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Medicaid Estate Recovery Act

Medicaid is required by federal law to engage in an estate recovery program to recoup the costs of providing medical coverage to individuals who are 55 or older, own property and receive Medicaid. Colorado has exempted estates where there is a surviving spouse or a child under 21 or a blind or disabled dependent. In addition, the home may be exempted from the estate if a sibling who has an equity interest and resided in the home for at least one year before, contributed to the care of the Medicaid recipient and has lived in the home continuously since the individual was institutionalized (in an assisted living or nursing home). A similar exemption exists for children of the Medicaid recipient who lived in the home for at least two years prior to the institutionalization, though the child is not required to have an equity interest.

Under what conditions will the estate be subject to recovery?

  • It must be cost effective for the state to pursue a recovery. This means that it is more likely for the state's Medicaid expenditures to exceed the cost of recovering the estate.
  • The estate must not be exempted by one of the criteria described above.
  • The individual must be over age 55.

Please note, it is not required for a lien to be placed on the individual's property for it to be subject to a recovery. Non-institutionalized individuals' estates may be subject to recovery, but liens are more likely to be placed if the individual enters an assisted living or nursing home as the costs to Medicaid are higher.

The Lien Process
Individuals who are 55 or older, are institutionalized and recovery is cost-effective can have a lien placed on their property if there is not a reasonable expectation of home-discharge, there is no spouse, under-21 child or blind or disabled dependent lawfully living in the home.

The most contentious point here is usually the expectation of returning to the home. Though an individual may intend to return to the home, Options for Long Term Care or the Single Entry Point agency can make a determination that it cannot be reasonably expected that an individual will return to the home. All decisions made can be appealed. If their is a denial, Options for Long Term Care is required to provide you with the steps to appeal the decision.

When a lien is applied to a piece of property, it does not mean that the individual no longer owns the home. Instead it means when the asset is liquidated (by the individual selling it, or during the closing of the estate after death), the state has a claim to part of the value as a creditor of the estate. The state will not exercise a lien until the property is sold, the title transferred or the Medicaid recipient dies. If an individual is discharged from an institution to home, the lien will be dissolved within 30 days (it is advised that individuals confirm with the County Clerk and Recorder to determine it a lien has been filed).

When the lien is exercised, the estate will be presented with a claim for the value of medical care provided. Medicaid is not automatically the first claimant on the estate however. The estate may first deduct expenses associated with the sale and maintenance of the home, reimbursement to family members for any repairs to the home, estate probate administration expenses, and burial expenses, before paying Medicaid claims.

Estate Recovery for the Non-Institutionalized
Medicaid only places property liens when an individual is institutionalized, however it may still recover funds from a Medicaid recipient who dies without being institutionalized.

The State is a Presumptive Creditor of the Estate
The state is presumed to be a creditor of record, even when liens are not filed. Though the state does not have to file a claim with the estate, or a lien, it is presumed to be owed for medical expenses paid on the Medicaid recipient's behalf. The executor of the estate is responsible for paying the state any funds due prior to the closure of estate, even when no claims are filed.

Transfer of Property With A Beneficiary Deed
If a beneficiary deed is signed, to transfer property to a beneficiary outside of probate, the home is automatically no longer an exempt resource for Medicaid. This means an individual could potentially lose Medicaid. For estate recovery this is important, because even if it is deeded to a beneficiary, a home can still be an asset available to the estate if it is deficient in meeting its financial obligations. This means that a beneficiary may be required to pay an amount due to the state for Medicaid expenditures from the value of the home, or from personal resources if the beneficiary does not want to sell the home.

Responsibility for Debt of a Medicaid Beneficiary
In general, an individual's heirs cannot be obligated to pay the debts of a parent. Even if the estate had obligations outstanding at the time of its closure and the final disbursement of its assets, a child or heir cannot be forced to assume those debts. Instead, those debts must be declared uncollectable, unless the heir chooses to pay the debts.

For more information about Medicaid estate recovery, please call us at 303-333-3482.

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