HHS Reports Medicaid Estate Recovery Low, Varies from State to State

Published May 1, 2006

As states run their own Medicaid programs, they also handle their own estate recovery collections for Medicaid. States are permitted to try to recoup Medicaid spending by going after recipients’ estates after they die.

In February, the U.S. Department of Health & Human Services (HHS) Office of Assistant Secretary for Policy & Evaluation published a policy brief detailing the difficulties states encounter when seeking to recover funds from recipients’ assets.

The brief, “Medicaid Estate Recovery Collections,” summarizes the estate-recovery mandate, discusses variations in mechanisms used to implement the mandate, and presents a state-by-state analysis of collections from 2002 through 2004.

According to the study, data about the size and numbers of estates affected are not readily available. Given the small amounts recovered compared to total Medicaid spending, the report concludes, Medicaid estate recovery is relatively rare. A previous HHS study conducted in Massachusetts–a state with above-average collection rates, a total Medicaid population over 1 million, and a Medicaid nursing home population over 33,000–reported completion of the claims process for just over 1,600 claims on estates in 2003.

Half-Hearted Efforts

The current HHS brief illustrates “why most assets disappear before state Medicaid programs’ half-hearted recovery efforts, which are further hamstrung by arbitrary federal rules, are even attempted,” said Stephen Moses, president of the Center for Long Term Care. “One couldn’t ask for a better argument to reduce Medicaid’s outrageously high asset exemptions and exclusions so that resources are spent for quality long-term care in the private market before people become dependent on public welfare programs. Such programs are often unequipped to operate business-like recovery programs.”

Kansas, Minnesota, Oregon, and a handful of other states operate relatively successful Medicaid estate recovery programs “in spite of the obstacles put in their way by federal regulations and Medicaid planners,” Moses said.

Mark Merlis, an independent health policy consultant writing for Georgetown University’s Health Policy Institute, noted in Long Term Care Financing Project, published in March 2005, that states are looking at several ways to balance state aid with taxpayers planning to pay for their own long-term care.

“As the nation considers ways of meeting growing costs for long-term care services, there has been growing interest in the possibility that older people without other financial resources could draw on their home equity to help pay for their own care,” Merlis wrote.

One way to access equity for this purpose is a “reverse mortgage, under which a lender advances money to an older person in return for a future claim on the home.” Merlis pointed out that “some older people with functional disabilities might be able to use proceeds from a reverse mortgage to meet costs for personal care, home modifications, or other assistance needed to remain in the home. Those not yet in need of assistance could use the funds to pay premiums for a private long-term care insurance policy.”

State Variances

According to the brief, there are several reasons for the wide divergence in states’ reported estate recovery activities.

One is how they implement federal recovery options and other state policy choices, such as exemption of certain assets. The effect of the Federal Medicaid Matching Percentage rate–how much of the total amount recovered represents the federal match and, therefore, must be returned to the federal government–may inhibit states from seeking repayment from Medicaid recipients. According to the brief, states have varying ways of doing this, including the exclusion of “certain types of real property or an amount to allow for burial of the deceased Medicaid recipient), reducing, possibly substantially, the amount of assets remaining for the state to recover.”

Another element creating variations is how state laws interact with Medicaid provisions. For example, some states put certain homestead property beyond the reach of Medicaid estate recovery or other claimants against deceased persons’ estates. Also, administrative systems and actions taken by individuals to shelter their estates through estate planning might make recovery more difficult.

Susan Konig ([email protected]) is assignment editor of Health Care News.

For more information …

“Medicaid Estate Recovery Collections,” published in September 2005, is available online at http://aspe.hhs.gov/daltcp/reports/estreccol.htm.

“Medicaid Liens and Estate Recovery in Massachusetts,” published in April 2005, is available online at http://aspe.hhs.gov/daltcp/reports/MAliens.htm.