Medicaid Myths Part Three: Estate Recovery
Myth: “I heard I have to turn over my home to the state in order to get Medicaid.”
This fear, or something similar that involves worry that the state will swoop in and take property, furnishings, car, or home out from under a person who needs Medicaid, is common among clients who come in to see me. It is a myth, based on a misinterpretation of Wisconsin’s Medicaid recoupment law.
The truth is that you never have to give up your house to qualify for Medicaid. In most cases, the home will be a resource that does not count in the Medicaid eligibility process. It’s often unfortunate that people have been given bad advice to sell their homes and use the proceeds to pay for nursing home care before applying for Medicaid, when they may have been able to qualify while still owning the home.
Truth: You never have to give property to the state as a condition of Medicaid eligibility. Period.
That being said, if you receive Medicaid in a nursing home, or hospital where you have been there for more than 30 days, AND you own a home, AND there is no reasonable likelihood that you will ever return home, the state may be able to place a lien on your home. This does not apply in all cases, however. For example, if a spouse lives in the home, the state may not obtain a lien. There are other exceptions as well.
If the state is allowed to place a lien on your home, then the lien could be enforced if, for example, the house is sold in the probate of your estate.
The lien cannot be enforced if certain people are living in the house, such as a child who lived with and took care of you for two years prior to the time you went into the nursing home, and who continues to live in the home.
Allowing a lien to be placed on the home is not the worst thing in the world. This is because the lien is for the cost of nursing home care at the Medicaid rate. Compare the following:
Joe’s house is worth $200,000 free and clear.
If Joe sells his house and uses the proceeds to pay for nursing home care at the private pay rate of $9,000 per month, he will exhaust the proceeds in about 22 months. There will be nothing left.
However, if he keeps the home and it is considered exempt because he intends to return home (even if that intent is not reasonable) then he can qualify for Medicaid without selling the home. At some point, a lien will be placed on the home. 22 months of care at the Medicaid rate of about $5,500 is $121,000. The lien would be based on the Medicaid rate. After the same amount of time has elapsed, if Joe chooses Medicaid even with the lien, he still has $79,000 worth of equity in his home. This increases the chance that if he dies, there will still be equity in the home to leave to his heirs.
The takeaway is this:
1) If worry about the state taking your house is preventing you from considering Medicaid, that worry may be based on a myth.
2) If a caseworker or nursing home social worker tells you that you have to sell the house to pay the nursing home, get a second opinion. Selling the house will lead to you paying the nursing home at a higher rate than if you kept the house.
You can learn the truth by talking with an elder law attorney.
