What is Medicaid Estate Recovery?

You may be aware that Medicaid benefits are available to help Michiganders pay for nursing home care. Medicaid is a federal healthcare program administered by the states for individuals who meet income and asset requirements (and it’s distinct from Medicare, which provides health insurance for older Americans).

Because Medicare generally does not pay for nursing home care, many seniors need to qualify for Medicaid in order to pay for long-term care; a Medicaid planning attorney can help in this regard. But qualifying for Medicaid benefits isn’t the end of the story. You also need to understand Medicaid estate recovery, and how to minimize its impact on your estate.

Medicaid Planning and Medicaid Estate Recovery in Michigan

Medicaid helps to pay for long-term care for seniors in need, but what happens when a Medicaid beneficiary dies? In many cases, the answer is that Medicaid seeks reimbursement for benefits paid on the senior’s behalf from their estate. This is known as Medicaid estate recovery. The Michigan Department of Health and Human Services (MDHHS) is authorized by Michigan law to make a claim against a deceased beneficiary’s estate.

Medicaid estate recovery allows the state to recoup some or all of its outlay on behalf of a Medicaid beneficiary, but doing so may deplete the assets to which the deceased beneficiary’s surviving family would otherwise be entitled. The purpose of Medicaid estate recovery is not to impoverish families, but to ensure the financial viability of the Medicaid program and to prevent people from taking unfair advantage of the program. 

With proper planning, people can both comply with the law and retain the hard-earned assets they want to leave to their loved ones.

What Assets are Subject to Medicaid Estate Recovery?

The assets that are most vulnerable to Medicaid estate recovery are those that go through probate after an individual’s death. When the Michigan estate recovery program was first implemented in 2011, only probate assets were subject to recovery by the Medicaid program. Accordingly, assets that pass outside of probate, such as those held in revocable living trusts, are more protected from the reach of recovery efforts.

There are multiple means for transferring assets to heirs and beneficiaries outside of the probate process, and doing so is essential to protect those assets from Medicaid estate recovery. Estate planning tools such as trusts offer other benefits beside protection from estate recovery; it’s important to discuss your needs with an experienced elder law attorney to ensure that your assets do not go through probate and that your overall estate planning goals are achieved.

How Much Can Medicaid Recover From an Estate?

MDHHS can only recover as much from an estate as the deceased received in Medicaid benefits; the state is not entitled to a windfall. Estate recovery applies to benefits for costs associated with long-term care in a nursing home for Michiganders aged 55 and older. The long-term care services in question must have been provided on or after September 30, 2007 to be subject to estate recovery.

Exemptions and Deferrals from Medicaid Estate Recovery

Typically, after an individual who received qualifying benefits has died, MDHHS will send the personal representative of the decedent’s estate a notice of an intent to file a claim. The personal representative then has the opportunity to respond by completing, within two weeks, a questionnaire identifying any exemptions from estate recovery. The personal representative may also need to file a separate application indicating that Medicaid estate recovery would pose an undue hardship to the Medicaid beneficiary’s survivors. This application may be requested after the questionnaire is completed.

In many cases, it is possible to defer Medicaid estate recovery. Estate recovery may be put off while any of the following are living:

• The surviving spouse of the Medicaid beneficiary
• The Medicaid beneficiary’s child who is under the age of 21
• The Medicaid beneficiary’s child of any age who is blind or disabled

MDHHS will also defer recovery if one of the Medicare recipient’s survivors still lives in the home, if that person provided care that allowed the recipient to remain in the home for at least two years just prior to their admission into a medical facility. The agency will also defer Medicaid estate recovery if the recipient’s sibling who has an equity interest in the home, and who lived in the home for at least one year prior to the recipient’s admission to a facility, lives in the home.

MDHHS will also grant a temporary deferral of Medicaid estate recovery if the recovery would result in an undue hardship to survivors. To qualify for an undue hardship waiver, the applicant must pass a means test and meet other criteria.

Planning Ahead to Avoid Medicaid Estate Recovery

If you are faced with the possible recovery of some of a loved one’s estate by MDHHS, contact an elder law attorney immediately to determine your options for deferring or preventing estate recovery. However, if you are simply looking ahead and wondering how to avoid possible recovery of your own estate if you ever receive Medicaid benefits, you have more options. Simply put, the most important thing you can do is to ensure that your assets do not need to go through probate upon your death.

Depending on your situation, and how long it may be before you need care, you might create irrevocable trusts to hold property or execute a ladybird deed for real estate. However—and we cannot emphasize this strongly enough—you should always consult with an experienced attorney to ensure that you avoid probate and that any actions you take do not have unintended consequences, such as potentially jeopardizing your eligibility for benefits. 

To learn more about estate planning and Medicaid estate recovery in Michigan, contact Estate Planning & Elder Law Services to schedule a consultation.