Article By K. Gabriel Heiser
Here’s a typical scenario I’ve seen play out: You’ve met with your elder law attorney, you’ve come up with a plan of action, time has gone by, and your parent has entered the nursing home, with Medicaid paying the full cost. Your family members have managed to preserve virtually all of their assets through careful planning, so you feel that the lawyer’s fee was well worth it!
A number of years go by and your parent has now passed on to a better place, but before you’ve finished grieving you get a letter from the state Medicaid Recovery Unit requesting repayment of every dime they paid out on your parent’s behalf! You’re depressed, angry, confused. You stare at the paper and can’t believe it. “I thought we were all set, that once Mom was on Medicaid we didn’t have to worry about that any more….Can this be correct?” you ask your siblings.
Unfortunately, the answer is “Yes.” What you have just been confronted with is something called Medicaid “estate recovery.” Essentially, it requires repayment of the entire amount of Medicaid benefits that were made during your family member’s stay in the nursing home.
Prior to 1993, such estate recovery was optional—a state could implement it or not. However, in that year a new federal law was passed (known as OBRA ’93) that mandated that every state must seek estate recovery from its Medicaid-receiving residents, following their deaths.
In essence, while you thought you had qualified your family member for a government handout, all you’ve really received is an interest-free loan. And upon your family’s member’s death, the state wants its loan paid back.
Now if you’re sharp, you may be thinking “Wait a minute…if someone qualifies for Medicaid, they have to be essentially broke. So where exactly is this money coming from to repay the state?” That’s a good question, and the good news is that if your family member died owning nothing, then indeed the state is out of luck. It can’t go after the kids’ money. There must be some assets that the nursing home resident had a legal interest in, at the time of death, in order for the state to be repaid.