States Target Deceased to Recoup Nursing Home Costs

States are leaving no stone unturned in their search for ways to save money in health care not even gravestones.

Georgia and Michigan are the last of the 50 states to work to adopt “estate recovery” plans, in which states seize assets from the estates of dead patients who lived in nursing homes on the state’s tab. The issue is sparking heated emotions in those states, as well as in Massachusetts, where the Legislature recently froze efforts to expand recovery practices.

Under a 1993 federal law, states are required to recover some of the money they’ve paid to nursing homes through Medicaid, the state-federal health insurance program for the poor and disabled. Forty-six states currently comply, but several have been slow to embrace the often controversial mandate and the federal government hasn’t enforced the rule. Alaska and Texas held out against federal law for more than a decade, but both states now are close to putting rules in place to begin collecting from estates.

The issue often pits state officials, under pressure from tight budgets and obligation to the federal government, against poor senior citizens who feel it’s unfair for the state to prey on their modest property. To qualify for Medicaid long-term care assistance, patients must spend down most of their assets to about $2,000, though eligibility rules vary. What are often left after death are homes, life insurance policies and other personal property.

“There’s a great deal of opposition to the idea of the state taking people’s homes after their death, particularly when you’re dealing with low-income and middle-class folks,” said Charles Sabatino of the American Bar Association Commission on Law and Aging.

Many states, however, feel justified and compelled to enforce the practice. Nursing home care, which costs states more than $20 billion annually, comprises about 20 percent of most state Medicaid budgets.

“There’s a legitimate principle at stake here for states,” said Trudi Matthews, chief health policy analyst at The Council of State Governments. “If someone is using a really large degree of taxpayer resources … and there are assets from the estate, it ought to go to pay back the taxpayers who’ve been picking up the bill for that person all these years.”

In Georgia, where state agency spending may be slashed for a second year and the Medicaid well has run dry, Republican Gov. Sonny Perdue in his proposed budget is banking on estate recovery to recoup more than an estimated $1.2 million in 2005.

“We’re operating in very lean times. So while the governor wouldn’t want to implement any cuts, and while his concerns go out to the more financially needy segments of the population, at the same time he has to balance the budget,” said Loretta Lepore, Perdue’s press secretary.

Some senior citizens lobbyists in the Peach State blast the plan as bad public policy. Martha Eaves, the 87-year-old legislative chairwoman for the Georgia Council on Aging, an Atlanta-based advocacy group, told Stateline.org that the plan would turn Medicaid into a “predatory loan” for those over 55 years old.

“This state is in a real crux about money, so they’re just looking anywhere they can get it,” Eaves said. “At this point it’s a budget issue, but it’s one that ought to be reconsidered. It’s ridiculous to penalize people because they have to go on Medicaid for a nursing home.”

In Michigan, Gov. Jennifer Granholm (D) also is looking to save money and is seeking legislative approval to begin estate recovery. State health officials want to handle the issue with a “certain amount of sensitivity,” said T.J. Bucholz, a spokesman for the Michigan Department of Community Health. “The goal in Medicaid estate recovery is not to bankrupt people. The goal is to receive some dollars back for services rendered while at the same time trying to balance the Medicaid program,” he said.

The state calculates it could get back $16.8 million through estate recovery in 2005. Some critics argue that’s not a significant amount of money compared to the state’s $7 billion annual Medicaid budget.

States vary in how they go after estates, but most have not been aggressive, said Donna Folkemer, a long-term care expert at the Denver-based National Conference of State Legislatures. “It’s not an all-or-nothing thing. The state has substantial discretion,” she said.

Massachusetts lawmakers voted in 2003 to get more aggressive in recovering dollars from estates, then reconsidered this year and put a three-month hold on its new tactics. Although Gov. Mitt Romney (R) vetoed the temporary suspension, the Democrat-controlled Legislature overrode his veto. The move gives elderly citizens and elder law attorneys more time to decide how to move forward, said Carole Malone, a policy advisor to Massachusetts state Sen. Susan Tucker (D), who pushed for the temporary hold.

Georgia and Michigan likely would follow other states’ leads in creating hardship exemptions; they won’t be going after family farms, small businesses or very minimal estates. Georgia, for example, would not target estates valued at less than $10,000.

Texas, which passed estate recovery legislation in 2003, will provide similar exemptions, though the details are still in the works. The state held six public forums in February 2004 to seek input before drafting final rules, which could go into effect this fall, said Kathleen Anderson, assistant general counsel at the Texas Health and Human Services Commission. Texas actually put an estate recovery law on the books in 1987, but it was ill-received and repealed two years later, Anderson said.

The Maine law provides a hardship provision based on the income level of the person who would benefit from the estate.

No recent data thoroughly track states’ recovery plans, but AARP is currently surveying how much money states have recouped, their tactics and administrative costs, said Brian Burwell, vice president of Medstat, a health care information company involved in the study.

Many states place liens on homes occupied by survivors of deceased Medicaid beneficiaries as security on repayment. The Nevada Supreme Court ruled April 1 that state can use liens, saying the government “has a legitimate statutory interest” in recovering what they’ve paid out, the Las Vegas Review-Journal reported.

Oregon has used estate recovery since the 1940s, long before the modern Medicaid program existed. The state collects $20 million annually and sends about $8 million back to the federal government. “Every little bit helps, especially in the budget exigencies the states are under now,” said Roy Fredericks, manager of the estate administration program for the Oregon Department of Human Services. “So although $20 million doesn’t sound like a lot … it really does make a significant impact on our ability to continue to provide services to low-income seniors and disabled clients.”

South Dakota’s law is “fairly restrictive,” according to NCSL’s Folkemer, because it recovers nursing home costs for a person of any age, not just the elderly. The state recoups about $1 million a year, but sends about 70 percent back to the federal government, said Rolland Hostler, program specialist in the South Dakota Department of Social Services.

In West Virginia, estate recovery was so fiercely opposed that the attorney general’s office sued to end the practice. But in May 2002 a federal court rejected West Virginia’s plea, and the law remains on the books.