Minnesota Estate Recovery
Estate recovery has been in the news more than usual lately – but what is it? And, why is it in the news?
Medicaid is a federal program that helps provide healthcare services to those who cannot afford them. The federal government sets the basic parameters for the program, but then states administer the program and have some authority to customize it to their state. There are many programs under the Medicaid umbrella, but the one that usually has to do with estate recovery is the program that provides long-term care services to persons over 65. Federal law requires states to recover the value of benefits paid from the estates of people who received long-term care benefits at age 55 or older, which includes nursing home care, home and community-based care, and related hospital and prescription drugs. To recover against the estate of a Medicaid recipient, the county typically files a claim through the probate process or files a lien against real estate owned by the decedent. Federal law also allows, but does not require, states, at their option, to recover all Medicaid benefits paid on behalf of persons 55 and over, not just long-term care services.
Until recently, Minnesota was one of the states that recovered not just long-term care services but all Medicaid services provided to persons 55 and older. But no one really noticed. Why? Because until 2014, to be eligible for recoverable Medicaid services you had to meet strict asset eligibility rules. For instance, for a person to qualify for long-term care services, you cannot have more than $3,000 in available assets. For these folks, estate recovery didn’t seem so bad because there wasn’t much to recover at the end of that person’s life. But in 2014, Minnesota participated in the Medicaid expansion under the ACA (“Obamacare”). This expansion lifted the asset limitation for folks under 65, greatly expanding the number of people who qualified for insurance paid for through Medicaid. Suddenly, many more people were enrolled in a program for which estate recovery rules applied.
In addition, it is not the policy of the Minnesota Department of Human Services (DHS) to notify Medicaid enrollees of the estate recovery program. Furthermore, federal law encourages, but does not require, states to notify enrollees of the estate recovery requirement. Therefore, many people were unwittingly signing up for a healthcare plan that subjected them to estate recovery without ever realizing it, until it was too late. Because the state prepays the projected cost of healthcare on a per capita basis, with adjustments based on age and other demographic data, rather than taking into account the care an individual actually receives, the monthly costs associated with Medicaid participation can be shockingly high. It’s not unusual to see Medicaid recovery claims with monthly costs of $700 to $800 or more, which adds up very quickly.
When some Medicaid recipients learned their assets were subject to estate recovery, they were shocked and called their state representatives to complain, which is how this landed in the news. Due to a grassroots effort, Minnesota’s estate recovery law was modified in 2016. Initially, the law stated that the state could not recover costs other than those associated with long-term care services going back to 2014. But when the state submitted its proposed law to the federal Centers for Medicare and Medicaid Services (CMS) for approval, CMS rejected the limit on the retroactivity provision. So, the law as it is currently in effect prohibits the state from recovering any services other than long-term care services for everyone. Also, the law still only applies to persons who received services at age 55 or older (except for the now-defunct General Assistance Medical Care, for which claims are still valid).
Recently, the Grand Forks Herald reported that the same group of citizens that successfully got Minnesota’s law changed are now fighting to change the law at the federal level. Presumably, this would mean repealing the section of the law that permits states to recover any services under the State Plan, not just long-term care services. Therefore, estate recovery is once again in the news.
But this proposal may not sit well with the roughly 36 states that seek recovery of both long term care and non-long term care services from the estates of Medicaid recipients. The most recent available data show that estate recovery nets over $360 million annually, which sounds like a lot, but is less than 1% of the cost of Medicaid spending on nursing home care. Even so, with how expensive these programs are, and with the current climate of budget cuts and intimations in Washington that Medicaid may be cut or block granted to states, this is a precarious time to suggest to states that they ought to forgo any of these dollars.
So, what does this mean for the average Minnesotan? First, no one should be worried about enrolling in a healthcare program through the state out of fear that their assets would be subject to estate recovery. Unless you are receiving nursing home care or similar long-term care services in your home or in an assisted living facility, you are not subject to estate recovery. Ordinary insurance policies that you can get through the exchanges are not going to result in estate recovery actions. It’s dismaying to learn that certain individuals are now foregoing insurance coverage out of fear of estate recovery. Had DHS adopted a policy of open disclosure about the estate recovery program, there would not now be this loss of confidence in government programs. Second, if you are someone who has been diagnosed with a long-term degenerative illness, it is important to speak with an elder law attorney who can address with you your options for paying for care and to avoid or minimize estate recovery claims. No one should have to be surprised by an unexpected estate recovery claim.