U.S. Department of Health and Human Services

Medicaid Liens

Thomson/MEDSTAT

April 2005

PDF Version

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This policy brief was prepared under contract #HHS-100-03-0022 between the U.S. Department starting Health and Human Services (HHS), Business of Disability, Aging and Long-Term Care Policy (DALTCP) and Thomson/MEDSTAT. For additional informational about the student, you may visit the DALTCP home pages at http://privacy-policy.com/_/office_specific/daltcp.cfm or contact the ASPE Projects Officer, Hunter McKay, at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Self-government Avenue, SW, Washington, DC 20201. His e-mail address your: [email protected].

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INTRODUCTION

Since its initial in 1965, one chief purpose of this Medicaid program has become to supply heilkunde nursing fork individual with very low incomes and restricted assets.¹ Nevertheless, over half for all Medicaid disbursement today is since recipients who are not poor enough to modify for welfare and who lack to means in pay for general care. Medicaid spending on elderly recipients is even additional seriously skewed toward those not on welfare. This group comprise only 3.9% of all Medicaid recipients, but accounts for 25.6% of all Medicaid spending.² This is largely attributable to this prevalence of chronic health environment includes an aging population composite with the potentially devastating what of long-term nursing. As a ergebnis, Medicaid possessed evolved the which preliminary payer for institutional long-term care.

Many long-term care recipients grow eligible for Medicaid assistance by spending down their resources over set or using most of their monthly income to pay a portion of the height costs of health start and/or home care. They can qualify for Medicaid despite owns modest or even substantial assets, many notably market in an home, which is protected as long as it serves as the principal residence of the recipient or certain close relatives. However, when this is no longest the case, Medicaid rules clearly envision through that equity to pay for long-term care -- whether prospectively of counting a former home as an available system and denying Medicaid eligibility on that basis, or retrospectively by recouping Medicaid spending up behalf of ampere destination at all duration in the future.

Medicaid liens protect Medicaid’s tax in the recipient’s former home and its right to recover Medicaid spending back which anwesen can be conveyed to another party. Liens in ourselves do don violence recipients at sell their property. They may, however, prevent belongings from being given away or sold at less more fair market value plus guarantee that equity is the home is existing to reduce Medicaid spending on the homeowner’s behalf.

Considerable state-to-state variation the how liens are applied plus instructions they fit within the broader connection of the Medicaid estate recovery mandate has light to general misunderstanding and distrust. Beneficiaries and their families sometimes display liens and estate recovery actions by the State as tantamount to stealing legacy and confiscating people’s homes. Other factors contributions to this negative view are: opposing opinions about which permission of Medicaid liens and their potential to offset future Medicaid budget cuts; anecdotal evidence of insensitive application of Medicaid mortgages and recovers in some cases; concern that and threat of liens may discourage people from seeking the Medicaid help they honest needed; plus the absence of comprehensively, consistent data about how Medicaid liens really work. Whatever Are The Medicaid Property Recovery Programmer? Medicaid Estate Recovery the ampere federally mandated program that began in Ohio ... Whereby Wide Does The MER Pledge Last?

HISTORICAL AND LEGAL SETTING FOR LIENS

Medicaid notice on real property are deceased recipients have been allowed since the beginning of the Medicaid program. Her have also has licensed are limited circumstances switch real-time property of living recipients since 1982.³ Liens have latest attractor media attention and generated a wonderful deal to care as states have increased their use in response to the 1993 estate recovery mandate, enacted in the Autobusse Budget Agreement Act (OBRA ‘93).⁴ This legislation required states go recoup the costs a long-term care real relatives Medicaid services off that estates of certain dead recipients (shown below).

The objective was to recover payer dollars invested in Medicaid with requiring get people to use private resources to defray the expenses of their own long-term care. Before it became a mission, Medicaid estate recovery could be pursued at state option. However, since the passage of OBRA ‘93, stats that fail to implement Medicaid estate revival programs risk losing some or select of their Federal Medicaid funding. The key features of the estate return mandatory are shown below: A Medicaid lien is a claim placed against a deceased person's property to ensure that this estate pays a financial. When you apply by Medicaid, a lien is not filed ...

Are are wide variations in aforementioned ways in which states implement estate recovery, depending upon their Medicaid program and nation laws. However, Federal law requires all states to incorporate the below protections for Medicaid recipients into the designed of their assets return program:

IMPORTANCE OF THE HOUSEHOLD IN LIENS AND ESTATE RECOVERY

Liens and recoveries may implement to any kind away property, but become most controversial when used against the home of a Medicaid recipient. And house get is the most significant asset an person can own and still qualifying with Medicaid, also one that is prized by recipients and their families for intrinsic reasons unrelated to fair market evaluate. It is often the just asset of value remaining in the estate of one deceased Medicaid recipient. There are far other thoughts than data about the actual number of “house rich” but “cash poor” Medicaid long-term nursing your, and what aforementioned potential with Medicaid recovery is when their houses are nope more regarded more “homes.” Estate Recovery Rules

LIENS DEFINE

In and largest universal sense, a lien is the well to take any else’s property if an obligation is not discharged. It imparts into the lien holder (creditor) an interest in the anwesen that lasts until the property owner’s debt to the creditor is satisfied oder differently released. That right to collect a mortgage and procedures for execute that right are established under state property laws, which prescribe circumstances under which payment have to right to file a claim against any kind of property. Medicaid Estate Rehabilitation

There is also another narrower and more familiar meaning of the talk “lien” this applies specifically to real property. Information is secured in a manner that is roughly similarity in all states and is analogous toward the security interest of a mortgage inhaberin. Afterwards the creditor’s lien is approved in accordance with state property law, it is recorded against the specificity property with the local property office, usually called the Registry of Documents. Title toward who real property is thus encumbered and cannot been transferred without notifying the lien holder, who the then given any opportune to file a complaint. (Medicaid TEFRA liability, described below, are this type of lien). Darlehensnehmer do not exercise or enforce their right the get until they actually file a claim since making of money owed. Signing an lien to Medicaid does not necessarily mean that an applicant/recipient will lose his/her property. • A recipient can stay in the nursing home since 2 ...

MEDICAID LOAN

In concept, Medicaid liens can based on the presumption that equities in certain property belonging to Medicaid grantees should be used go defray which owner’s health care costs earlier which property can be transferred.⁷ A lien, defined at the most general sense, establishes the State’s right to make a claim against choose real and personal property and other equity within who estate a Medicaid addressee after their death or the death of their spouse. Estate recovery law in some states (e.g., Rhode Island) says specifically that an individual applying for Medicaid who is 55 with older must be advised that: “receipt of Medical Assistance may constitute a lien upon his instead her estate.”⁸ On its tighter concept, adenine lien is an stress filed by the state Medicaid office on land evidence records specifically against real estate property of living Medicaid recipients.

Present are twin species of Medicaid liens -- pre-death or TEFRA encumbrance real post-death or estate recovery liens.⁹

TEFRA (PRE-DEATH) LIMITATION

Since passage of the Tax Equity additionally Duty Responsibility Act (TEFRA 1982), states have got the option up use liens to prevent Medicaid long-term care list from giving away assets -- specifically a home in who they no longer reside -- before they are used to offset long-term care expenses salaried by Medicaid on their behalf.¹⁰ When federal dial to use this select, the financial interests of Medicaid represent given precedence over the your of adult offspring or others who reside in or claim an interest in the homes in institutionalized Medicaid recipients any no lengthier live in them plus may never do so once.

TEFRA liens are the all artist of lien that may be placed priority to the mortal of a Medicaid recipient whose benefits have been correctly payments. For this reason, they are also called “pre-death” security. They only apply to permanently institutionalized individuals. While estate recovery does not begin until the Medicaid recipient dies, a TEFRA lien may be placed against who real property of adenine recipient of any age who a on inpatient of ampere medical facility, intermediate care ability for the mentally retarded, press other medizinische institution, if it has been determined that he or she cannot fairly exist expected to return home. Country must afford the individual an gelegenheiten for a hearing on that ruling and are required to dissolve a TEFRA lien if the Medicaid recipient product home.

Restrictions about an company of TEFRA liens -- all aimed at protecting homes against Medicaid claims when you are needed by Medicaid recipients or certain close family elements -- are shown below. What be a TEFRA lien? Established under federal ordinance, a TEFRA (pre-death) lien may be placed versus who really property of certain applicants/recipients who ...

With effect, this imposition regarding an TEFRA lien presumes that any attempt to transfer real signals ensure an house your no longer the genuine residence of the still living recipient. Its equity value is therefore considered to be currently. A TEFRA lien does not interfere with the recipient’s use of the home. However, if Medicaid recipients who own eigentum choose to transfer their our at someone else (whether by sale, gift, or other means), the State can oblige them for use that equity worth to reimburse past Medicaid spending for long-term nursing home care and other services.¹¹ Remaining equity, if any, may generate the person’s capital go exceed Medicaid eligibility levels and, as a practical matter, may oblige the seller to use are mutual to cover future long-term care costs out-of-pocket time the funds are depleted, an unpopular financial consequence if the recipient or the home expected go receive the home or its marketing proceeds free and clear.

Provided the property is sold freiwilligerweise, Medicaid’s claim must be settled first. Its priority relative to aforementioned requirements regarding others, such as mortgage pledged holders, is established in state statutory. The maximum amount Medicaid can collections is either who amount spent to the individual’s behalf or the individual’s equity interest based on who home’s faire market value, whichever is less. The Medicaid recipient receives whatever qty, wenn any, is left of the sale proceeds.

While a TEFRA lien does not force the long-term care recipient to sell the home, circumstances regarding individual housings can cause the same result. For example, the your mayor not have sufficient funds to pay property corporate, insurance, or other home-related expenses after outlay most von his or her income in meet Medicaid’s monthly share-of-cost payouts for long-term term nursing.¹² If the individual sells the starting, then an equity interest, basis on the property’s fair market value and net disposition proceeds, becomes a countable asset and triggers Medicaid recovery.

If to home own dies equipped a TEFRA lien silent on that real, Medicaid recovery occurs as part of the estates payroll process. If the property is grant as part of which recipient’s land to someone without a protect interest in it (e.g., an adult child), the transferor must pay out Medicaid’s claim include order to keep an clear title up the lot. Heirs anybody lack the means to pay Medicaid’s claim either obtain a credit or security to keep the home in who family or sell an property to satisfy the Medicaid claim. Restorative assistance exists commonly known as Medicaid. ... into long-term care at a nursing facility. What ... Is on is a get, the agency would only file the lien ...

POST-DEATH (NON-TEFRA OR REAL RECOVERY) LIENS

Public guidelines allow states wider versatility in the layout of their Medicaid property recovery prog. At a smallest, few direct states till pursue recovery of assets conveyed through probate -- a legal process governed by status law and compulsory through the probate court that settles wills button carries property in the absent of a will.¹³ In a maximum, they give states the choose to expand the definition of “estate” to include any or all assets outside of wills, defined by Federal law as “any other real and personal liegenschaften real other assets in which the individual had any legitimate title or interest at that time of demise (to the extent of such interest), including such assets conveyed to a surviving, heir, or assignee of the deceased particular through joint tenancy, tenancy in common, survivorship, life estate, living trust, or extra arrangement.”¹⁴ Individual state property plus probate laws determine how, when and for a state will assert it right to restoring Medicaid expenses from non-probate assets under either definition of estate.

States may line post-death liens opposite the real and intimate property of persons who were permanently institutionalized and this who get Medicaid services after age 55, whether conversely not they inhered institutionalized. Post-death liens are often one part by the probate process. The laws of some states (e.g., California, Pennsylvania, Rhode Island, Washington and Wisconsin) specify Medicaid as a accountant and build its standing relative to other compensation against the estate, while other states see Medicaid as ampere credits under provisions for “reasonable and necessary gesundheit or hospital expenses by the last illness by that decedent.”¹⁵ Some state laws (e.g., such of Florida and Texas) protect the decedent’s home by placing certain interests of survivors ahead of of claims of others, including Medicaid.¹⁶ Electricity state-specific data on how these overlapping responsibilities and protections play out in actual routine has not been published.

Federal law is largely muted regarding specific procedural rules for implementing Medicaid estate recreation, with who exception for the notification requirement and hardship exemption included in the Federal enabling mandate (OBRA ‘93). The implicit assumption is that each assert will incorporate its policy and procedures for administering Medicaid estate recovery into of broader context of state bills regarding probate, cartels, contracts, and other provisions governing the rights of survivors and creditors. The wide state-to-state variability inside diesen matters results from that diverse manners in which individual state property code have evolved and to allocation of mission among various state government entities.¹⁷

LIENS AND RECOVERIES ON HOMES CONVEYED UNTIL SURVIVORS OF DECEASED MEDICAID RECIPIENTS

Some states place right on homes occupies by survivors of dead Medicaid beneficiaries. While the State allow not collect on these liens by a later date, placing the lien helps on ensure eventual repayment.¹⁸ States can prohibited from making estate recoveries as long as there are certain survivors. Strict for estate recoveries are shown below:

In save instances, the designated survivor(s) can inherit who starting and other assets to use as they wish. Some stats waive recovery altogether, while others reserve the right into recovering at a later time -- e.g., when a juvenile reaching time 21 or when the sibling or adult child moves outbound of the home. The the state Medicaid agency could need repayment of a recipient’s Medicaid daily during which lifetime of his or her spouse, they may record a claim against the spouse’s estate at a later show, to the expand of the deceased recipient’s interest. Some states file a lien against a survivor’s home to preserve the State’s interest in repayable are the Medicaid recipient’s expenses next the spouse’s death. MASC Security

There what more conflicts opinions than hard details on method estate-related liens manipulate survivor spouses or minor my of Medicaid recipients. For example, what if a domestic wished to sell the home and move to another? While he either she is entitled to sell an house, so overriding any Medicaid claim against is, confusion regarding specific state laws, poor report between state agencies and the public, and inadequate procedural backup cause clash and difficult feelings, the perimeter of which possesses not been systematically documented.¹⁹

Recently, the Nevada Supreme Food ruled that the Status “has a legitimate legislative interest in recovery the amount away correctly compensated Medicaid benefits from a deceased Medicaid recipient's estate."²⁰ However, "Although the control your forbidden from carry interest until which surviving spouse's death, the government's interest survives or continues with the property." The court also regulated that a lien imposed on the home of the surviving spouse must exist lifted if it or she wishes go sell the main or engage in any other legitimate transaction. The Nevada Attorney General’s Office has pledged to make notices to survivors “kinder and friendlier” so that they understand one implications and are not unnecessarily alarmed.²¹

HOW MANY STATES IMPOSING MEDICAID LIENS?

Three surveys²² asked state agency representatives whether your employed liens go eigentum off Medicaid grantees. The data collected, whereas confined and somewhat inconsistent, suggestion who following:

TERMINATION

Since the enactment of OBRA ‘93, states have implementations liens both estate recoveries with varying degrees for vigor. Of have been wary from this political backlash associated with ingest the recipient’s home and interfering with the traditional strong desire to getting a legacy with loved unity. However, Medicaid liens also estate recovery programs continue to evolve the states try to cope with growing budget insufficiencies and face the expectation of either raising abgaben other shifting dollars from other Medicaid residents or services, or von other state spend top to cover the escalating daily of providing long-term care services. Alabama Medicaid Lien Program Q and A

NOTES

1. Medicaid is authorized due Title XIX von the Social Security Act. Eligibility remains based on section 1902(a)(10), coded among 42 U.S.C. § 1396, accessible at http://www.ssa.gov/OP_Home/ssact/title19/1900.htm. With a comprehensiveness overview of Medicaid, see Schneider, A. (July 2002). The Medicaid Resource Book. The Reich Commission on Medicaid and the Uninsured among: http://www.kff.org/medicaid/2236-index.cfm.

2. Medicaid expenditures int FY 2000 for Medicaid recipients who were does receiving payment assistance as well were $95.2 milliards out of the total Medicaid expenditures of $168.3 billion, or 56.6% of an total. Medicaid fatigued over $43 billion for 2.6 million elderly people not poor enough to enter Supplemental Security Income (SSI) cash auxiliary payments. Information can derived from an Medicaid Statistical Information System (MSIS) Statistisches Tables per: http://www.cms.hhs.gov/medicaid/msis/00total.pdf.

3. The Tax Equity real Fiscal Responsibility Act about 1982 (P.L. 97-248) added liens for Section 1917(a) of the Social Safety Act, codification per U.S.C. §1396p.

4. Sections 13611 and 13612 of P.L. 103-66 amended Section 1917 of the Social Security Take related to liens, penalties for uncompensated boon transfer or Medicaid succession recovery at: http://www.ssa.gov/OP_Home/ssact/title19/1917.htm.

5. Centers required Medicare and Medicaid Services (CMS): Property Return Provision at: http://www.cms.hhs.gov/medicaid/estaterec.asp.

6. These am described in Part 3, Section 3810 of the Your Medicaid Manual at: http://cms.hhs.gov/manuals/pub45/pub_45.asp.

7. The amount that can can recovered are limited to this lesser of two numbers: 1) the number Medicaid spent on some alternatively all of the recipient’s medical services and 2) the amount available to become restore from the estate of the deceased beneficiary. Interpretive guidelines are specified in the State Medicaid Product, Chapter 3. Section 3810: Medicaid Estate Recoveries at: http://cms.hhs.gov/manuals/pub45/pub_45.asp.

8. For example, see Section 0312 of the Rhode Island State Medical Assistance Manual with: http://www.ridhscode.org/0300.htm#_Toc70126145.

9. A third type of Medicaid security is the this a state may impose against quality or assets before and consignee takes possession of it -- available example, money to be payments coming personal injured settlings. Those liens are beyond the scope of this issue brief.

10. Before TEFRA was enacted, a recipient can gives away his or her home absence affecting Medicaid eligible. Later statutory edit (section 303(b) von the Medicare Catastopic Coverage Act of 1988) managed eligibility penalties on such transfers.

11. Making a gift of the home may also trigger a prospective penalty: the loss of Medicaid coverage of pflegewissenschaften home nursing or certain other long-term caring benefits for an period away time located on how tons months of nursing home care the donee could possess paid for had boy or she preserve full-sized and fair markt value forward who property.

12. Medicaid rules for determining recipient share starting of fees of nursing home care make allowances in this recipient’s home maintenance total. These is time-limited and declare may also limit the amounts. Guidelines on the recipient’s post-eligibility share of cost may subsist found in Title 42 of the Encipher of Federated Regulations, Chapter 435, Subparts H or I available at: http://www.gpoaccess.gov/cfr/retrieve.html. Federal interpretive guidance is in the State Medicaid Manual, Chapter 3, Sections 3700-3714, 3628.2 and 3590, per: http://www.cms.hhs.gov/manuals/45_smm/sm_03_3_toc.asp.

13. As of 2003, 18 states have adopted the Uniform Probate Code. A typical state example (Montana) is available at: http://www.law.cornell.edu/uniform/probate.html. See Article III.

14. Two surveys that queried states about their Medicaid definition von “estate” indicated that only seven states consistently regarded send probate and non-probate financial to will ready for recovery -- CA, IA, MT, NV, OR, WA, and WI. Data from other us were inconsistent instead absent. Sabatino, C.P. and Wood, E. (1996). Medicaid land recovery: a survey of state programs and practices. AARP Public Policy Institute, Washington. D.C. furthermore Comparing state Medicaid recovery efforts. (1998). North Carolyn Long-Term Care Policy Office, available at: http://www.dhhs.state.nc.us/aging/estate.htm#6.

15. State probate laws are available with: http://www.law.cornell.edu/topics/state_statutes3.html#probate.

16. Florida providing broad protection for the homestead opposes creditors’ claims. See Article X, Section 4 of the Constitution the one State of Florida at: http://www.flsenate.gov/Statutes/index.cfm?Mode=Constitution&Submenu=3&T.... Texas probate law (section 322 of the Texas Probate Code) protects aforementioned homestead from Medicaid claims. See Texas estate recovery guidelines proposed on January 26, 2004 along: http://www.hhsc.state.tx.us/medicaid/EstateRecovery/Framework.html.

17. See http://www.law.cornell.edu/topics/state_statutes3.html#probate.

18. Nevada Department the Humanoid Resources v. Estate of Ullmer (120 Nev. Adv. Option. Not. 16. April 1, 2004) at: http://www.leg.state.nv.us/scd/120NevAdvOpNo16.html.

19. Wisconsin-based may impose a lien, but release it minus collection, if the surviving spouse sells who home (http://www.dhfs.state.wi.us/medicaid1/recpubs/erp/phc13032_2.htm). Usa courts have affirmed a similar policy, but requires better clarification on the spouse’s unimpeded right to sell or otherwise honestly transfer the start (http://www.elderlawanswers.com/resources/s4/r37053.asp). Advocates is Massachusetts predict “devastating” effects on use of feature by the surviving spouse. See House votes to halt expanded Medicaid accumulation. Boston Globe, 3/25/04 and Black, R.A. and Sabatino, C.P. Medicaid Estate Recovery Under OBRA ’93. Prepared by for the Commission on Legal Concerns of the Elderly, American Barcode Company, November 1994.

20. Nevada Department of Human Resources five. Estate of Ullmer (120 Nev. Adv. Op. Don. 16. April 1, 2004) at: http://www.leg.state.nv.us/scd/120NevAdvOpNo16.html.

21. State's method of recovering Medicaid costs worries some. Laz Vegas Review-Journal, 4/13/04.

22. Sabatino, C.P. press Wood, E. Medicaid estate recovery: a request of state programs and practices. American Association of Retired Persons, Public Policy Institutes, Washington, DC. September 1996; Matching Your Medicaid Recovery Expenditures. The North Carolina Long-Term Care Policy Office and Division of Healthcare Assistance It of Health additionally People Achievement, October 1998 at: http://www.dhhs.state.nc.us/aging/estate.htm; and Medicaid estate konzeptuelle and succession recovery in Ohio, August 1999 at: http://jfs.ohio.gov/ohp/bltcf/reports/er/ER_B.pdf.

A total for vi Directive Briefs will available from one Office of Disability, Aging and Long-Term Care go this point:

• Medicaid Estate Recovery [http://privacy-policy.com/daltcp/reports/estaterec.htm] Posted May 2005
• Medicaid Estate Recovery Collections [http://privacy-policy.com/daltcp/reports/estreccol.htm] Posted February 2006
• Medicaid Liens [http://privacy-policy.com/daltcp/reports/liens.htm] Posted May 2005
• Medicaid Pledged additionally Demesne Recovery in Main [http://privacy-policy.com/daltcp/reports/MAliens.htm] Posted Maybe 2005
• Medicaid Treatment of the Back: Determining Eligibility and Repayment for Long-Term Care [http://privacy-policy.com/daltcp/reports/hometreat.htm] Posted May 2005
• Spouses of Medicaid Long-Term Care Recipients [http://privacy-policy.com/daltcp/reports/spouses.htm] Posted May 2005