Reform Update: Medicaid estate-recovery law may hamper enrollment efforts

Both Obamacare supporters and critics are warning that a longstanding federal law allowing states to recover Medicaid payments from the estates of deceased beneficiaries may discourage lower-income Americans from enrolling in the expanded Medicaid program.

Since 1993, federal law has required states to recover Medicaid payments for nursing home, long-term care and home- and community-based services for deceased Medicaid recipients who started receiving such benefits at age 55 or older. But the law also gave states the option to recover other types of Medicaid costs, including medical services. Some states, such as California, have taken that option and have sought reimbursement for medical costs as well as long-term-care costs.

Now it's unclear whether the more than two dozen states that have expanded Medicaid will go after the assets of low-income residents who enroll in the expanded program, which under the Patient Protection and Affordable Care Act makes Medicaid coverage available to adults with incomes up to 138% of the federal poverty level.

Facing a public outcry, two states, Oregon and Washington, have changed their policies to go after only the assets of people who receive Medicaid payments for long-term-care supports and services, such as nursing home stays. “It was proving to be a barrier for people to sign up for coverage… and we believed that it was more important that people get coverage,” Judy Mohr-Peterson, head of the Oregon Medicaid program, told Oregon Public Broadcasting last month.

Faced with growing anxiety over the issue, the CMS issued a State Medicaid Directors Letter on Feb. 23 stating that the “CMS intends to thoroughly explore options and to use any available authorities to eliminate recovery of Medicaid benefits consisting of items or services other than long-term care and related services in the case of individuals who are determined eligible for Medicaid benefits using the (modified adjusted gross income) methodology.” The letter urged states not to pursue estate recoveries against Americans who sign up for expanded Medicaid under the Affordable Care Act.

Healthcare providers and advocacy groups that want all qualifying lower-income individuals and families to sign up for the expanded Medicaid program so they will have a payment source for their care are nervous about the Medicaid estate recovery issue. Media reports around the country have quoted people who were eligible for Medicaid but who chose not to enroll out of fear of having their home or other assets seized after they die. The Los Angeles Times reported that the group Asian Americans Advancing Justice in Los Angeles found that a quarter of potential Medi-Cal beneficiaries at the group's enrollment events were walking away instead of signing up, citing worries about losing their estates.

AARP, the senior advocacy group, “hopes consumers won't be deterred from taking advantage of health coverage made available through Medicaid expansion,” said Elaine Ryan, vice president, government affairs at the organization. “That said, we want to make sure consumers do their homework and understand the laws as they apply to their personal situation in their state.”

“It is definitely a disincentive in California for those who are aged 55-64 to enroll because California has taken an expansive approach to recovery,” said Patricia McGinnis, executive director of California Advocates for Nursing Home Reform.

The reason Medicaid estate recovery is a worry under expanded Medicaid is that many new beneficiaries may have some assets, such as a home. Prior to the Affordable Care Act, Medicaid eligibility was determined both by income and assets tests; people with more than a bare minimum of assets could not legitimately qualify. Under Obamacare, eligibility for Medicaid health benefits is determined only by an income test, without regard to assets. Thus, people who may have accumulated a home and other assets now may qualify for Medicaid if their income has declined for some reason.

States are not allowed to go after the assets of a deceased beneficiary if there is a living spouse, minor children or surviving dependents with disabilities. Families have the option to apply for hardship exemptions to avoid being subject to the recoupment.

Washington state, which changed its policy to rule out estate recovery for services received under Medicaid medical coverage, does not expect to lose much money from making the change, said Manning Pellanda, assistant director of Washington State Health Care Authority. The state for the most part only went after costs related to the long-term care due the legal costs of pursuing estate recovery, she said.

Elaine Ryan, AARP's vice president of state advocacy and strategy integration, told the news organization FactCheck.org that AARP is watching the issue and hasn't decided yet whether to lobby states to roll back their estate recovery programs. “This is all so new … and we're still looking at what makes sense,” she said.

Undocumented residents who have applied and been granted deferred action status should be allowed to obtain Medicaid under the Patient Protection and Affordable Care Act, University of California researchers say.

The designation refers to those undocumented individuals who have gotten temporary work authorization and relief from deportation because they came to the U.S. as children, under an executive order from President Barack Obama. Up to 125,000 young immigrants who have been granted this status are estimated to be eligible for the Medicaid program, according to the researchers.

Proposed state legislation in California, known as the Health for All Act, would address this coverage gap for young immigrants and their families by expanding healthcare coverage to all Californians regardless of immigration status.

The UCLA Labor Center researchers found that 69% of immigrant youth did not have health insurance.

Utah's House Business and Labor Committee voted 11-3 to create a state-funded option that would provide health coverage for all adults under the federal poverty line. As part of the plan, the state would take no federal Medicaid funds.

The plan calls for the state to spend $30 million to $35 million over each of the next two years. The funds would ensure some sort of coverage for nearly all of 60,000 state residents earning below the federal poverty level who don't qualify for subsidies under the Patient Protection and Affordable Care Act or Medicaid, according to bill co-sponsor Rep. Dean Sanpei (R-Provo).

The level of coverage would not equal what's available under Medicaid. But it would allow the state to offer coverage to those who have none now.

Follow Virgil Dickson on Twitter: @MHvdickson