Critics of the Affordable Care Act are seizing on a decades-old provision in Medicaid law to scare lower-income Americans from signing up for health care insurance, warning newly eligible enrollees that the federal government could take their house and other assets once they die.
“I was leaning toward not getting Medicaid, because there is somewhat of a stigma,” Steve Olin, 60, told the Washington Post. “Then, when I heard about the estate recovery, I was really sure.” The paper describes this “little-known aspect of Medicaid” as “the latest anxiety to spring from the health-care law” that is “causing fear.”
But the provision has little to do with reform. In 1965, the federal government permitted states to “recover from the estates of deceased Medicaid recipients who were over age 65 when they received benefits.” The provision was grounded in the rather conservative theory that wealthier individuals should take responsibility for their health care costs and pay back taxpayers for hundreds of thousands of dollars of care. As Washington & Lee law professor Tim Jost put it, “it’s only fair that the state can recover for long-term care if there are significant assets left behind.”
Congress agreed and in 1993, went a step further, requiring states to implement a Medicaid estate recovery program for “deceased recipients who were 55 or older” in cases of nursing home or other long-term institutional services. It also gave states the flexibility to recover assets for other health care services covered by Medicaid. When health care reform passed in 2010, it did nothing to change the law.
Fast forward to 2013. Millions of individuals with incomes below 133 percent of the federal poverty line are applying for Medicaid under the expansion provided in the Affordable Care Act and are now theoretically subject to the recovery measure. “State can seize your assets to pay for care after you’re forced into Medicaid by Obamacare,” HotAir.com warned. Another conservative blog, RedState.com, termed the provision, a “Medicaid asset-seizure bonanza.”
But it’s unlikely that the provision will become “a cash cow for states to milk the poor and the middle class,” as one Washington Times article put it.
First, recovery programs vary tremendously across the country. According to a 2005 AARP report, 25 states recover all services covered under Medicaid, 10 recover items besides long-term care and 10 only recover for long-term services. Newly eligible individuals who live in one of the states with an expansive recovery programs would have to be 55 or older, maintain significant none income earning assets (yet still qualify for Medicaid) and remain ineligible for the provision’s existing exemptions. States are prohibited from recovering assets during the lifetime of the surviving spouse, from a surviving child who is under age 21, or if the deceased sibling or adult child lived in the home continuously for a significant period of time.
That rules out a good portion of the newly-eligible population, Jost says, calling the issue “more an imagined than a real problem.” Still, he concedes that in some instances, seniors with expensive assets could be affected. Some states are adopting new rules asserting that “recovery now applies only to long-term care,” as required by federal law, and the Obama administration is preparing to issue additional clarification.
“You could conceivably have someone a million dollar home that yields no income but is very valuable who applies for Medicaid, and runs up big bills and then dies, and they come after their estate,” Jost said, but pointed out “it’s going to have to be a fairly significant asset to be worth [the state’s] trouble.”
“This is not a very big problem,” he concluded.