Estate Recovery: States Are Leaving No Gravestone Unturned

As Erin Madigan, a writer for Stateline.org, aptly puts it, "states are leaving no stone unturned in their search for ways to save money in health care -- not even gravestones."

In 1993, Congress passed a law requiring that states try to recover from the estates of deceased Medicaid recipients whatever benefits they paid for the recipient's care. Those states that don't implement such "estate recovery" laws risk losing some or all of their federal Medicaid funding.

While some states have enacted such laws with enthusiasm, others have come along only very reluctantly. Usually the only asset of value remaining following a Medicaid recipient's death is the family home.

"There's a great deal of opposition to the idea of the state taking people's homes after their death, particularly when you're dealing with low-income and middle-class folks," said Charles Sabatino of the American Bar Association Commission on Law and Aging.

But to cash-strapped states that are being forced to cut back on Medicaid services left and right, estate recovery looks like easy if modest money.

Only two remaining states have failed to enact estate recovery laws -- Georgia and Michigan. Michigan's governor Jennifer Granholm (D) has said it is "important for Michigan to come up to speed with other states" out of concerns that the state could "jeopardize some funding" and because there has been "perhaps by a few some gaming of the system." However, Granholm has had difficulty finding a lawmaker willing to sponsor legislation to address it.

Georgia Gov. Sonny Perdue (R) has put estate recovery in his proposed budget and is counting on it to reap an estimated $1.2 million in 2005.

States have quite a bit of discretion in how they structure their laws. For example, they can limit recoveries to the probate estate, meaning property that is held in the beneficiary's name only, or they have the option of seeking recovery against property in which the recipient had an interest but which passes outside of probate. This includes jointly held assets, assets in a living trust, or life estates.

The Massachusetts legislature recently voted overwhelmingly to postpone expanding estate recovery to the non-probate estate, overriding Republican Gov. Mitt Romney's veto. Elder law attorneys and other advocates there will be working to repeal expanded estate recovery altogether, and the prospects look good.

States must also implement exceptions in cases where estate recovery would be an undue hardship, and states have flexibility in how they structure the hardship provision. For example, Georgia's proposal would not target estates valued at less than $10,000. Texas, which passed estate recovery legislation in 2003, will provide similar exemptions, though the details are still being worked out.

Some states have passed estate recovery laws but couldn't be accused of actually enforcing them. In 1995, West Virginia implemented an estate recovery program, although the legislature directed the state Attorney General to determine whether the federal mandate was constitutional. The state attorney general sued the federal government, arguing that the choice of creating an estate recovery program or losing all or part of desperately needed Medicaid funds is unconstitutionally coercive and a violation of the Tenth Amendment.

A federal appeals court ruled that the estate recovery program requirement is constitutional. Now the West Virginia Attorney General posts on his Web site tips on how state residents can avoid estate recovery.

California has been recovering from the estates of Medicaid nursing home recipients for 10 years. Such collections affect mostly the poor and "are terribly unpopular," says Pat McGinnis, executive director of California Advocates for Nursing Home Reform. "They don't recover nearly as much as the damage they do."

For the 2004 Stateline.org article on estate recovery, click here.

For more on estate recovery, click here