Medicaid Estate Recovery And How It Will Affect Your Estate Plan

In Colorado, Long-term Care Medicaid allows some of the Medicaid applicant’s resources to be exempt including applicant’s home, household property, one vehicle and a pre-paid burial plan. This will protect assets while the recipient is alive and receives Medicaid benefits, but not forever. After the death of the recipient those assets may be subject to claims by the State. The federal Medicaid statute allows for States to pursue estate recovery for applicants of Medicaid programs. 42 U.S.C. § 1396(p).

Upon the recipient’s death the Colorado Department of Health Care Policy & Financing may recover medical assistance paid on behalf of the recipient for services paid by Medicaid after the age of 55 for nursing facility services, home and community-based services, and related hospital and prescription drug services. The State can also recover all payments made by Medicaid for medical assistance paid on behalf of an institutionalized recipient.

The Colorado Department of Health Care Policy & Financing will file a claim against the estate of the recipient. The estate includes all real and personal property solely owned by the recipient when he or she passes away. In order to pay the claim all property will need to be sold, and the proceeds will be used to reimburse the State. The State will not file a claim against the estate of a recipient if:

1. survived by a spouse, a child under 21, or a blind or disabled dependent;
2. a brother or sister of recipient has an equity interest in the home and lived in the home for at least one year before the recipient went into a nursing facility, and who lived in the home continuously since the date of entry into the nursing facility; or
3. a son or daughter of recipient lived in the home for at least two years before the recipient entered a nursing facility, whose care allowed the recipient to delay nursing facility placement, and who has lived in the home continuously since the date of entry into the nursing facility.

The Medicaid Estate Recovery program also allows the Colorado Department of Health Care Policy & Financing to place a lien against a home owned by a Medicaid recipient for medical services provided, as described above for services provided to a recipient 55 years or older, or is institutionalized. A lien may be placed on recipient’s home when the recipient lives in a nursing home or other facility and owns a home or other real property that the recipient is not likely to return to. Medicaid will not place a lien on recipient’s home if there is a spouse, child under 21, blind or disabled child living in the home, or brother or sister of the recipient who has an equity interest in the home and lived in the home continuously for one year prior to institutionalization.

Transferring property for less than fair market value before applying to Medicaid to avoid Medicaid Estate Recovery may have consequences such as a period of ineligibility for Medicaid. But there are strategies to prepare for Medicaid Estate Recovery. If you are concerned with Medicaid Estate Recovery, before applying for Long Term Care Medicaid you should consult with an experienced attorney to develop a strategy that works for your estate.