Friday, September 17, 2010

Medicaid Estate Recovery - A Medicaid Death Tax

Written by Jeffrey A. Marshall, CELA*

While Washington and the Media debate what to do about the Federal Estate Tax, another even more pernicious death tax goes unnoticed by lawmakers. Medicaid Estate Recovery is a federal mandate that requires states to recoup the costs of long term care paid by Medicaid. 

Medicaid, not Medicare, is the biggest government source of payment for long term care.  Most people who reside in nursing homes have part of the cost of their care paid by Medicaid.  And many frail seniors who reside at home with help from their family also get some assistance from Medicaid.   

If you are old and need financial help to meet your care needs, the Government wants your home or farm when you die.  

In a curious exercise of age discrimination, the recovery program only applies to people who are over age 55. Essentially, estate recovery turns government financial help to frail seniors of modest means into a loan program with collection taking place at death. If Medicaid helped pay for any of your care, your estate will be forced to repay the government after you die. 
Estate recovery is a Medicaid “death tax” imposed only on the elderly. The program has been referred to as “picking the bones of the poor,” and “sucking the last ounce of blood from the corpse.”

Because most assets must be spent before a senior becomes eligible for Medicaid, recovery efforts focus on real estate – mainly the home or family farm.  Although states bear the costs and burdens of collection, most of the money collected goes to the federal government.   

Estate recovery was first mandated by the federal government in 1993.  States are given some discretion over the scope of the assets that will be subject to recovery, although, at a minimum,  recovery must include collection from the probate estate of the recipient of Medicaid.  Most states have expanded recovery beyond the minimum requirements. 

Here is an example of how estate recovery works. 
When John came back from Korea he took over working the family farm.  Eventually, John and his wife Mary inherited the farm from John’s parents.  John and Mary were always “dirt poor.”  But they worked hard their whole lives and raised two fine sons.  They were proud when both of the boys received degrees in Agriculture from Penn State.  They were even more proud when both of the boys came home to help their father work the farm.  
In 2000 Mary’s health began to decline due to Parkinson’s disease and dementia.  Everyone in the family pitched in to care for Mary and keep her home.  In 2003, after 3 years of struggle, the family needed some outside help.  They applied for home care that was paid for in part by Medicaid.  This extra help, combined with the ongoing care by John and the boys and their wives, allowed Mary to stay at home for another full year. 

In 2006 John died of a heart attack. Without John's support in caring for Mary, the family was no longer able to care for Mary at home.  She moved to a local nursing facility.  The family didn't have the cash to fully afford the nearly $8,000 a month cost and Medicaid benefits were needed.  

Mary died in January 2009.  She was 84.  Three weeks later her sons received a letter in the mail from the Government.   The letter said Pennsylvania was owed $171,386 for the Medicaid that was provided for Mary’s care, both at home and in the nursing facility. The boys are going to have to find some way to pay off this state lien.  But they don't have this kind of money. Most likely, the farm will have to be sold.  

In some cases, the fear of losing their home or farm to estate recovery deters seniors from getting the care they may desperately need.  Failing to provide needed care puts both the senior and caregiver at risk and is likely to ultimately increase the cost of care.   

These are tough times for all of us, including the state government.  But helping people get the care they need at the end of their lives should not give the government the right to take our property.  Much more than money is at stake in the battle over estate recovery. Thousands of families are struggling, often magnificently, to do the right thing for their loved ones.  We need to support our families and caregivers, not take their property.   

Jeffrey A. Marshall is certified as an elder law attorney (CELA) by the National Elder Law Foundation. He is licensed to practice law in Pennsylvania. Jeff can be contacted at or by calling 570.321.9008. More information read Jeff's article


Nathan J. Forck, Attorney at Law said...

Fantastic article Jeff! Do you have any stats on what % of estate recovery goes to feds vs the state?

Jeff Marshall said...

I believe the Federal Government gets reimbursed in proportion to its contribution. The federal contribution is based on the FMAP (Federal Medical Assistance Percentage) for the particular state. I recently posted an article about the FMAP:

gmkjr said...

Great article, Jeff. But I have one question. If the cost of care for the elderly is not met by their families, and the government pays instead, who should be ultimately responsible? Should the government be left holding the bag, or should the assets of those receiving care be ultimately responsible? I think it has to be one or the other, in the absence of long term care insurance. But what is truly pernicious is that the government may try to recover "capitation costs," even if the elderly person never received that much care. And that works as a huge wealth transfer from the impoverished elderly to major insurance companies.

Anonymous said...

Does the "Recovery" make any allowances for "social security dependent" family members who live in the household with the elderly person who receives the Medicade care? or are they out of a home once the recipient dies?

Mark said...

My Father owns a home and he paid less than $7,000 for the whole house.But that was with Housing opportunities commission.They gave him that kind if a deal.I called a licensed and certified appraisal guy and he said there was not enough data to appraise the house but the State tax assessment is $153,00.He needs Medicaid but we cannot lose the house other family live there and we're helping him as well.Any suggestions.I live in Maryland.How likely is it they will come after his house.

katydid said...

Love, love, love this article! The minute a 55-plus Medicaid recipient passes on, the state Medicaid asset recovery team screams, "Cash On Delivery!" Wow! Thanks!