Before using Medicaid for long-term care, it’s essential to understand the impact and implications on a person’s estate entering long-term care. It is important to note each state has variations in laws related to estate recovery. Some states, such as Missouri, are considered “probate only” states, wherein the law is slightly different. Each state has its rules and regulations regarding the Medicaid Estate Recovery Program (MERP), so it’s essential to fully understand the details before long-term care.

What Is the Medicaid Estate Recovery Program (MERP)?

The Medicaid Estate Recovery Program, or MERP as it’s abbreviated, is Medicaid’s program wherein Medicaid can seek reimbursement for long-term care costs paid out to a Medicaid member’s beneficiary. Costs may include things such as nursing home care, community and home-based services, hospital care, prescription medications, and much more.

It’s also important to understand Medicaid cannot request more than the long-term care costs paid out. If the long-term care costs actually expended on a recipient totaled $200,000, for example, then Medicaid cannot seek more than $200,000 in their request to recoup the costs. The law is specific and is closely monitored and regulated to ensure only the actual cost of long-term care is recoverable through MERP. Of course, it is also possible for them to request other fees for services related to long-term care. Each case is examined closely and will be determined based on its actual costs.

A typical estate may include cash, savings and checking accounts, stocks and bonds, and other funds in a qualified income trust. All remaining funds and any irrevocable funeral trusts or items of value (including vehicles, RVs, boats, and homes) are often exempt from the asset limits while the recipient is still alive; however, upon their death, these assets are no longer exempt. Typically, although not always, life insurance policies are exempt from estate recovery if the beneficiary is named other than the estate.

How Did the Medicaid Recovery Program Begin?

In 1993 the Omnibus Budget Reconciliation Act (OBRA) was put into effect for all states. The act requires every state to have a Medicaid estate recovery program to recoup funds paid out for long-term care for any person over 55 or older. For individuals under the age of 55, there is an exception. The exception indicates a care facility must permanently institutionalize the recipient. 

Before OBRA, each state made a discretionary determination on estate recovery for long-term care costs. The state where the recipient resides determines the rules on any attempt to recover long-term care costs. One such example is some states may try to recover costs other than long-term care.

While it may seem unfair to the heirs to give a portion of the estate to the MERP for the care of their loved one, the government put the process in place to help alleviate heirs having to repay Medicare for services rendered. Any funds collected through the Medicaid estate recovery program go back into the Medicaid program to cover the cost of care for other recipients. If the beneficiary is a spouse without any means to care for themselves, Medicaid cannot move forward with estate recovery until the beneficiary dies.

There are also specific guidelines regarding disabled children, blind children, children under the age of 21, siblings who have an equitable share in the estate, and an adult child who cared for the parent before the parent entered into long-term care their care and support.

How Does Medicaid Estate Recovery Work?

All states must follow the laws related to Medicaid and the MERP in recouping funds paid for long-term care. Upon the death of a Medicaid recipient, Medicaid will send a letter to the estate’s executor or a beneficiary of the estate. The letter asks for reimbursement of the long-term care costs previously paid out to the deceased for their care at the long-term care facility. They may also request other fees related to the care of the person at the long-term care facility. The letter is to inform the family Medicaid intends to file their claim of repayment. It is against the law for the Medicaid agency to claim more than the amount paid out for long-term care.

Not every estate will go through probate. However, those who do will be subject to Medicaid estate recovery to reimburse Medicaid for the monies paid out for the decedent’s long-term care. It’s important to understand each state has different rules and regulations regarding MERP. Additionally, spouses and “tenants in common” are treated differently depending upon the state in which the decedent resided. Missouri, for example, is a “Probate Only” state. For those living in “probate only” states, specifics can help protect their assets for their heirs. Other states will have other laws wherein the laws are written and executed differently.

What Is the Recoupment Process?

Every state will try to recover monies for long-term care. Some states will also attempt to recoup funds for other healthcare expenses. States using Medicaid-managed care in place of paying directly for the medical needs may use the recoupment process to recover all or a portion of the money spent on long-term care services.

The state will first send a letter to the decedent’s beneficiary or executor of the estate detailing the recoupment process. At this point, there are a few options to ensure the estate remains intact. It is also legal for a state to recover costs via a living trust and avoid probate. There are many variables to consider, and each case and each state is slightly different.

Can Medicaid Put A Lien on Your Home?

Depending on the specific state’s policy, Medicaid may place a lien on any property the decedent owns. During the person’s lifetime, the state may determine it’s in the state’s best interest to place a lien on the person’s property to recoup their long-term care investment during the decedent’s lifetime. When the property is sold, before the decedent’s death or shortly after, the state will collect its portion of the lien from the sale proceeds just as any other lienholder would.

In a “Probate Only” state, this isn’t how it works. The laws are particular on what can and cannot have a lien placed upon it. The only way a lien would work here would be if the estate had to go through probate.

When are Assets and Estates Subject to MERP?

Every state will utilize MERP to recoup costs of long-term care Medicaid has paid out. There are many variables related to the program. Typically, the process begins with a letter to the executor or beneficiary of an estate detailing the MERP process and then attempting to recoup the costs paid out to long-term care. Any decedent age 55 or older and who resided in long-term care utilizing funding from Medicaid is subject to this process.

What Estates Are Exempt and How Can I Avoid Estate Recovery?

Sometimes, it is not possible to protect an estate. Other times, by utilizing advanced planning and with the aid of an elder law attorney or estate planning pro, it may be possible to shield some or all of the assets in the estate. If, in the future, the person requires Medicaid and Long-term care, a portion of the cost of the long-term care services may be able to be protected from an estate recovery process.

Additionally, a surviving spouse, a child under the age of 21, siblings who share in the estate, adult children who were caregivers to the parent for a specified amount of time, and other varying factors may also help protect the estate from the MERP. It is essential to fully understand each situation as these variables may change (the surviving spouse’s death, for example) the recovery process.

How Often Is MERP Enforced?

Every state has a MERP and has to attempt the reimbursement process for all long-term care costs. Medicaid can enforce the MERP regardless of which state a long-term care recipient resides. However, it’s worthy of note to understand some extenuating circumstances wherein the state is not allowed to seek out reimbursement of the estate. These may change as the situation changes, so it’s imperative to keep that in mind when considering how to “save the estate. As children age and if the living spouse passes on, the circumstances would have changed and changed the entire situation. These specific circumstances can leave the MERP in a holding pattern may include any or several of the following specifics: 

• A Spouse is still living and residing in the home.
• The decedent has a child who is not yet 21 years of age.
• The decedent has a child who is disabled per Social Security regulations (this includes blind children).
• A brother or a sister has equity or ownership in the home and moved in at least one year before the decedent was in long-term care.
• An adult child resides in the home, provides care for the parent, and resided there at least two years before the parent goes to a long-term care facility.

There are also exemptions for Alaska Natives and for Native Americans that are specific to their status. If the estate sale would cause undue hardship to the nature of a business or if the sale would leave the family member destitute, may utilize further exemptions to prevent the sale of the property to recoup the MERP.

How Can I Protect My Assets from MERP?

Those who wish to protect their estate and assets for their heirs should consult with an elder law attorney experienced in Medicaid law and probate laws in the specific state the recipient resides. States such as Missouri have “probate only” laws that may also make it a bit easier to protect one’s assets by working with an attorney to keep their assets out of probate. There are many contributing factors in protecting one’s assets from estate recovery. At Paths Elder Law, we have been working with seniors and their families to protect them from unforeseen issues due to aging. We have had the privilege to work with hundreds of Missouri residents in helping them to protect their future and their loved ones. If you or someone you know needs assistance navigating Medicaid eligibility, benefits, or estate recovery, contact us to schedule an appointment. We are here to help you secure your future.