Estate Recovery Under Obamacare
by Chad E. Nelson, Esq.
Under Obamacare, or The Affordable Care Act (ACA), Medicaid enrollment is set to increase dramatically. Financial eligibility for the program has been broadened to include families below 138% of the federal poverty line in states that elect to expand coverage.* For states that opt in to ACA’s Medicaid expansion, wide discretion has been granted as to how these states will administer so-called reimbursement rules.
Individuals who receive long-term care Medicaid benefits during their lifetime are required to reimburse the state upon death, if their estate contains any items of value. If a Medicaid beneficiary has received long-term care paid for by the state for several years, his or her house will be subject to a lien up to its entire value, if necessary, in order to repay the state upon the individual’s death. Even if no real estate exists, or if the real estate is exempt, other estate assets will be targeted. With average yearly nursing home costs well above the six-figure mark, it doesn’t take many years of Medicaid-funded nursing home coverage to wipe out one’s entire life savings. According to Genworth Financial, the median annual cost for a private room in a Rhode Island nursing home in 2013 was $111,000. In Massachusetts, it was a staggering $133,000!
With expanded Medicaid coverage under the ACA also comes an expanded ability for states to seek reimbursement. States opting in to the ACA’s Medicaid expansion are authorized to collect from all estates of individuals who have received Medicaid benefits after the age of 55, regardless of whether the services received were in connection with long-term care.
What does Estate Recovery Under Obamacare Mean?
This means that for many impoverished individuals in need of basic healthcare, receipt of Medicaid benefits will result in a debt to the state that may be satisfied upon death, regardless of whether the recipient was ever in a nursing home. It is these lower-income individuals who generally do not have the resources to conduct the kind of estate planning that many older, financially comfortable individuals do when they implement a long-term care strategy. Many critics of the ACA fear that this expanded ability of states to seek reimbursement through estate recovery will dissuade many of the people the law seeks to help from signing up. As a result, some states, such as Washington, are considering changing their estate recovery rules so that only estates of persons who received long-term care are included
As we have discussed in past installments of this newsletter, proper estate planning can allow individuals to preserve both real estate and liquid assets for future generations so that they are not subject to Medicaid reimbursement. There are a variety of tools and techniques available no matter what the makeup of one’s estate is.
*Rhode Island and Massachusetts are two of the twenty-six states that have signed on to the ACA’s Medicaid expansion