Medicaid is a health payment program for needy individuals. In other words, if a person meets the criteria for eligibility, Medicaid will pay for the necessary health services that the individual requires.
Medicaid will pay for long-term care, such as care in a nursing home. For this reason, many people who never thought they might need or want to qualify for Medicaid find themselves needing to or wanting to qualify. After all, if you were faced with a $10,000 a month nursing home bill with no end to your monthly payments in sight, you would want to qualify for a program that would help you pay that bill.
A large part of my practice involves Medicaid planning. Medicaid planning is designed to assist an individual with qualifying for Medicaid sooner than he would qualify without planning and while preserving a portion of his estate to help supplement his needs or the needs of his family. The typical Medicaid planning client has a net worth of between $50,000 and $700,000.
Because Medicaid is for needy individuals, not individuals with the ability to pay for their own care, a qualified beneficiary must have very limited resources, typically less than $2,000. So, once a person qualifies for Medicaid, it is unlikely that he will ever own anything of any substance again.
With that said, Medicaid does seek estate recovery from the estate of a deceased Medicaid beneficiary for all payments that the Medicaid program made on behalf of that individual after he attained the age of fifty-five. In other words, assume that Mr. Smith begins receiving Medicaid benefits when he is forty years of age. Assume further that Mr. Smith lives until he is seventy years of age and for those thirty years (age forty to age seventy), Mr. Smith continuously receives Medicaid payments towards his health care costs.
When Mr. Smith dies, the Medicaid program will seek estate recovery from Mr. Smith’s estate for all benefits that the program paid after he attained the age of fifty-five. So, if Medicaid had paid $100,000 for health care services for Mr. Smith before he attained the age of fifty-five and $200,000 for such services after he attained then age of fifty-five, then Medicaid will only seek recovery for $200,000 of payments.
You may be wondering why Medicaid would bother seeking estate recovery from poor people. If a person needs to have less than $2,000, why even bother seeking estate recovery from his estate; moreover, the New Jersey regulation on estate recovery provides that the State will note seek recovery if the estate is worth less than $3,000. Given these facts, when would recovery ever happen?
The typical asset against which estate recovery is accomplished is the home. A home is a non-countable asset, so a Medicaid beneficiary can own a home and still qualify for Medicaid. When the Medicaid beneficiary dies, Medicaid will record a lien against the home and when the home sells, the Medicaid lien will need to be satisfied.
If a Medicaid beneficiary is survived by his spouse, then Medicaid will defer estate recovery until the spouse dies. So, if Mr. and Mrs. Smith owned a home and Mr. Smith receives Medicaid, assuming Mr. Smith dies first, Medicaid will wait until Mrs. Smith dies to record a lien against any property that Mr. Smith owned at the time of his death, such as the home if his name were still on the deed to the home when he died.
Most people who hire lawyers are educated to a point where they remove all assets, including the home, from Mr. Smith’s name, so when Mr. Smith dies, he owns no assets and no estate recovery can occur against his home. At least that’s what the law provides.
Lately, I have seen Medicaid get quite aggressive and make claims that they are entitled to recover against Mrs. Smith’s estate when she dies even if the assets in her estate weren’t in Mr. Smith’s estate at the time of his death. This position is untenable, but an uneducated executor of the estate of Mrs. Smith may be intimidated by the long arm of the State’s Medicaid recovery department.
Understanding estate recovery rules allows you to safeguard assets for your family. Planning ahead helps reduce unnecessary claims and protects your loved ones.
Estate recovery is meant to follow specific rules, yet the way those rules are applied can vary and sometimes feel broader than expected. Since states are required to seek repayment for certain Medicaid costs after death, understanding where the limits are can make a meaningful difference for families navigating the process.