How Medicaid Takes Its Money Back After You Die

How the Medicaid Estate Recovery Program Works

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Medicaid, the state-run health insurance program for low-income people, may take its money back from your estate after you die. Known as the Medicaid Estate Recovery Program, Medicaid can recover the money it spent on your healthcare from your estate.

Although the idea of Medicaid taking money that otherwise would have gone to your heirs is distasteful, it becomes more palatable when you look at the reasons behind the MERP program. Since Medicaid is funded by federal and state taxpayers, the goal of MERP is to lower Medicaid costs. If it can recover part or all of the money it spent on your healthcare, it saves taxpayers money.

If Medicaid is paying for your long-term nursing home care, it’s likely thanks to Medicaid that there will be any estate left to recover funds from. Without Medicaid coverage, you may have had to sell your house and other valuables to pay for your care, in effect liquidating your estate while you’re alive to pay for your long-term care.

Whose Estates Are Subject to MERP?

The federal government has general guidelines for MERP, but specifics vary from state to state. The basic federal guidelines place your estate at risk if you’re at least 55 years old when you receive Medicaid, or if you’re permanently institutionalized at any age.

This doesn’t mean your estate is safe if you’re less than 55 when you receive Medicaid, or if you’re not permanently institutionalized. States can also recover funds from the estates of Medicaid recipients that don’t fit into either of those categories. But, if one of those categories describes you, it’s certain that Medicaid will at least consider your estate for MERP.

What Assets Does MERP Take?

All states try to recover Medicaid money spent on long-term care such as nursing homes. Some states also try to recover money spent on other healthcare expenses. States aren’t allowed to take more money from your estate than they spent on your care.

All states try to recover from estate assets that pass through probate, but some states also try to recover from other assets. States are allowed to recover Medicaid money from assets that avoid probate such as assets that pass through joint tenancy and living trusts.

Since state laws vary, the only way to know for sure if your estate is at risk is to educate yourself about the specifics of your state’s MERP. Although your state Medicaid office can tell you the basics, you may find it helpful to consult a professional specializing in elder law or estate planning.

Whose Estates Are Protected?

States aren’t allowed to make estate recoveries while your spouse is alive, but they can try to recover Medicaid funds spent on your healthcare after your spouse dies. States can’t make recoveries if you have a living child who is under 21 years old, blind, or disabled.

In some situations, states can’t recover funds from the value of your house if an adult child who cared for you is living there. But, these rules are complicated, so if you’re relying on this to protect your house from MERP, you’ll need to consult an estate planning professional or get legal advice.

States must provide for hardship exceptions to MERP. But, each state decides for itself how it defines hardship. The federal government suggests that estates which include small family businesses and family farms be considered for a hardship exception if the income produced from the property is essential to the support of surviving family members.

How Can You Protect Your Estate?

In some cases, you may not be able to protect your estate. In others, advanced planning with the help of an elder law attorney or estate planning professional may shield some or all of your estate’s assets. Or, you may discover that the laws in your state make it unlikely that MERP will try to recover assets from your estate.

Since Medicaid regulations and probate laws vary from state to state, often the only way to know is to seek help from a professional familiar with both the Medicaid MERP program and probate laws in your state.