Home About Writers Categories Recent Issues Subscribe Contact File Transfer





Charlie Traffas
Charlie Traffas has been involved in marketing, media, publishing and insurance for more than 40 years. In addition to being a fully-licensed life, health, property and casualty agent, he is also President and Owner of Chart Marketing, Inc. (CMI). CMI operates and markets several different products and services that help B2B and B2C businesses throughout the country create customers...profitably. You may contact Charlie by phone at (316) 721-9200, by e-mail at ctraffas@chartmarketing.com, or you may visit at www.chartmarketing.com.
What's New
2001-07-01 15:19:00
What exactly is 'estate recovery?'
Question: After almost two months in the hospital, Mr. Clark entered a nursing home. His wife was surprised that Medicare would not pay for any of his nursing home expenses. While she was relieved to learn that Medicaid would cover the cost, she has heard that there is a federal law that requires state Medicaid agencies to engage in "estate recovery." Mrs. Clark does not understand what this means or how it will affect her family. What can we do?
Answer: The Clarks' situation is not unique. In certain situations, Medicare will pay for nursing home care for a limited time. However, most people pay for their nursing home care out of pocket until they have exhausted their savings, and then they rely on Medicaid to pay for their care.In the face of a growing older population and rising nursing home costs, it has become very expensive for the government to pay for nursing home care for all the people who cannot afford to pay for their own care. Since passage of the Omnibus Budget Reconciliation Act of 1993 (OBRA '93), Congress has required states to try to recover the cost of Medicaid benefits from the estates of certain nursing home residents and older persons receiving home and community-based services. This law applies to individuals who were age 55 or older when they received Medicaid. As this is a new and complex law, nursing home residents, families, and advocates for older people often have questions about the effect of estate recovery. The following are answers to some of the most frequently asked questions about estate recovery. What is Medicaid?Medicaid is a joint federal/state program that pays for medical care for individuals who cannot pay their own medical bills. To qualify for Medicaid, an individual must have limited income and resources. Medicaid eligibility rules are complicated, and different states apply different rules. Each state operates its own Medicaid program, consistent with federal law.Why are we hearing so much about Medicaid these days?Congress has become very concerned with limiting the growth in Medicaid spending. Between 1988 and 1993 Medicaid spending grew from $26 billion to an estimated $139.8 billion. Between 1995 and 2002, Medicaid spending is projected to grow by $150.8 billion; this translates into an average annual growth rate of 10.1 percent. In order to reduce government spending, the federal government is now requiring states to try to recover some of the money they spend on Medicaid beneficiaries.Some people think that Medicaid only pays for health care for people who are uninsured and who have very low incomes. Medicaid often pays a portion of the bill for nursing home residents who have spent almost all their savings and whose monthly income does not cover the cost of care. Medicaid pays the difference between an individual's income and the cost of nursing home care. Some states have an income cap on gross income, and special income trusts must be set up to establish eligibility in those states. Right now Medicaid is the only national program available to help pay for long-term care; Medicaid is the main source of payment for nursing homes.ESTATE RECOVERYWhat is estate recovery?OBRA '93 requires each state to recover the costs of nursing facility and other long-term care services from the estates of Medicaid beneficiaries. This means that states must try to get reimbursed for money they spend through their Medicaid programs. At a minimum, states are required to file claims in probate court against the estates of certain deceased Medicaid beneficiaries.What exactly is an estate? Under probate laws, an estate is usually defined as all real estate and personal property that passes from a deceased person to an heir through a will or by rules of intestate succession. Property that passes directly to joint owners or to beneficiaries under a trust is normally not considered part of the probate estate. However, OBRA '93 gives states the option to expand the definition of estate to include these types of interests and any other property that the individual has any title or interest in at the time of death.What is a claim against an estate? A claim against an estate is a demand for payment from a creditor who believes the deceased person owes the creditor money. In estate recovery under OBRA '93, the request comes from the state Medicaid agency and the amount owed is all or some of the amount of Medicaid payments spent on behalf of the deceased Medicaid beneficiary. Do states have to recover money from the estates of everyone who receives Medicaid? No, but states must recover money spent on behalf of the following individuals:• individuals who were age 55 or older when they received Medicaid. A state must recover payments made for nursing facility services, home- and community-based services provided under a Medicaid waiver, and related hospital and prescription drug services; and• Individuals in nursing facilities, intermediate care facilities for the mentally retarded, or other medical institutions who pay a share of cost as a condition of receiving Medicaid and who cannot reasonably be expected to be discharged and return home. This provision requires that the state determine, after notice and an opportunity for a hearing, that the individual cannot reasonably be expected to return home.Can states go beyond these requirements? Yes, states have the option to recovery payments for all other Medicaid services provided under their state Medicaid plan for individuals age 55 and older. These may include services such as home- and community-based care for functionally disabled persons, community-supported living arrangements, optional personal care, and mandatory home health care.Are there any exceptions to estate recovery? There are limits on a state's right to recover Medicaid benefits. Recovery cannot be made: • before the death of a surviving spouse;• if the individual has a surviving child who is under age 21 or who is blind or permanently disabled; and• against one's home on which the state placed a lien, unless additional protections for siblings and adult children are satisfied.How does estate recovery work? At the time of a Medicaid beneficiary's death, the state becomes a creditor in probate court. State laws govern the distribution of assets in estates, and this process is administered by the courts. In many states, the Medicaid agency is simply a creditor in these proceedings, and probate costs, the cost of last illness, reasonable funeral expenses, and taxes have priority over claims made by the Medicaid agency. In some states, the Medicaid agency can also file under "cost of last illness" and gain priority over other creditors. Under OBRA '93, states may amend their probate laws to make the Medicaid agency a priority creditor. Heirs receive their inheritance only after these priority claims are paid.Does this mean that if people can avoid probate, they will be able to avoid Medicaid estate recovery? No, states can expand the definition of "estate" to include any property in which an individual had any legal title or interest at the time of death, including assets passed outside probate. A state can define this property to include joint bank accounts, bank accounts with a pay-on-death beneficiary designation, living trust, life estates in real property, and real estate held in joint tenancy. This suggests that the state can recover from surviving joint tenants and transferees of property with a reserved life estate. This is a major change in the law because the definition includes property interests that are extinguished by the death of the owner, and are otherwise unavailable to creditors. You should check to see if your state uses the expanded definition.What about the surviving spouse? During a spouse's lifetime, the state Medicaid agency cannot require repayment of Medicaid expenses. However, after the spouse dies, the state may file a claim against the spouse's estate to recover money spent for nursing home care, to the extent of the deceased beneficiary's interest.LIENSIf Medicaid pays for nursing home care, are there any circumstances when the state can take a home before a person's death? No, but under some circumstances the state may place a lien on the home. This can occur if the Medicaid beneficiary pays part of the cost of care as a condition of receiving Medicaid, and the state determines, after notice and an opportunity for a hearing, that the individual cannot reasonably be expected to be discharged and return home.What is a lien? A lien is a claim against a specific piece of real estate. When the property is sold or title is transferred, the lien must be paid. For nursing home residents, the lien is the amount of Medicaid payments made on behalf of the persons receiving care. This amount builds up the longer a person receives care.What is the effect of a lien? If a lien exists, the property holder must first pay off the lien before title to the property can be sold or transferred. Often, when property is sold, a lien is paid off from the proceeds of the sale.How does the state get the lien? The state must file a claim with the county property office (often the Register of Deeds) in the county where the home is located.Must states use liens? No, OBRA '93 requires the use of estate recovery, but it does not require the use of liens. I have heard the state can't put a lien on property if a relative lives in the home. Is that true? It is true under some circumstances while the Medicaid beneficiary is alive. A state Medicaid agency may not place a lien on a home for benefits paid if any of the following relatives live in the home:• a spouse;• a minor child;• a permanently disabled or blind adult child; or• a brother or sister who has been residing in the home for at least one year immediately before the Medicaid beneficiary entered the nursing home.Can the Medicaid agency place a lien if an adult child, who is not disabled, lives at home? Yes, it can place a lien on the property, but it cannot enforce the lien if the Medicaid beneficiary can prove that the live-in adult son or daughter provided care that allowed the beneficiary to stay out of a nursing home for at least two years immediately before entering a nursing home. Then, even after the beneficiary's death, the state cannot enforce the lien as long as the adult child lives in the home.Under what circumstances is a state not permitted to enforce a lien? A lien may not be enforced, and the house may not be sold to pay for Medicaid benefits under the following circumstances:• there is a living spouse (no matter where he or she lives);• there is a child who is under age 21, or is blind or disabled (no matter where he or she lives);• there is a brother or sister with an equity interest who lived in the home for the year immediately prior to the nursing home admission (but only if the sibling has continuously lived in the home since that date);• there is a non-disabled adult child who had lived in the home at least two years immediately prior to a parent's admission to a nursing home, and was providing care that delayed admission (but only if the adult child has lived continuously in the home since that date).Is there any way to prevent all of this ‘estate recovery’ business and be able to pass along assets to family members instead of losing them to the nursing homes?Yes, it is called Long Term Care insurance.  If you qualify (all policies have to be underwritten based upon health), these policies can pay all or a portion (your option) of the expenses associated with nursing home care, assisted living care, adult day care, and/or home health care.  The younger and healthier you are when you purchase one of these policies, the lower the premiums.  Under most of the better policies, after 90 days of continuous benefits, you no longer pay the premium.  If you are receiving care at home, many of the better policies will not only pay for professional care (that care provided by a licensed practitioner such as a doctor, nurse, therapist, CNA, CMA, etc.), but they will also pay for basic care or homemaker services... someone to come in and cook, clean, shop, run errands, pay bills, etc.   Like most things you buy, there are lots of options (riders) in a Long Term Care insurance policy.  While they all make sense for certain situations, the most important thing is to get the coverage first.  You purchase Long Term Care insurance by buying so many dollars in benefits per day (i.e. $100).  You can have your choice as to whether or not these benefits will be paid  in a nursing home, assisted living residence, adult day care center, or at home.  You can add an inflation rider if you choose so these benefits increase each year to keep up with inflation. You can get another rider that will pay the premiums for life if you or your spouse should die after you’ve had the policies for 4 or 5 years.  Again... lots of options... lots of companies... but get the coverage first.Long Term Care insurance is not for everyone.  The rule of thumb is... if you have something to protect, like your income, assets, peace of mind, independence, or that of your family, and you have a stronger desire to save it than lose it...  you will want to do so.  A Long Term Care insurance policy preserves and protects these things.  Once they understand the facts... it doesn’t take long for most people to answer the question... ‘Would I rather pay the premiums now which I can plan for and afford; or would I rather pay the cost of care later and end up losing much or all that I have?’
 
The Q & A Times Journal accepts no responsibility for unsolicited manuscripts or photographs.Materials will not be returned unless accompanied by a stamped, self-addressed envelope. Thank you.
 
Wildcard SSL Certificates