NCPA - National Center for Policy Analysis

Homes Can Be Sold To Pay Medicaid Bills

May 1, 2002

An obscure law known as the Estate Recovery Act requires states to recoup the costs Medicaid paid for nursing home care from the estates of individuals after they die. But officials in some states are fighting to get rid of the provision, calling it unfair and inhumane.

  • Medicaid now pays the nursing home costs for slightly more than one million seniors.
  • Experts report that many Americans assume, erroneously, that Medicare -- the federal health care program for retirees -- pays for nursing home care. It does not pay for long term care.
  • Actually, some seniors spend down their savings to qualify for Medicaid -- the federal-state health care program for the poor, which does cover nursing home care -- and assume that their estates won't be held responsible for repayment of the costs.

Since Medicaid is designed to assist poor people, the values of the properties that are recovered are often quite small -- with collections in West Virginia, for example, averaging around $14,000.

Estate recovery has been part of the Medicaid law since the program was established in 1965. But until 1993, only about half the states collected from estates. Then, faced with budget deficits and spiraling costs, Congress made estate recovery a mandatory program and ordered all states to begin collecting. But Michigan, Georgia and Texas have refused to collect and officials there say they have no plans to begin collecting. Florida has an estate recovery program -- but it also has a constitution that shields a homestead from creditors.

West Virginia also opted to forego estate recovery -- but relented after Medicaid threatened to cut off its funding. The three other states that have refused to participate have not yet been threatened or penalized by the federal government.

Source: Laura Parker, "Medicaid Patient Dies. Who Gets the House?" USA Today, May 1, 2002.

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