Taking a Look at Medicaid Estate Recovery Advocacy

WHAT IS MEDICAID ESTATE RECOVERY? 

Medicaid Long-Term Services and Supports (LTSS) include long-term nursing facility stays and home and community-based (HCBS) waiver services that provide nursing home level care in a person’s home. Under Section 1917 of the Social Security Act, states must establish a Medicaid estate recovery program to recoup from a deceased beneficiary’s estate any expenses for LTSS services received after turning 55.  It is optional for states to recover the costs from additional Medicaid benefits.  

To recover the costs of services, states may pursue a deceased beneficiary’s estate. An estate includes an individual’s house, money, and valuable objects, and in some states, may include a beneficiary’s trust. Alternatively, the state can place a lien on the beneficiary’s home, wherein the state puts a claim on the equity of the home before the house is sold. Some states do impose liens on the beneficiary’s house if they permanently reside in a nursing facility. 

Federal regulations allow for exceptions to when the state can and cannot recover costs from a beneficiary’s estate. The state cannot pursue a deceased beneficiary’s estate when a surviving spouse, a child under the age of 21, or a blind or disabled child of any age still lives in the home. Additionally, surviving heirs can dispute the state’s action by applying for an undue hardship waiver. Each state determines what qualifies for undue hardship waiver, which are circumstances that lead to the state waiving the estate recovery they pursued. A common reason to be granted an undue hardship waiver is if recovering the cost of the deceased beneficiary services would lead to their surviving heirs needing public assistance.  

Consumers cite several problems with the estate recovery program. The Medicaid Estate Recovery program has multiple criticisms including lack of notification and deterred from using needed health services. Medicaid beneficiaries and their loved ones are unaware that the program exists upon applying for Medicaid benefits. Therefore, surviving heirs are caught unaware that they need to pay the state back for care their loved one received. Even if individuals are aware of the estate recovery program, there is a lack of understanding of how the program operates. Individuals knowing that they may lose their home if they used Medicaid services, have deterred individuals from using much needed LTSS services and other programs. Including programs that do not trigger estate recovery, such as the Medicare Savings Program. Medicaid estate recovery does not apply to the costs that the state pays for Medicare cost sharing under the Medicare Savings Program.  

Importantly, the program can contribute to generational poverty and wealth inequity among people of color. When the state places a claim on a deceased Medicaid beneficiary’s estate, their surviving heirs often sell the family home to be able to pay the state back. This loss of the family home can impact the financial stability of future generations as home ownership is considered an important way to build generational wealth. Additionally, surviving heirs may be able to keep the house if they take out loan or remortgage the house which can impact them financially. This is exacerbated for people of color, who already face racist housing and economic policies.  

MEDICAID ESTATE RECOVERY IN ILLINOIS AND OTHER STATES 

In Illinois, once a beneficiary who receives LTSS services passes away, their estate representative or heirs receive a notice that the state is intending to file a claim. Detailed Information on estate recovery in Illinois is hard to obtain. For example, the Illinois Department of Health Care and Family Services reports that that in FY 2019, Illinois collected $25,949 from an unspecified number of estates.  We have noticed that the number of cases that the state perused have fluctuated in recent years, including a spike in FY2023. From the most completed fiscal year, FY2023 there have been 7,123 cases of Medicaid estate recovery. Out of the 16 hardship waivers submitted in that fiscal year, only 12 were granted.    

Recent changes to the Illinois Medicaid estate recovery program placed limits on when the state could pursue estate recoveries if the beneficiary died on or after July 1, 2022. These limits include not pursuing the first $25,000 of the estate and foregoing estate recovery if the cost of selling the property exceeds the value of the property. Heirs can apply for undue hardship if the estate property is a family business, farm or ranch. Surviving heirs can also qualify for a hardship waiver if it would result in them becoming eligible for government benefits programs such as Food Stamps or Medicaid or, inversely, having access to the full value of the estate would allow the heirs to stop requiring such benefits.  

The detrimental impacts of Medicaid estate recovery can vary across states depending on how aggressively they pursue estate recovery.  For example, in FY 2019 Hawaii collected $31,000 in estate recovery while Iowa collected $26 million.  

EFFORTS TO ELIMINATE ESTATE RECOVERY 

The Medicaid and CHIP Payment and Access Commission (MACPAC) released a report in 2021 that focused on improving equity in the Medicaid estate recovery program. MACPAC recommends making Medicaid estate recovery optional rather than required for LTSS services.  Other recommendations from MACPAC include having the secretary of HSS set a minimum standard for hardship waivers and giving states the option to eliminate estate recovery all together.  

Other efforts to reform estate recovery include West Virginia’s recent unsuccessful attempt to sue the federal government to eliminate the estate recovery requirement. Meanwhile on a federal level Illinois Congresswoman Jan Schakowsky recently introduced the Stop Unfair Medicaid Recoveries Act that would prohibit Medicaid estate recoveries for LTSS services across all states. This bill has 32 cosponsors and currently sits in the committee. On April 30th, Congresswoman Schakowsky spoke before the House Emergency and Commerce’s health subcommittee in a legislative hearing. (Congresswoman Schakowsky’s testimony starts at 4:01:44) She shared that the Medicaid is the only benefit program in the United States that requires costs to be recover. Additionally, most states do not want to administer this program. In her testimony, Congresswoman Schakowsky revealed how one of her constituents was required to pay back $77,000 after her mother passed away. She called for a review of the Medicaid Estate Recovery program due to states recovering only less than 1% of Medicaid spending, while low-income families are paying high amounts of money. Congresswoman Schakowsky also highlighted news articles from the New York Times and the Associated Press on Medicaid estate recovery in her testimony.  

AVISERY’S INTEREST IN MEDICAID ESTATE RECOVERY 

Avisery is investigating how Medicaid estate recovery affects people in Illinois through the work we do with our partners. Advocates need stories on individual experiences with Medicaid estate recovery to help bolster reform efforts. If you have a story on how Medicaid estate recovery has affected you, a client, or someone in your life, please email avisery@ageoptions.org  

 

Posted on September 19, 2024

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