Recently, the Supreme Court of the United States ruled on a case involving Medicaid estate recovery. Medicaid is a health insurance program for needy individuals. Unlike most policies of health insurance, Medicaid will pay for the costs of long-term care, such as care in a nursing home or an assisted living residence.
In order to qualify for Medicaid benefits, an individual must have insufficient income to pay for his care and he must have very limited assets. For instance, if Mr. Smith resides in a nursing home that costs $10,000 a month but has monthly income of only $2,000, then his income is insufficient to pay for his care. In most states, a Medicaid beneficiary must have assets of no more than $2,000 or some very low figure.
Because Medicaid is designed to pay for the care of needy individuals, the Medicaid programs compels states to seek estate recovery from a Medicaid beneficiary’s estate after he dies. Most Medicaid beneficiaries do not have an estate, because as discussed above, most Medicaid beneficiaries have very limited assets; however, some Medicaid beneficiaries reside at home and a home is a non-countable asset for purposes of Medicaid eligibility.
Mr. Smith could, for instance, reside in his home worth $300,000 and still qualify for Medicaid benefits. Mr. Smith may receive home health aide services paid for by the Medicaid program. When Mr. Smith dies, he will die owning a home worth $300,000, so the state that paid Medicaid benefits to Mr. Smith would be compelled to seek estate recovery from Mr. Smith’s estate after his death.
As the phrase indicates, “estate recovery” only occurs after Mr. Smith dies. Medicaid does not seek reimbursement from a beneficiary’s estate until the Medicaid beneficiary dies, unless the Medicaid beneficiary received benefits incorrectly. If a Medicaid beneficiary committed fraud, for instance, and lied about his asset, then Medicaid would seek recovery from the fraudulent beneficiary during his life.
The other instance in which Medicaid seeks recovery from a beneficiary’s estate involves people who receive Medicaid benefits as the result of an injury and who later recover a judgment as a result of the events that caused the injury. For example, assume that Mr. Smith is on his way to work and is involved in a horrific car accident. Mr. Smith is seriously injured. He has no health insurance, and as a result of his injuries, he can no longer work.
In a short period of time, Mr. Smith depletes his assets, and he becomes a Medicaid beneficiary. Medicaid pays a substantial amount of money for Mr. Smith’s care, which he requires as a result of the car accident. In total, Medicaid pays $800,000 for the care, rehabilitation, and custodial care of Mr. Smith.
Mr. Smith sues the other driver who caused the car accident that injured him. After several years, Mr. Smith obtains a judgment against the other driver for $1,000,000. Of that award, the jury indicates that $300,000 is for the medical expenses that Mr. Smith incurred and $700,000 is for his pain and suffering and lost wages.
In Wos v. E.M.A., the Supreme Court of the United States decided whether or not a North Carolina statute that required up to one-third of any personal injury award be paid to the state to reimburse the state for Medicaid benefits paid was constitutional. Specifically, the Court was considering whether the North Carolina statues was pre-empted by the federal Medicaid Act.
The Court held that the North Carolina statute conflicted with the federal Medicaid Act, because the North Carolina statute arbitrarily permitted the state to receive up to one-third of any personal injury award whereas the federal Medicaid Act only permit recovery against that portion of a personal injury award that is specified as reimbursement for medical expenses. In so doing, the Court affirmed its holding in a prior case that it decided several years ago.