30Medicaid routinely pays for nursing home care for seniors who become unable to live on their own before the end of their lives. Medicaid can also pick up the tab for costly medical services which people may need as they age and develop infirmities. The amount of money paid out by Medicaid can be very substantial, and it is an important benefit to seniors and their families.
Unfortunately, many people are unaware that Medicaid is not just a no-strings attached type of government insurance. There are rules in place which allow for estate recovery. Essentially, under these rules, the state can try to recoup some of the money spent by Medicaid on a person's care. The state can take this step to try to regain money spent after the recipient of the taxpayer funds has passed away.
This is called Medicaid estate recovery. It can leave your family with limited or no inheritance if Medicaid estate recovery is pursued in your case- and obviously it should be avoided whenever possible. An elder law attorney with estate planning experience can provide assistance in creating a Medicaid plan to try to ensure that assets are not lost to estate recovery.
USA Today reported on the effects of Medicaid estate recovery, highlighting the plight of one New Jersey family. A 92-year-old woman had passed away, and her children were about to put her New Jersey home up for sale. Unfortunately, they received a bill for $25,347 before the house could be put on the market. The bill was for the cost of the home-based medical care which had been received by their mother over the course of her life. The family was told the state would be placing a lien on the mother's house if the bill was not paid in full.
This news was surprising to the children, as most people are unaware Medicaid has had estate recovery rules in place for more than 20 years. Under these rules, family members of a deceased person person who used Medicaid can be forced to sell off homes and other possessions to try to repay the money Medicaid spent. The state can recover all Medicaid expenses paid out to someone aged 55 or older when receiving the Medicaid benefits.
Nursing homes cost more than $100,000 per year, and the state adds thousands of dollars in administrative fees to bills sent during the estate recovery process, so it is very common for heirs to end up with no inheritance at all after a death because it all has to be sold to pay back Medicaid.
New Jersey is described as "one of the more aggressive states when it comes to seeking reimbursement," and the state has collected close to $40 million from heirs after Medicaid recipients have passed away. The state may soon be able to collect even more cash, as the expansion of Medicaid under the Affordable Care Act has more people receiving Medicaid coverage.
Estate planning can help people to structure ownership of assets to try to avoid Medicaid estate recovery, but it is important to begin early before Medicaid coverage is actually necessary in order to protect the maximum number of assets.