Finding a Balanced Approach to Medicaid Estate Recovery

February 25, 2021

One of the more delicate topics in U.S. healthcare is the double-edged sword that is the Medicaid Estate Recovery Program (MERP) — a federal program that requires states to recover certain costs paid by Medicaid from the estates of deceased beneficiaries. With some exceptions, states are required to recover Medicaid dollars spent on long-term care services provided to recipients age 55 or older and have the option to do so for other Medicaid services these individuals received. Enacted in 1993 as part of the Omnibus Budget Reconciliation Act (OBRA), the MERP helps to protect the integrity of the Medicaid program and its role as a vital safety net for millions of low-income Americans.

Still, the practice of recouping assets that may have otherwise been intended for a surviving spouse or family members can be a hard one to swallow. Just a quick internet search can reveal some of the program’s notorious issues, told through stories of distraught family members struggling to understand the implications. While the MERP may have played a part in funding their loved ones’ long-term care, anecdotal examples such as these highlight opportunities for improvement in how the program is structured and communicated. Additionally, individuals with sophisticated tax mechanisms or the means to navigate the complexities of estate planning may be able to protect their assets and circumvent the recovery process. This is neither fair to those most affected nor beneficial to the sustainability of the Medicaid program. It is reasonable to say that enabling people to shield their assets, while Medicaid foots the bill for their healthcare, was never the intention of the Medicaid program, which exists to serve our most vulnerable populations.

Protections & Improvement Efforts

Upholding the MERP for the important purpose it serves, while mitigating the potentially negative impacts of estate recovery, is a delicate balance — one that government and industry stakeholders are continuously working to reach. Written into the law itself are several protections for family members and heirs who may be adversely affected by attempts to recover money from a recipient’s estate. These include recovery deferrals or exemptions for surviving spouses, children under 21 and blind or disabled children, as well as undue hardship waiver provisions and cost-effective thresholds for both the estate claim amount and estate value.

Recommendations for a Balanced Approach

At HMS, we believe this balance is already afforded in existing regulations and can be strengthened through outreach, education and best practices promoting transparency and uniformity. Some recommendations include:

  • Creating a best practices compendium in partnership with states, the Centers for Medicare and Medicaid Services and others to guide Medicaid estate recovery policies.
  • Providing beneficiaries and their families with a program overview at the time of application and on an annual basis so that all stakeholders are aware of the recovery process.
  • Improving outreach and education to the legal community, including elder law attorneys, as well as state personnel, county case workers, nursing homes and funeral homes.
  • Leveraging technology to ease all aspects of administration.

It is important to acknowledge challenges in the estate recovery process — particularly given the stress and uncertainty people are facing when these requirements often come to light — while working to ensure Medicaid funds are available for others in need of long-term care. To this end, HMS is committed to working closely and continuously with federal and state governments and others to improve the MERP for the benefit of the Medicaid program, its patients and their families.

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