Many states have enacted, or may soon enact, laws or regulations that permit the state to recover against the estates or other property of Medicaid recipients. In other words, if a person received Medicaid benefits during life, the state can demand reimbursement from the estate after death.
New York is the most recent state to issue regulations. Other states that have estate recovery rules include Arkansas, Minnesota, Idaho, California, Tennessee, North Dakota, Nevada, Missouri, Ohio, New Jersey, Iowa and Wisconsin. If your state is not listed, don’t stop reading – it is likely to be added to the list before long.
No one would normally object to such a recovery, except in doing so, the states are undoing hundreds of years of legal precedent. Federal Medicaid law requires all states to implement an estate recovery program, but does not provide specific requirements and guidelines. The problem is that many states have enacted estate recovery statutes that pursue assets that are not owned by the Medicaid beneficiary or their estate after death!
This might include joint accounts, or beneficiary-designated accounts like an annuity, life insurance policy, and even IRAs. Perhaps the most egregious overreach by the states is pursuing homes that were transferred to children prior to qualifying for Medicaid, with the individual retaining the right to live there until they die. Essentially, after a Medicaid recipient dies, states are suing the children (or the person to whom the home was transferred during the recipient’s life), and forcing a sale of the home to reimburse the state for benefits paid.
This should sound extreme to most readers. The law permits a Medicaid applicant to qualify for benefits when they own these assets, but then after death, seeks to take those same assets. Even more disturbing is that for hundreds of years our country has held to principles of common law and contract law, which provide when an individual enters into an agreement or contract, the terms of the agreement are enforceable.
A life insurance policy, for example, is a contract that identifies the beneficiary when you pass away. These new state Medicaid laws permit the states to undo hundreds of years of contract law and pursue life insurance proceeds from a beneficiary. Further, if you retain a life estate in your home, the common law provides that your interest in that home after your death is zero. Many estate recovery rules, however, value a life estate as the value at the moment just prior to your death. States often sue the children or the individuals who survive the Medicaid recipient, to be reimbursed based on a value that does not exist in the law.
We must acknowledge that the government is in the midst of a financial crisis and is struggling to pay all the benefits it offers its citizens. Medicaid is just one of those benefits. But it is troubling that someone can qualify for benefits under the government’s own rules, and then have the government come back and change hundreds of years of precedent, demanding to be reimbursed for something they earlier said you qualified for.
We expect laws like this to apply in more and more states as the financial crisis continues. Are you prepared? Stay tuned to stay ahead of the ever changing Medicaid rules.
