If you’re helping an aging parent navigate Medicaid because they don’t have long-term care insurance or you think you’ll need it yourself someday, it’s important to understand how the program works.
Medicaid is a government program used by Americans to pay for nursing home and long-term care. The Medicaid Estate Recovery Program (MERP) is used to recoup costs paid toward long term care, so that the program can be more affordable for the government, says the article “What is Medicaid Estate Recovery?” from kake.com. Beneficiaries of Medicaid recipients are often surprised to learn that this impacts them directly.
Medicare was created to help pay for healthcare costs of Americans once they reach age 65. It covers many different aspects of healthcare expenses, but not costs for long-term or nursing home care. That is the role of Medicaid.
Medicaid helps pay the costs of long-term care for aging seniors. It is used when a person has not purchased long-term health care insurance or does not have enough money to pay for long-term care out of their own funds.
Medicaid is also used by individuals who have taken steps to protect their assets using trusts or other estate planning tools.
The Medicaid Estate Recovery program allows Medicaid to be reimbursed for costs that include the costs of staying in a nursing home or other long-term care facility, home and community-based services, medical services received through a hospital when the person is a long-term care patient and prescription drug services for long-term care recipients.
When the recipient passes away, Medicaid is allowed to pursue assets from the estate. That often varies by state, but for the most part it means any assets that would be subject to the probate process after the recipient passes. That may include bank accounts, real estate, vehicles, or other real property.
In some states, recovery may be made from assets that are not subject to probate: jointly owned bank accounts between spouses, payable on death bank accounts, real estate owned in joint tenancy with right of survivorship, living trusts and any assets a Medicaid recipient has an interest in.
An estate planning attorney will know what assets Medicaid can use for recovery and how to protect the family from being financially devastated.
While it is true that Medicaid can’t take your home or assets before the recipient passes, it is legal for Medicaid to place a lien on the property. Let’s say your mother needs to move into a nursing home. Medicaid could place a lien on the property. If she dies and you inherit the home, you’ll have to satisfy the lien before you can sell the home.
Heirs need to anticipate inheriting a smaller estate. Medicaid eligibility assumes that recipients are low income or have few assets to pay for long term care. However, if parents are able to leave some amount of assets to their children, the recovery program will shrink those assets.
Strategic planning can be done in advance by the individual who may need Medicaid in the future. One way to do this is to purchase long-term care insurance, which is the strategy of personal responsibility. Another is removing assets from the probate process. Married couples can make that sure all assets are owned jointly with right of survivorship, or to purchase an annuity that transfers to the surviving spouse, when the other spouse passes away. An estate planning attorney can help create a Medicaid Asset Protection Trust, which may remove assets from being counted for eligibility.
Speak with an elder law attorney to learn how to prepare for yourself or your parent’s future needs. The earlier the planning begins, the better chances of successfully protecting the family. It is important you visit with an experienced and qualified elder law attorney. A good start would be visiting with an attorney who is designated as a Certified Elder Law Attorney by the National Elder Law Foundation, the only program that is accredited by the American Bar Association. Legacy Law Firm has the only Board-certified Elder Law attorney in South Dakota.
Reference: kake.com (Feb. 6, 2021) “What is Medicaid Estate Recovery?”