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Medicaid Estate Laws

Medicaid is a government-sponsored insurance plan for children and adults with very limited incomes to help pay for necessary medical costs. Medicaid eligibility depends upon the individual's total resources. Since federal and state governments expend funds to cover these costs, Medicaid estate recovery plans were implemented by these governments seeking reimbursement as part of the Omnibus Budget Reconciliation Act of 1993 (OBRA).

  1. Individual's Estate

    • Medicaid laws require each state to recover amounts from an individual's estate to pay for nursing facilities for recipients over 55-years-old. Recovery includes home or community services, drug costs and hospital costs. States with Medicaid plans that were approved after May 14, 1993 when OBRA was enacted must cover 100 percent of the costs for Medicaid nursing.

    Established State Procedures

    • States must establish rules and procedures that allow exceptions to the estate recovery rule if recovery would cause serious hardship to the estate.

    Spousal Impoverishment Estate Exception

    • Congress enacted legislation in 1988 which allows the Medicaid beneficiary's spouse to remain in the couple's home without the legal need to deplete the couple's assets. The rule was enacted in recognition of the significant expense that nursing homes may cost. This exception applies only if the sick patient is expected to remain in a nursing facility for at least one month.

    Transfer of Assets "Look Back" Rule

    • States are legally allowed to look back to find past transfers of income and resources for 36 months. Recognizing that property assets of a long-term care patient's estate may be transferred to other family members to avoid state depletion of resources, states look back 36 months from the beginning of the hospitalization.

    Beneficiary's Trust Rule

    • If the Medicaid beneficiary or the beneficiary's family sets up a trust using eligible resources, the trust becomes part of the available estate for Medicaid's eligibility determination. The determination process does not include a review of the trust's purpose or restrictions on trust distribution. As far as Medicaid laws are concerned, so long as the trust is available, it counts toward the recipient's resources.

    Exclusionary Trust Rules

    • Trusts that are set up by the individual's parent, grandparent or by a court for a disabled individual's benefit are not counted as available resources. The recipient must be under 65 years old. Other trusts set up by non-profit associations for an individual's benefit are also excluded.

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