Medicaid estate-recovery programs may hamper enrollment efforts

Both Obamacare supporters and critics are warning that a long-standing 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 from the estates of 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 collected 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 estate 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 with no asset test. According to a Consumer Reports article, 10 Medicaid expansion states plan to go after assets, 11 do not, and the intentions of four states plus the District of Columbia are not yet known.

Some conservative groups opposed to Obamacare have issued warnings to people about signing up for Medicaid. Writing in the Washington Times, Dr. Jane Orient, executive director of the Association of American Physicians and Surgeons, called the recovery provision “a cash cow for states to milk the poor and the middle class.”

Facing a public outcry, Oregon and Washington have changed their policies to go after only the estate assets of people who received Medicaid payments for long-term-care supports and services. “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 in January.

To address these concerns, the CMS issued a letter to state Medicaid directors 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.” The letter urged states not to pursue estate recoveries against Americans who sign up for expanded Medicaid under the ACA.

Healthcare providers and advocacy groups that are encouraging uninsured, lower-income individuals and families to sign up for the expanded Medicaid program are nervous about the estate-recovery issue. Media reports have quoted Medicaid-eligible people who chose not to enroll saying they feared having their home or other assets seized after they die.

Health system leaders already are concerned about mandatory premium contributions in Republican-led states such as Michigan dampening Medicaid enrollment. Bob Riney, president of Henry Ford Health System in Detroit, said the state's alternative Medicaid expansion model, called Healthy Michigan, “has features that require financial contribution from enrollees, so adding estate recovery would only be an unnecessary barrier to getting people enrolled and could defeat the whole purpose.”

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 of state advocacy and strategy integration at the organization's government affairs group. “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.”

The Medicaid estate-recovery program “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 a home or other assets. Prior to the Affordable Care Act, Medicaid eligibility was determined both by income and asset 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 the Washington State Health Care Authority. The state for the most part went after only costs related to long-term care because of the legal costs of pursuing estate recovery, he said.

Follow Virgil Dickson on Twitter: @MHVDickson