Medicaid Estate Recovery Program: Rules, Limits & Variations by State
The Medicaid Estate Recovery Program is how states are paid back by Medicaid Long Term Care beneficiaries after their deaths. Medicaid Long Term Care pays for nursing homes and Home and Community Based Services for low-income people who are older or have chronic illnesses, and the law requires that after death the beneficiary’s estate reimburse the state for the price of that care. There are exceptions described below, but MERP targets a deceased beneficiary’s estate, usually the home.
Medicaid Estate Recovery Programs Explained
The Medicaid Estate Recovery Program is required by law in every state. This means someone receiving Medicaid Long Term Care usually must repay the program after death. The services one receives from Medicaid while still alive include all the expenses of living in a nursing home; getting help with activities of daily living in one’s own home via waivers or Aged, Blind and Disabled Medicaid services; prescription drugs; and much more. These services can be expensive, and MERP is designed to allow the state to recoup those costs, though the details will differ depending on the recipient’s state of residence.
Usually when someone has been on Medicaid up until the end of their life, the home is the last remaining thing of value after death. This is not always the case, however. Less often, Medicaid will recover other parts of the estate after death, including:
– Money in checking and savings accounts
– Remaining funds in Qualified Income Trusts
– Remaining funds in irrevocable funeral trusts
– Items of value including vehicles
Can the Home be Exempt from a Medicaid Estate Recovery Program?
Without Medicaid planning strategies, the home is not exempt from MERP after death. This can be somewhat confusing when one considers that when the recipient was alive the home was exempt from Medicaid’s asset limit. So: The home is exempt (not counted) when determining assets at the time of applying for Medicaid benefits, but it is not exempt when the state comes to collect reimbursement after death.
For details on how to protect the home from Medicaid, including asset protection trusts and Ladybird Deeds, click here.
How Does the Medicaid Estate Recovery Program Work?
After a beneficiary dies, a family member will get a letter from state Medicaid offices asking to be paid back for all long term care costs that were previously paid out for the deceased’s care needs. It is also possible, depending on the state, that family members of someone on Medicaid are required to notify state offices when the recipient dies.
The state cannot take more than it paid out through Medicaid
MERP requires states to seek reimbursement from the dead recipient’s estate following the probate process. In states designated as “expanded,” the Medicaid offices can also go after assets that do not go through probate. “Expanded estate recovery” states can seek reimbursement via assets held by the surviving spouse, life estates, and assets in a living trust. There are more probate-only states than those allowing expanded estate recovery.
This chart shows which states are probate-only states and which are expanded recovery states.
|Medicaid Estate Recovery Program: List of Probate Only and Expanded Recovery States|
|Probate Only||Expanded Recovery|
|New Mexico||New Hampshire|
|New York||New Jersey|
|North Carolina||North Dakota|
How the State Takes a Home (Often Using a Lien)
Medicaid can put a lien on a recipient’s home, but not every state will do this. A lien prevents the sale until debts are paid. This means a Medicaid recipient can’t transfer ownership of a home before death to prevent it from being used to pay back state Medicaid.
A lien will be filed by the state after the recipient moves out, if they are not expected to ever move back in. The lien gets lifted if the recipient moves home or if the home is sold to pay back Medicaid.
Medicaid cannot put a lien on a home if any of the following still live there:
– The recipient’s spouse
– Recipient’s child who is under 21
– Recipient’s child who is disabled or blind
– Recipient’s sibling with partial ownership
The process of selling a home and collecting debts via MERP will often be contracted to an agency outside Medicaid, like a Health Management Service (HMS). The home is put up for sale with a MERP claim on it. Once a buyer is found, the MERP claim must be addressed before the sale can close.
State Variances on How MERP Takes Homes
How a state seeks reimbursement through the Medicaid Estate Recovery Program can vary quite a bit depending on the state. Some states won’t use MERP if the home is valued below a certain amount. Texas, for example, does not try to be reimbursed from a recipient whose estate is valued below $10,000.
Some states waive the MERP process if the cost of Medicaid Long Term Care for the deceased recipient was less than a certain amount ($3,000 in Texas).
For specifics on how your state recoups costs through MERP, contact the closest Medicaid office. (Click here.)
How Often is the Medicaid Estate Recovery Program Used to Recoup Costs?
Every state has a Medicaid Estate Recovery Program and will use it to be reimbursed for Medicaid Long Term Care costs unless certain exceptions apply.
These are the reasons a state Medicaid office will choose not to use MERP to recover costs of Long Term Care:
– The recipient’s spouse is still alive
– The statute of limitations has expired (See below for more on statutes of limitations)
– The deceased has a child under 21
– The deceased has a blind or disabled child
– The sibling exemption applies: This means the sibling has an equal interest in the deceased’s home, but the sibling must have lived there for more than a year before the recipient moved into a nursing home
– The recipient’s adult child lived in the home for at least two years, serving as caregiver, before the recipient moved into a nursing home (Caregiver child exception)
All states have an Undue Hardship Exemption, which means they will not use MERP to recover Medicaid costs if it will result in a problem like homelessness or an inability to live comfortably for the surviving family members. If relatives run a business out of the deceased’s home, for instance, it might be exempt from MERP due to “undue hardship,” but the definitions and exceptions are not uniform, meaning “undue hardship” will differ depending on the state.
Medicaid Estate Recovery Program Statute of Limitations
Not every state has a statute of limitations. In those that do, the statute of limitations caps the amount of time Medicaid offices have to seek reimbursement from a recipient’s estate after their death. The statute of limitations for MERP, in states that have one, is usually one year. After one year following the death of a Medicaid recipient, in other words, the state cannot seek to recover costs from their estate due to the statute of limitations.