Medicaid Estate Recovery: What Families Need to Know

For many families, discovering the existence of the Medicaid Estate Recovery Program (MERP) comes as a shock. Federal law requires every state to establish a program to recover the costs of long-term care services paid on behalf of Medicaid beneficiaries who were 55 or older, or who received services in a nursing facility.

How Estate Recovery Works

When a Medicaid beneficiary passes away, the state's estate recovery agency submits a claim against the deceased person's estate to recoup the costs of care. The estate typically consists of assets that pass under the deceased person's will or through intestate administration, most notably the family home.

It is important to note that recovery only occurs after the beneficiary's death and only when there is no surviving spouse, no child under the age of 21, and no child of any age who is blind or permanently disabled.

Exemptions and Hardship Waivers

Certain exemptions can protect assets, particularly the home, from estate recovery claims:

• Sibling Exemption: If a sibling lived in the home for at least one year before the beneficiary entered a nursing home and has an equity interest in the home, recovery may be delayed or waived.
• Caregiver Child Exemption: If an adult child lived in the home for at least two years before the beneficiary entered a nursing home and provided care that delayed institutionalization, the home may be exempt.
• Hardship Waivers: Families can apply for a hardship waiver if estate recovery would cause survivors loss of their sole income-producing asset, loss of their primary residence, or other severe financial distress.

Asset Protection Planning

Consulting with an elder law attorney is highly recommended to explore legal avenues such as trusts or life estate deeds. Planning must be done carefully to avoid violating Medicaid's five-year look-back period.