Be Prepared for More Aggressive Medicaid Estate Recovery
When I first practiced elder law, Medicaid estate recovery was one of those relatively inconsequential programs that mandated we complete a form on behalf of a client and move on. Since the federal Deficit Reduction Act, a law that went into effect in 2006, and, especially during the past year, that understanding has changed.
Even though no new legislation has passed on the subject and no new regulations issued, the former fairly routine compliance requirements have morphed to the point that our office is spending more time handling estate recovery issues. This is statewide and not in just a few County Assistance offices. The result seems to be another case of government spending more money tracking fewer dollars.
What is estate recovery and how it affects the average reader is a story in itself.
When adult children apply for Medicaid for their parent, they might think that, once the application has been approved and the services in place, their work is done. This is not true. As long as a Medicaid recipient continues to receive benefits, the government periodically monitors his or her assets to make sure, for instance, that he did not strike it rich in the State lottery or inherit money from a wealthy relative. Also, if conditions change, the recipient or his power of attorney is advised to report changed circumstances to the government so that he can be removed from the program.
In addition, although federal law clearly states that, once a spouse qualifies for Medicaid and thirty days have elapsed, his spouse at home is entitled to keep her remaining assets and income, Pennsylvania continues to try to monitor the spouse and that practice is expanding. That is a subject for another column.
Estate recovery comes after death when the government becomes one of the creditors of the estate.
In judging whether estate recovery is a cost effective program, this should be kept in mind. In order to qualify for Medicaid in the first instance, the applicant had to prove that he had a maximum of $2,400 (or $8,000) in assets left depending on his monthly income and many times he has much less. Unless there is a spouse at home with minimal income, the Medicaid recipient’s entire income from Social Security and all other sources except for $45 monthly is given to the nursing home and then Medicaid makes up the difference.
If, while receiving benefits, the Medicaid recipient has $2,401 (or $8,001), he can be terminated from the program until his assets return to the Medicaid approved level.
In this situation the obvious question is “What is there left to collect?” Note that estate recovery concerns only probate assets, those that pass by Will or would require an estate administration. Therefore, life insurance, unless it is payable to the estate, is not an issue.
There are, generally speaking, two major asset possibilities left for estate recovery collection and one smaller one. First, there is the house if it is in the name of the Medicaid recipient alone at the time of his death. Then there may be a prepaid burial reserve established during life. Finally, there may be a small bank account or a personal needs account (PNA) with a few hundred dollars at the nursing home titled only in the name of the Medicaid recipient. These are the assets that were exempt from Medicaid during life.
Our experience has been that the house is usually long gone by the time a single or widowered Medicaid recipient dies. If the Medicaid recipient was married, his spouse at home either owns it or it was titled jointly and she receives it automatically on the nursing home spouse’s passing.
As to burial reserves and small accounts, it seems unbelievable that we might spend massive amounts of time to prove to the Department of Public Welfare that sums spent on funerals really were needed for funerals but lately we have been asked for details down to providing a receipt for a burial gown or justifying a funeral service at a distant location.
Finally, a Medicaid recipient’s sole bank account worth a few thousand dollars might trigger the need to file an estate administration.
For relatives and friends of Medicaid recipients, the answer is to get advice after their loved one’s passing so that they know whether estate recovery applies at all and, if it does, what are their responsibilities and rights.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.