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Medicaid Lien

States receive Medicaid funding from the federal government. In return, the federal government requires each state to adopt an asset recovery Medicaid plan to help the federal government recoup its funding. The Omnibus Reconciliation Act of 1993 (OBRA) requires each state to recover its Medicaid funds from recipients after receiving government assistance. OBRA requires states to place liens on Medicaid recipients real property in return for providing them with government benefits.

  1. Medicaid Overview

    • Medicaid insurance helps low-income disabled individuals and low-income senior citizens receive medical care through direct payments to health care providers. Each state's Social Security office is responsible for administering the benefits and overseeing the application process. Medicaid requires recipients to have exhausted their available financial resources to qualify for government assistance. Additionally, the Medicaid qualification rules require applicants to prove they do not own any real estate, except for qualifying real estate under the spousal impoverishment exception.

    Medicaid Liens

    • The spousal impoverishment exception allows each Medicaid recipient to own real estate used by the recipient's spouse. The recipient's spouse must use the home as a primary residence. The recipient's state government places a lien on the home. After the recipient and the recipient's spouse or any other qualified dependents no longer need the home or pass away, the state sells the house. Each state uses the profits from the sale to subsidize the Medicaid program by paying back the funding provided to the beneficiary.

    Asset Depletion

    • OBRA also requires states to ensure recipients have no available assets and have depleted their personal resources to pay for their health care. However, Medicaid rules allow recipients to retain personal property used for everyday purposes. Under the federal Medicaid rules, a recipient may keep one car to use for medical purposes or everyday use by the recipient or recipient's family.

    Look-Back Periods

    • The federal and state governments may use a three-year "look-back" period to ensure recipients are not attempting to intentionally deplete their financial resources. Medicaid rules allow states to place a lien on any property transferred within three years prior to original acceptance into the program. The three-year look-back allowance prevents Medicaid recipients from transferring property solely to qualify for government assistance. Medicaid rules allow recipients to receive a waiver from government lien filings if they can show undue hardship. The undue hardship exception allows a recipiens to retain property if he can show that the government's lien requirements would lead to an undue financial hardship to the recipient or recipient's family members. However, states rarely grant these exceptions.

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