01 Apr Medicaid Estate Recovery Kill Bill
U.S. Congresswoman Jan Schakowsky of Illinois has proposed a bill that would end Medicaid estate recovery (Medicaid estate recovery is the process to recoup care costs such as nursing home care, care at home, medications, etc.) from the estate of the deceased Medicaid recipient. Typically, the most common resource that the state seeks reimbursement is from the recipient’s home (although sometimes other exempt resources under Medicaid rules such as cars, mineral interests, businesses essential for self-support, etc. are also pursued).
The congresswoman has proposed the bill for 2 main reasons: 1) She believes it is cruel and creates wealth disparities resulting in more poverty (especially if the home is at risk); and 2) it is ineffective as the states see little return on the process as only approximately 1% of the $150 billion spent annually on Medicaid is recovered. The Medicaid and CHIP Payments and Access Commission (which recommends policy decisions to Congress) has advised that Congress reverse the law mandated in 1993 that required states to implement Medicaid Estate Recovery as a condition for states to get federal funds for Medicaid. The majority of Texas Medicaid dollars comes from the federal government.
The rules of each state differ. Some states have liens (so a home can’t be sold without paying the lien) and some states (such as Texas) only have claims. In Texas, Medicaid estate recovery is only a Class 7 claim (equivalent to credit card debt).
Since Texas is a claim state, it collects only nominal amounts compared to what it spends. There are numerous exceptions to a successful claim for Medicaid estate recovery against a home under Texas including the following:
- Ladybird Deeds and Transfer on Death Deeds
Texas seeks recovery against homesteads that pass through probate (either by will or intestacy). Ladybird (enhanced life estate) deeds and Transfer on Death deeds avoid probate and thus avoids a successful estate recovery claim. It should be noted that if the home is sold during the life of the Medicaid recipient if the recipient is single, then other planning will be needed to retain eligibility since the proceeds are a countable resource. Texas is only one of a few states whereby these types of deeds can be used to avoid a successful claim. - Surviving spouse
A death certificate is all that may be needed to prove there is a surviving spouse which is an exception to Medicaid estate recovery. Furthermore, there is no claim after the surviving spouse dies (unless the surviving spouse is also on Medicaid). - Surviving child is blind or disabled
A letter from the Social Security Administration showing the child is receiving Supplemental Security Income or Social Security Disability is all that is needed to avoid a successful claim. - Unmarried adult child who continually resides in the Medicaid recipient’s homestead for 1 year prior to the decedent’s death
Tax returns, W-2’s, utilities statements, etc. of the unmarried adult child are often required as proof. - Asset protection trusts
This is subject to a 5-year look-back period but is used for those who plan in advance and want to have the ability to sell the home without a Medicaid spend-down (since the sales proceeds remain in the trust which is not countable) and without negative tax consequences if the trust is properly drafted. - Child under 21
A birth certificate will prove the age (under 21) of the child of the Medicaid recipient. - Cost ineffective
If the amount to be recovered is less than $3000 or the resource is valued at less than $10,000 or the cost to sell the property is greater than the value of the property, then the claim of the state would not be pursued. - Undue hardship
If the value of the homestead is less than $100,000 and the income of the beneficiary who is to receive an interest has income that is 300% of the federal poverty level, then there is exemption for undue hardship for that beneficiary to the extent of that beneficiary’s interest.
It should also be mentioned that sometimes it can be proved that the state failed to give proper notice as required by the Texas Administrative Code. Also, sometimes dependent administrations are used to cut off the statute of limitations for a state claim.
Since we are in an election year and very few bills get bipartisan support, it is this author’s belief Representative Schakowsky’s bill will not pass in 2024. However, this could be reintroduced at a later date. Planning for protection of your home should still be considered at this time.
If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.