Legislation introduced to eliminate Medicaid estate recovery

On March 6, 2024, U.S. Rep. Janice Schakowksy of Illinois and chief deputy whip and ranking member of the House Innovation, Data and Commerce Subcommittee, introduced a bill to totally eliminate Medicaid estate recovery. For those affected by the program it was a major move and this was the congresswoman’s second attempt. Although in the current Congress it is admitted that the bill does not have much of a chance, with November elections and possible change in the composition of Congress for next and following years, it might. This is the background.

Medicaid estate recovery is a federal mandate on the states that receive much of their Medicaid funding through the federal government. It requires states to have a program in place to recover some of the funds paid out through the Medicaid program to individuals. Although there are variations from state to state the overall idea is the same. This column will address Pennsylvania’s criteria.

First, Medicaid estate recovery only affects, when it does, Medicaid recipients aged 55 and older. Medicaid that is paid on behalf of persons under age 55, for instance, for medical bills and care, is not subject to the program. As a concept, estate recovery is a little understood idea and is more likely to affect those with minimal assets and less ability to pay. This also means these same persons are, generally speaking, less likely to seek proper legal advice in advance.

However, because the rules are extremely confusing, confusion is not limited to lower income persons. Almost anyone whose older family member received Medicaid could be affected. This is where consultation with an experienced elder law attorney can be extremely important and, because of the complexity, mistakes can be made.

Estate recovery relates only to probate assets. If property passes automatically to a survivor, such as the owner of a joint account, it is not subject to estate recovery. Also, life insurance proceeds where the beneficiary of the policy is an individual are not affected. Estate recovery relates both to Medicaid recipients who received nursing home care under the Medicaid program and those who received help under Home and Community Based Services which would mean the Aging Waiver program at home/Community Health Choices.

Often, the greatest concern regarding Medicaid estate recovery is ownership of the house. If the family residence is titled in the name of the decedent and the decedent received Medicaid during lifetime, a claim can be made by the government as a creditor of the estate at the time of the Medicaid recipient’s death. This is not generally understood and is where many mistakes are made. Although the house is exempt during lifetime and no claim against it can be made during life, it can then become an asset of the probate estate on death and subject to the government’s claim.

It might be that a family member could believe in order to avoid estate recovery; the property should be retitled so there is no estate. That can also be a problem. Again experienced professional advice is needed. Retitling a property in joint name would result in a “gift” of half of the value of the property and would cause the Medicaid recipient during life to lose benefits.

Retitling the property into the name of a family member would result in loss of benefits unless an exception such as the “caretaker child” exception applies. Under caretaker child if an adult child of the Medicaid recipient or expected Medicaid recipient has cared for the parent for at least two years and lived with the parent in the affected residence such that the parent did not need to move to skilled care then she/he can receive the property without Medicaid estate recovery being a problem at a later date and without Medicaid penalties, assuming all requirements are met.

Where a property is jointly titled with a spouse and the husband or wife needs to go to a nursing home there is no problem with estate recovery for the house if the nursing home resident is the first to die even if the nursing home resident was receiving Medicaid and even if the nursing home resident was over 55 years old. With joint titling, the house is not part of a probate estate. Also, transfers between spouses are permitted during lifetime.

Elimination of estate recovery altogether could eliminate many of these thorny questions altogether.

Janet Colliton is a Certified Elder Law Attorney by the National Elder Law Foundation and member of the Pennsylvania Association of Elder Law Attorneys. She limits her practice to elder law, life care, special needs, guardianships, estate planning, estate administration, real estate, and retirement. Colliton Elder Law is located at 790 East Market St., Suite 250, West Chester, 610-436-6674, colliton@collitonlaw.com. She is with Jeffrey Jones, CSA, co-founder of Life Transition Services LLC, a service for families with long term care needs.