families who bought LTC insurance could shelter an equal amount of assets and still qualify for Medicaid. The program did not help the woman in the NYT story, however. Her mother had LTC insurance but that didn’t pay for care in the home prior to needing institutional care.
In recent years the federal government has worked to encourage more care in the home by compensating caregivers – often family members – who assist them. It makes little sense to claw back that money in the estate settlement process lest it discourage family caregiving.
Long-term care is an expensive problem that defies an easy solution. Rather than throw out estate recovery, the federal government should look to reform it in ways that boost incentives to care for frail seniors in the home.