What is Medicaid Estate Recovery?

Orange City Iowa Estate Planning

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If you’re helping an aging parent navigate Medicaid because they don’t have long-term care insurance or you think you’ll need it yourself someday, it’s important to understand how the program works.

Medicaid is a government program that helps seniors and others pay for long term care. However, it’s not always free, explains the article “What Is Medicaid Estate Recovery?” from AOL.com. The Medicaid Estate Recovery Program (MERP) is used by states to recover costs from estates of people who used their services so that the program is more affordable for the government. However, it can have a severe impact on the beneficiaries of Medicaid recipients. Contact an elder law attorney if you believe you or a loved one may need Medicaid.

Medicaid is used when someone does not have long term care insurance or enough money to pay for long-term care out of pocket. Medicaid can also be used for long-term or nursing home care, if steps have been taken to protect assets. This usually includes strategies, like trusts and, in states with expanded estate recovery programs like Iowa, Medicaid Asset Protection Trusts (MAPT).

A federal law passed in 1993 (the Omnibus Budget Reconciliation Act) requires states to attempt to seek reimbursement from a Medicaid beneficiary’s estate after they have died. Some of the costs that the state will try to recover include:

  • Nursing home costs
  • Home and community-based services
  • Medical services received through a hospital where the recipient is a long-term care patient
  • Prescription drug services for long-term care recipient

This recovery program lets Medicaid pursue any eligible assets owned by the estate, and any assets part of the probate estate could be attached, including:

  • Bank accounts
  • Your home or other real estate
  • Vehicles or other real property

In addition, some states allow Medicaid to recover assets that are not subject to probate, including:

  • jointly held accounts
  • Payable-On-Death (POD) bank accounts
  • real estate owned in joint tenancy with right of survivorship
  • living trusts
  • any other assets that the Medicaid recipient had a legal interest in.

This is called the expanded estate, and Iowa is one such state where these types of assets are not protected from estate recovery.

For beneficiaries, Medicaid recovery means a smaller inheritance. However, strategic planning can help you or loved ones avoid the financial impact of Medicaid estate recovery. If you are eligible and can afford to buy a long-term care policy, that may help to cover most of the cost of care. Another option is to remove as many assets from the probate process as possible. An estate planning attorney will be able to help you create a plan to protect your assets.

Reference: AOL.com (February 5, 2021) “What Is Medicaid Estate Recovery?”

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