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Medicaid Estate Recovery: Explanation, Process, & How to Avoid


Medicaid is a government program that provides healthcare benefits and financial assistance for low-income individuals including children, parents, seniors, and people with disabilities. The program is jointly funded between the states and federal government, and each state operates their own Medicaid program with unique benefits available for eligible individuals.

While Medicaid benefits vary by state, most offer assistance with long-term care or assisted living costs. For seniors, the cost of care can range from $1,625 to $9,500 per month and is expected to get more expensive in correlation with inflation. As a result of the high cost of care, many seniors rely on Medicaid to help pay for the services they need. However, in some circumstances the state will seek repayment after the death of the recipient through the Medicaid Estate Recovery Program, which could mean taking away the person’s home.

To avoid Medicaid Estate Recovery, we’ll explain everything you need to know about the program including what it is, how it works, and how to avoid states taking your assets.

What is the Medicaid Estate Recovery Program?

The Medicaid Estate Recovery Program, sometimes referred to as MERP or MER, is a state run program that collects repayment for services utilized by someone enrolled in Medicaid. Each state has their own MERP laws, but in general, the state will seek reimbursement by filing a claim on the recipient’s estate after they die. The person’s estate includes any assets they own such as their home, money, investments, jewelry, vehicles, and other things of value. Through the Medicaid Estate Recovery Program, the state can collect repayment directly through the deceased individual’s cash or force the sale of their assets to recover costs. 

How Does the Medicaid Estate Recovery Program Work?

After the death of a Medicaid recipient, the state will send a letter to beneficiaries of the deceased or the executor of the person’s estate. The letter will request reimbursement for long term care costs paid for by the state, although the amount the state attempts to collect will vary based on state laws and preferences. For example, Texas will not seek recovery for an estate worth less than $10,000 while Georgia will not seek recovery for an estate worth less than $25,000. Additionally, some states will only collect from a person’s probate estate, which includes assets that pass through probate, and do not name a specific beneficiary.

In addition to a claim against a person’s estate, states may also seek recovery by placing a lien on a person’s real estate including their home. Placing a lien on a home allows it to be used as collateral and prevents it from being sold without repaying the debt. When the home is sold, the state will collect from the sale proceeds.

Who Does the Medicaid Estate Recovery Program Affect?

Medicaid estate recovery applies to all Medicaid recipients age 55 or older who receive benefits from the state, excluding individuals who leave behind one or more of the following:

  • A surviving spouse
  • A child under the age of 21
  • A blind or disabled child (of any age)

Depending on the state you live, other factors may affect whether the state will seek recovery through MERP and the amount they attempt to collect.

How to Avoid Medicaid Estate Recovery

Individuals who wish to avoid the state filing a claim on their assets have a few options to avoid MERP. 

Give Away Assets

MERP works by seeking repayment from the assets included in a deceased person’s estate, so one option to avoid recovery is by giving away assets before you die. Since Medicaid estate recovery can only occur after a person dies, recipients can transfer ownership to beneficiaries prior to their death to avoid the state taking them. However, individuals giving away assets should be cautious because there is a five year look back period that can result in a penalty which would make them ineligible for Medicaid for a period of time. You may be able to give away assets and avoid MERP through special actions with help from a lawyer. For example, some states allow residents to transfer real estate without going through probate using a Lady Bird deed or Transfer on Death deed for the person’s home.

Irrevocable Trust

Medicaid recipients can avoid recovery by placing their assets in an irrevocable trust, which is a type of trust that cannot be changed or canceled. When an individual signs an irrevocable trust, they give up control of those assets which would protect them from MERP. 

Undue Hardship Waiver

An individual may be able to prevent Medicaid estate recovery if they can prove that doing so would impose hardship upon beneficiaries. States may waive their recovery if the deceased individual’s beneficiaries have limites income and the estate is their sole income source, such as a family business.

Opt Out of Medicaid

If a senior is enrolled in Medicaid for the sole purpose of funding long-term care or healthcare costs, another option to avoid MERP is to opt out of Medicaid and seek funds from other sources. Qualifying for Medicaid may involve spending down to meet eligibility requirements which may be unappealing, and coupled with MERP — some people may question whether applying for Medicaid is worth the trouble.

Instead of relying on Medicaid, look into alternative ways to fund medical expenses such as utilizing a reverse mortgage or selling your life insurance policy.

Avery Logan

Avery Logan

Avery Logan is a writer for Harbor Life Settlements with expertise on insurance, finance, and senior care. He specializes in breaking down complex subjects in a way that's easy for people to understand so they can feel informed about what they're reading.

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