Medicaid Payback

Recently I’ve found myself answering questions about Medicaid payback. This is an aspect of Medicaid planning, and needs to be considered in that context – not as a stand-alone concern. However, it’s easier to explain what it is in a few paragraphs than delve into the complexity of Medicaid planning.

What is Medicaid Payback? In a nutshell, if the state is paying for an individual to receive any type of services (healthcare, home and community-based programs, etc…); the state is required to recover those expenses from the estate of the individual. There are limitations to this recovery, “States may not recover from the estate of a deceased Medicaid enrollee who is survived by a spouse, child under age 21, or blind or disabled child of any age. States are also required to establish procedures for waiving estate recovery when recovery would cause an undue hardship” (Medicaid.Gov).

To be eligible for Medicaid individuals need to meet income and resource limits, showing they cannot afford to pay for the afore-mentioned services on their own (Medicaid Eligibility). The state will provide the family with an accounting of what is owed, however if the individual or the individual’s estate does not have enough to pay it all back it will not carry forward to the family. Because we’re discussing just eligibility through disability, I will not be reviewing the 5 year look back or related strategies.

It’s important to note – the new ABLE (Achieving a Better Life Experience) Act has a provision requiring Medicaid payback. So although the money in the account will not affect Medicaid eligibility (> $100k it’s suspended but not lost); when the account holder passes away any money remaining in the account will need to be applied towards the Medicaid payback before paying out to beneficiaries. Some may say “this isn’t fair”, so let’s explore that. If you were paying 100% of someone’s medical expenses, most of us would want to be paid back. And since Medicaid is a social services program, it’s funded by our tax dollars – so in effect we’re all getting paid back; at least in the sense the money coming back in reduces the amount needed to be raised through taxes (the only way for governments to raise money).

Some special needs trusts have the same provision – specifically first party special needs trusts. Why? Well, a first party trust is established using resources an individual with special needs owns – unlike a 3rd party special needs trust which is established for their benefit using someone else’s resources (Special Needs Trusts). This could be an improperly titled inheritance (making the individual the beneficiary instead of the 3rd party trust), a divorce settlement, lawsuit settlement, etc… This is not limited to children with Special Needs.

In my opinion, there is nothing wrong with the Medicaid payback provision – I don’t think it’s something to be overly concerned about; because at the end of the day the individual is receiving the services they need giving the families some peace of mind. If you would like to avoid the payback, then pay for the services out of pocket. This would allow any remaining assets to pass to you, although you may find yourself spending much more than you’ll receive; especially if the care takes place for years.

 

 

 

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Author: Eric Jorgensen

I am a retired, widowed, disabled veteran who has a son on the Autism spectrum. I have learned, and accepted, I am owed nothing. I'm a proponent for people taking responsibility for their own actions, and making changes to their circumstances if they're not happy. My mission is to help people help themselves, by raising awareness of resources available, pointing them in the right direction; and being a coach, mentor, cheerleader. I'm starting the Christine Jorgensen Foundation - which will pay for therapies (speech, physical, occupational, etc...) for those that have been declined by insurance or need more than approved for - on a referral only basis.

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