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In August 1993, Congress passed an economic package that contained new requirements on the state’s Medicaid program. The federal law requires each state to establish an "estate recovery" program. This program will allow the state to recover the cost of Medicaid benefits from the estates of nursing home residents and other recipients who use long term care services. The state will be collecting recipient’s property after their death.

For many recipients, it will convert Medicaid from a health benefits program into a loan program.

The federal law took effect on October 1, 1993, but states were given until January 1, 1995, if state laws needed amendment. The federal agency issued written instructions to the states in September, 1994, explaining what the estate recovery program can do. However, many questions remain about what king of program can be implemented.

In 1994, the director of the Michigan Department of Social Services (now known as Community Health {MDCH} the state agency which runs the Medicaid program) told the federal agency which administers the Medicaid program that Michigan will not implement an estate recovery program until the Michigan Legislature enacts a program defining what the program will do. No legislative hearings were scheduled.

The timetable for when Michigan will have an estate recovery program is not al all clear.

The Michigan Legislature had told the MDCH that it must conduct public hearings before any estate recovery program is implemented.

This bulletin explains the federal law, information shared by state and federal officials, and actions you can take to help ensure that Michigan does not establish a punitive program.

The federal law requires Michigan and every state to "recover" Medicaid benefits from persons 55 years and older receiving long-term care services at home or in a nursing home. The State is operating programs (Medicaid Home and Community Based Waiver Services) in all counties that allow people to receive Medicaid-funded long-term care services at home rather than in a nursing home. Estate recovery will apply to these recipients of in-home health services.

Estate recovery will also apply, regardless of age, to people in nursing homes, intermediate care facilities for the mentally retarded, or other medical institutions if the State determines they will not be able to return home. Government officials have suggested that a physician should determine whether a nursing home resident is able to go home.

Although it is not required to do so, Michigan can apply estate recovery to all other Medicaid benefits for all recipients over 55.

According to federal law, the State must minimally file claims in probate court against the estates of deceased recipients to recover Medicaid benefits.

Federal law allows the State to place liens on property and to seize anything owned by the recipient at the ‘time of death.’ Some estates are using that language to take trust accounts, bank accounts, and other property, even if other names are on those accounts. State laws would have to be changed before the liens could be used or other property taken.

Implementing estate recovery will require a system of tracking assets as well as the deaths of Medicaid recipients. The state will hire more state employees. Employees may be assigned to monitor deaths by reviewing obituaries and other records. Nursing homes and other health care providers or banks, funeral directors, and insurance companies may be required to report all deaths to a recovery unit with MDCH.

State officials have not determined how much the estate recovery program will cost. There are varying estimates on how much money will be recovered but at one time the Governor’s budget for fiscal year 1995 estimated that $3.8 million would be recovered from October 1, 1994 through September 30, 1995.

It is not clear how or when recipients will be notified. MDCH had indicated that 30 days written notice would be given to all current Medicaid recipients. Federal officials have explained that notices would be required for applicants for Medicaid program and before any property could be taken or any lien placed on a home.

It is questionable whether the State can implement estate recovery at all without first passing state laws. The former MDCH director and the Governor announced that the state Legislature would have to act before establishing an estate recovery program.

No, but Michigan will have some kind of program unless Congress changes the law.

CBC and other organizations oppose estate recovery because:

1. It creates incentives for financial exploitation of the elderly as they are encouraged to give away their property to avoid estate recovery. Some people will be taken advantage of by others and left without the resources to meet their own needs.
2. It will decrease the value of the housing stock, as it reduces incentives for families to pay property taxes and maintain homes during a relative’s nursing home stay or extended illness. Neighborhoods will suffer as houses are abandoned.

 

3. It may deprive people of using their home to

obtain needed funds. For example, a surviving spouse may not be able to obtain certain types of loans or grants if the State has placed a lien on the home.

4. It may not recover much, if any, money. Many states with estate recovery programs have found them expensive to operate. For example, Colorado advocates report that their four year old program has yet to recover the costs of running the program. As noted earlier, the program will likely reduce the value of homes and the amount of property taxes paid.
5. It will take money from consumers and give it to nursing homes and health insurance companies. Reducing the availability of Medicaid will force people to pay nursing homes at higher, unregulated private rates or to buy sometimes worthless long term health care insurance. While this will create a windfall for nursing homes and health insurance companies (the major advocates for estate recovery), it will take money away
6. from consumers that they need for other purposes.
7. I will deprive lower income families of needed resources, as the home is often a resource they use to sustain or improve their economic standing.
8. It will increase distrust in government and citizens will wonder why it is spending money to take their homes instead of funding a decent long term care system.

While federal law currently requires Michigan to have an estate recovery program. Michigan officials will decide how the program will work, who will be affected, and when it will start. We urge you to contact state and federal officials and let them know your opinions.

CBC will be asking members of the Michigan Congressional delegation to repeal the law that requires Michigan to have an estate recovery program.

CBC will be asking state officials to:

1. Hold hearings around the state so that the public has an opportunity to voice its opinion to state and federal officials.
2. Keep estate recovery as limited as possible, to reduce hardship and the negative effects discussed above.
3. Urge Congress to repeal the federal mandatory requirement for which forces Michigan to have an estate recovery program and find a legitimate way of funding long-term care services.

Rev: 02/04

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