LIMITING GOVERNMENT SEIZURE OF PRIVATE PROPERTY
From our partners at The Disability & Aging Collaborative
After a loved one dies, some families learn that the government may take the home, savings, or small inheritance they thought would help them stay afloat, to repay Medicaid costs. For grieving families, that notice can come as a painful financial shock. This government seizure of private property, known as Medicaid estate recovery, can strip away what little wealth people with low incomes were able to build during their lives.
This happens because, when certain Medicaid beneficiaries die, federal law requires that states attempt to collect their remaining property from their estate to offset the cost of the Medicaid services they received.1 An estate is everything a person owned when they died—things like their house, car, bank accounts, and other belongings. However, people on Medicaid generally do not have a lot of income or assets, so the amount collected is typically minimal. The populations and services for which Medicaid estate recovery applies are summarized below. Medicaid is the only federal means-tested program with such a policy.2
States also have the option to seize what remains in an Achieving a Better Life Experience (ABLE) account (tax-advantaged savings accounts for people with disabilities) after an ABLE account owner dies through a very similar process known as Medicaid payback.3 States can seize what remains in an ABLE account even from people to whom Medicaid estate recovery would not apply.Counselors and legal aid staff commonly report that their clients decline Medicaid-funded home and community-based services (HCBS) due to the threat of future property seizure. Even so, the Medicaid estate recovery process is poorly understood by the public.4 For family members, it is often a shock to receive a notice that they owe significant amounts of money after a loved one’s death.
Estate recovery disproportionately harms low-income families and penalizes home ownership.5 This policy means the government may take the family farm, the modest home that has been in a family for generations, or what was saved in an ABLE account. States can waive estate recovery due to family hardship, but policies vary across states, and proving hardship requires knowledge of the policy and the process, the ability to compile and submit complex documentation, and often legal assistance to be successful.6
The experiences of families affected by this policy have been captured vividly in video interviews7 and news reports from across the country.8y
For states and communities, the net returns from pursuing people’s private property are limited. Medicaid eligibility is based on having low income and limited resources. Often, the only asset of substantial value in these cases is the home, and government seizure of that resource often harms families and communities.10 Even then, Medicaid estate recovery often does not play a meaningful role in helping finance the Medicaid program.
Total Medicaid estate recoveries offset less than 0.15% of all Medicaid spending.11
Because anything recovered by a state Medicaid program is shared with the federal government,12 at least half of all net recoveries leave the state’s economy.
And estate recovery is complex to administer, typically involving state staff, contractors, courts, family members, and estate attorneys, among others. A significant share of estate recovery revenue goes directly to its administrative costs.13
Application of Medicaid Estate Recovery
For whom does Medicaid estate recovery apply?
States are required to attempt to recover assets from the estates of deceased individuals who received Medicaid who were:
- expected to be permanently institutionalized;
- age 55 or older when they received Medicaid long-term supports and services and related services; or
- those with certain long-term care insurance policies.14
For what costs does estate recovery apply?
Most states seek to recover as much as possible to cover the costs of Medicaid services received. But federal law only specifically requires recovery to offset the costs of nursing facility services, home and community-based services, and related hospital and prescription drug services. Since Medicare does not cover long-term care and most people cannot afford to pay for such care on their own, Medicaid is often the only option for older adults and people with disabilities to receive these needed services. Recovery never applies for Medicaid coverage of Medicare premiums or cost sharing through the Medicare Savings Programs. Additionally, Medicaid payback (529A claims) does not apply to the cost of Medicaid Buy-In premiums paid by people with disabilities.
When does estate recovery occur?
Recovery happens shortly after the Medicaid beneficiary dies, except in a few circumstances. Recovery cannot happen until a surviving spouse passes away and also cannot happen if the deceased beneficiary has a child under the age of 21 or a blind or disabled child of any age, regardless of where the child lives. At a minimum, federal law requires states to pursue recovery for estates as defined by state probate law;15 some states go beyond this.
Who does the estate recovery?
Federal law requires state Medicaid agencies to implement estate recovery. States often use government lawyers or pay private contractors to seize assets.
Can we do better?
While states currently face multiple other demands and financial challenges, rethinking the ways in which states seize private property to offset Medicaid expenditures can reduce administrative costs and mitigate the negative experiences for people affected.
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