Q: Does the Affordable Care Act allow states to confiscate the estates of seniors on Medicaid when they die?
A: No, but a 1993 federal law requires states to recover Medicaid costs for long-term care from the estates of deceased Medicaid beneficiaries over the age of 55.
FULL QUESTION
As The Seattle Times notes: “If you’re 55 or over, Medicaid can come back after you’re dead and bill your estate for ordinary health-care expenses.” Is this in/part of the Affordable Care Act? Does Obamacare and the Medicaid expansion allow states to confiscate the estates of seniors when they die?
FULL ANSWER
The Seattle Times published an article on Dec. 15, under the headline “Expanded Medicaid’s fine print holds surprise: ‘payback’ from estate after death,” that said: “If you’re 55 or over, Medicaid can come back after you’re dead and bill your estate for ordinary health-care expenses.” The Times is right that the state of Washington has this power, but it was not in the “fine print” of the Affordable Care Act (as the story itself makes clear).
All states have had the option since Medicaid began in 1965 to recover some Medicaid costs from recipients after they die, as the Department of Health and Human Services explains in a 2005 policy brief. In 1965, it was optional and states could only recoup Medicaid costs spent on those 65 years or older. That changed in 1993, when Congress passed an omnibus budget bill that required states to recover the expense of long-term care and related costs for deceased Medicaid recipients 55 or older. The 1993 federal law also gave states the option to recover all other Medicaid expenses.
The Affordable Care Act did nothing to change existing federal law. It did, however, expand the number of people who are eligible for Medicaid, so there will be more people on Medicaid between the ages of 55 and 65, and, therefore, potentially more estates on the hook for Medicaid expenses after the beneficiary dies.
The gist of the Times story went viral in the blogosphere, where some blamed the ACA and/or questioned the motives of the Obama administration for expanding Medicaid. One blog post on the conservative Western Center for Journalism website — which carried the headline, “Obamacare Shocker: Strip Assets From Dead Seniors” — accused the administration of “deliberately turning the dead into cash cows.”
Medicaid Estate Recovery Program
Let’s first look at the origin of the recovery program. The HHS policy brief on state recovery programs said: “Since the beginning of the Medicaid program in 1965, states have been permitted to recover from the estates of deceased Medicaid recipients who were over age 65 when they received benefits and who had no surviving spouse, minor child, or adult disabled child.” Medicaid is a joint federal-state program that provides health care for the low-income and long-term care for the low-income elderly and disabled. The cost of long-term care, such as nursing home or community-based home health care, is substantial, and it is largely paid for by Medicaid. The HHS brief said Medicaid in 2002 paid “nearly half of the total amount spent on nursing homes.”
A March 1989 report by the General Accounting Office (now the Government Accountability Office) said that 21 states at the time established optional recovery programs, which the GAO found successful in offsetting the costs of long-term health care for Medicaid recipients. GAO recommended making the program mandatory and expanding it to include the estates of surviving spouses, not just deceased beneficiaries.
GAO, March 7, 1989: GAO believes the Congress should consider making mandatory the establishment of programs to recover the cost of Medicaid assistance provided to nursing home residents of all ages either from their estates or from the estates of their surviving spouses.
Congress rejected the idea of taking from estates of surviving spouses, but it did make it mandatory for states to recover the cost of long-term care (such as nursing home care or home health care) in the Omnibus Budget Reconciliation Act of 1993. That law also reduced the age of deceased recipients whose estates are subject to the recovery from 65 or over to 55 or over. Congress kept the prohibition on estate recovery in cases when there is a surviving spouse, a child under the age of 21 or a child of any age who is blind or disabled. In the cases of property, the law also carved out other exceptions for adult children who have served as caretakers in the homes of the deceased, property owned jointly by siblings, and income-producing property, such as farms.
All states now have Medicaid Estate Recovery Programs, although some were slow to create them. Michigan was one of the last to create one in 2007 after the federal government threatened to withhold federal Medicaid funds. A blog post on the website of a Michigan law firm that carried the headline “Now They Can Take Your Home: Estate Recovery Law Arrives in Michigan” said the state could have lost $5 billion in Medicaid funds.
The amount of money collected by states varies greatly, depending on how the state structures its program and how vigorously it pursues collections, according to Kristina Moorhead, state legislative representative for AARP. States recovered $347.4 million in fiscal year 2003, ranging from a low of $86,000 in Louisiana to a high of $54 million in California, according to a 2005 AARP report. The total recovered was 0.13 percent of total Medicaid spending for the year. Moorhead told us that although federal law allows states to recoup all of their Medicaid costs, not just costs for long-term care, only 25 states do so.
AARP, June 2005: OBRA ’93 allows recovery for “any items or services under the state plan,” going beyond what is required by federal law (nursing facility services, home- and community-based services, and related hospital and prescription drug services). Twenty-five states reported recovery of “all other items under the state plan”; 10 states recover “some other items”; 10 states do not recover for any other services beyond what is required; and 1 state was DK/NR. A few states reported specific additional items for recovery as follows: ambulance, funeral, and burial costs (Illinois); costs of technological assistance such as motorized wheelchairs and readers for eye gestures (Kansas); transportation, dental services, and other services (Minnesota, New Jersey); physical therapy (Nevada); durable medical equipment, dental and vision services (Ohio); and PACE (Program of All-Inclusive Care for the Elderly) (Tennessee).
The Seattle Times said that the state of Washington expanded its program in 2004 to cover “all medical services for Medicaid clients.” That was the case when the Times wrote its story. But the state has since changed the rules to limit the program to what is required under federal law: the recovery of state Medicaid expenses for long-term care and related costs.
Enter the Affordable Care Act
Moorhead, of AARP, said the Affordable Care Act did not change the federal law governing the Medicaid Estate Recovery Program. In fact, nothing changes for seniors 65 or older who apply for and receive Medicaid to pay for long-term care. (Medicare covers some costs for up to 100 days of long-term care, such as a stay in a nursing home. Beyond that, low-income seniors can apply for Medicaid to cover expenses.)
The ACA, however, does three things that potentially will subject more people between the ages of 55 and 65 and their assets to the Medicaid recovery program:
Mandates that most Americans have health insurance. The law requires Americans, with some exceptions, to purchase a qualified health insurance plan or pay a penalty. The penalty this year will start at $95 per person or 1 percent of household income, whichever is higher, and increases until it reaches 2.5 percent or $695 per person in 2016.
Expands eligibility for Medicaid. Medicaid has been largely limited to low-income children, parents, pregnant women, the disabled and elderly. “While states have increasingly expanded eligibility for children over time, eligibility for parents remains much more limited, and only nine states provide full Medicaid coverage to low-income adults without dependent children,” according to the nonpartisan Kaiser Family Foundation. The ACA expanded Medicaid, beginning in January, to include nearly all non-disabled adults under age 65 with household incomes “up to 138% FPL ($31,809 for a family of four in 2012), which would make millions of currently uninsured adults newly eligible for the program,” the Kaiser Family Foundation says. The ACA mandated the expansion, but the U.S. Supreme Court ruled that states can opt out. Half of them so far have done so.
Eliminates assets test from eligibility requirements. As the American Public Health Association explains, Medicaid eligibility “is complicated, and varies from state to state. It involves calculations of income and assets, as well as ‘disregards’ of income and assets that vary for different populations.” But, as AARP explains, the ACA created an “additional set of rules” based on income, specifically Modified Adjusted Gross Income. “[I]mportantly, it doesn’t count assets,” says the APHA.
Those who are eligible for Medicaid under the ACA expansion are not eligible for government subsidies to buy private insurance on state or federal health exchanges, so they have little choice but to accept Medicaid. For this reason, the Western Center for Journalism blog item says the individual mandate provision of the ACA will “force” people into Medicaid and then “strip” them of their assets after they die. “Since this despicable plot was exposed by the Seattle Times, a number of states have vowed to change estate recovery rules as revised by ObamaCare,” the blog post says. (Again, the estate recovery rules were not “revised by Obamacare.”)
The IRS, which levies the penalties for not complying with the Affordable Care Act, says it will provide a hardship exemption for certain low-income people who cannot afford insurance even with the subsidies, and it will provide an exemption for people who are otherwise eligible for the Medicaid expansion but live in states that don’t offer it.
Update, Jan. 15: A Treasury official also told us it is “very unlikely” that someone who refuses to sign up for Medicaid and cannot afford private insurance would be subject to a fine. That person would likely be eligible for one of at least three exemptions, including a financial hardship exemption.
The interaction of the federal Affordable Care Act and existing state Medicaid estate recovery laws is a legitimate issue and something that Medicaid recipients need to understand before they sign up. They should know that the rules vary from state to state, with some states dunning the estates of deceased Medicaid beneficiaries for all Medicaid costs and others just for long-term care. And the rules keep changing. AARP’s Moorhead says so far two states (Washington and Oregon) have changed their rules to limit estate recovery to Medicaid costs related to long-term care, as required by the 1993 federal law.
Elaine Ryan, AARP’s vice president of state advocacy and strategy integration, says the senior group is not lobbying for state changes to the Medicaid Estate Recovery Programs — at least not yet. “This is all so new and we’re still trying to unpack how the different states apply the recovery rules,” she said. “We’re still looking at what makes sense.”
Those who are Medicaid-eligible under the ACA also should know that the 1993 federal law bars estate recovery when there is a surviving spouse, a child under the age of 21 or a child of any age who is blind or disabled. And that there are exemptions that will allow other family members to keep the family farm or home under certain circumstances.
And they should know that the Affordable Care Act didn’t create Medicaid estate recovery rules or revise them. ACA merely expanded access to health care for millions of uninsured low-income people.
— Eugene Kiely
Sources
Ostrom, Carol M. “Expanded Medicaid’s fine print holds surprise: ‘payback’ from estate after death.” Seattle Times. 15 Dec 2013.
U.S. Department of Health and Human Services. Medicaid Estate Recovery. Apr 2005.
Karp, Naomi, et. al. “Medicaid Estate Recovery: A 2004 Survey of State Programs and Practices.” AARP Public Policy Institute. Jun 2005.
General Accounting Office. “MEDICAID Recoveries From Nursing Home Residents’ Estates Could Offset Program Costs.” Mar 1989.
Book, Doug. “Obamacare Shock: Strip Assets From Dead Seniors.” The Western Center for Journalism. 23 Dec 2013.
U.S. Congress. H.R. 2264. Omnibus Budget Reconciliation Act of 1993.
Michigan Law Section 400.112g. Michigan Legislative Website.
Heritage Elder Law and Planning. “Now They Can Take Your Home: Estate Recovery Law Arrives in Michigan.” accessed 10 Jan 2014.
Washington State Health Care Authority. “HCA says state’s recovery policy will be adjusted to protect new Medicaid enrollees.” press release. 16 Dec 2013.
Longtermcare.gov. “Medicare, Medicaid & More.” U.S. Administration on Aging website. accessed 10 Jan 2014.
Healthcare.gov. “What if someone doesn’t have health coverage in 2014?” accessed 10 Jan 2014.
Kaiser Commission on Medicaid and the Uninsured. “Key Facts about the Uninsured Population.” Sep 2013.
Kaiser Family Foundation. “Status of State Action on the Medicaid Expansion Decision, as of December 11, 2013.” accessed 10 Jan 2014.
Flowers, Lynda. “States Can Smooth the Transition from Medicaid to Medicare.” AARP Blog. 21 Nov 2013.
Moorhead, Kristina, state legislative representative for AARP. Phone interview with FactCheck.org. 8 Jan 2014.