Medicaid Reimbursement Rules & Regulations

Medicaid is only available to low-income U.S. residents who are not able to pay for health care. Each state issues its own Medicaid policy and sets its own rules for eligibility and reimbursement of services. Medicaid plans cover the majority of the medical fees and expenses for hospital care, physician visits, vision care and dental care. Medicaid may even cover long-term nursing care and other types of required institutionalization for certain medical conditions.

The 1993 Omnibus Reconciliation Act: OBRA

• Medicaid was established to provide subsidized health care for poor families with limited incomes and assets. OBRA rules require applicants to have very limited resources and means to pay for health care and depleted income and assets prior to applying. To help its mission of providing health care for poor families, Medicaid programs must attempt to recover expenses paid on a recipient's behalf through their estates in certain situations.

Estates and Trust Assets

• Congress implemented a mandate in OBRA for states to have asset recovery plans to recoup the Medicaid funds expended for medical care. Every state was provided permission to recover from Medicaid recipients' estates and file liens on homes. Trusts established by the recipient or recipient's relatives are considered available assets. Trusts that were established to benefit an individual who is disabled will not be included as available resources.

Recovery Requirement Rule

• States are required to try to recoup medical costs for nursing home care, long-term institutional care, home-based care and hospitalization fees. States attempt to recover expenses through recovery from a recipient's estate. Each state is allowed to recover assets from estates of deceased recipients who were 55 and older when they began receiving benefits and had no living spouse, adult disabled child or minor child. States with post-1993 OBRA-enacted Medicaid coverage programs must cover the entire cost of Medicaid long-term nursing fees.

Term of Recovery Rule

• States may seek recovery by looking back for a period of three years from the initial hospitalization or nursing home stay. All assets within the three-year period are allowed to be recovered through the estate recovery plan. This recovery rule eliminates the possibility of Medicaid recipients' relatives attempting to transfer assets in order to avoid recovery of resources.

Undue Hardship Exception

• Each state is required to implement rules that allowed undue hardship recovery exceptions to the general mandate for collection and recovery. If the attempt to recover Medicaid costs would pose an undue hardship for the estate's beneficiaries, then the state may forgo collection. The undue hardship rule provides a spousal impoverishment exception which was passed in 1988 by Congress. Spouses of Medicaid beneficiaries may stay in the primary residence without having to sell the home in an effort to completely deplete the family's resources. The exception only applies to nursing home care which exceeds one month.