State may go after estate to fund care; Homes of those who use Medicaid are fair game after death

10:19 PM CST on Sunday, February 27, 2005
By BOB MOOS / The Dallas Morning News
Beginning Tuesday, older Texans who apply to Medicaid for long-term care will need to read the fine print.
The state may try to get its money back from their estates once they die.
"These seniors are going to have to understand the long-term financial consequences for their families," said Anne Dunkelberg, assistant director of the Center for Public Policy Priorities in Austin.
Congress, grappling with soaring Medicaid costs, required all states to implement "estate recovery" programs 12 years ago.
Texas, where belief in property rights runs strong, is one of the last to comply.
The program's launch this week pits people who believe the law promotes taxpayer fairness against critics who fear it will deny heirs their rightful inheritances.
Though experts characterize the Texas Health and Human Services Commission's rules as among the most lenient in the nation, the program could affect tens of thousands of families that don't do estate planning.
Medicaid is the biggest safety net for older people in long-term care, Ms. Dunkelberg said. Seven of 10 Texas nursing home residents – or about 60,000 people – depend on the federal-state health care program each month.
"When an elderly parent begins to decline, many families are surprised to discover that Medicare doesn't cover custodial care," said Trudi Matthews, a health policy expert for the Council of State Governments.
$40,000 a year for care
Long-term care averages $40,000 a year, so even people with a hefty nest egg for retirement quickly deplete their savings and become eligible for Medicaid, she said.
But because Medicaid exempts houses and certain other assets when applicants sign up for benefits, "it's possible for someone with a very nice home to collect public dollars for his long-term care," Ms. Matthews said.
The thought of subsidizing seniors who still own comfortable houses has fueled support for recovering tax dollars after death, she said.
Under Texas' program, the state can file a claim in probate court against the estate of a Medicaid beneficiary older than 55 who applied for long-term care benefits on or after March 1. The estate includes the home and any other assets that remain.
State officials emphasize that the new rules don't cover anyone now on Medicaid.
They also say they won't file a claim if there's a surviving spouse, a child under 21, a child of any age with a permanent disability or an unmarried adult child who's lived in the beneficiary's home for at least a year.
Other relatives may seek hardship waivers to ward off the state's recovery efforts, and state officials say they'll consider those on a case-by-case basis.
"The Medicaid dollars we recover will be plowed back into long-term care," said Don Rogers, a spokesman for the Texas Department of Aging and Disability Services, which will administer the program.
Mr. Rogers said the state has no estimate of how much it will recover. Experts familiar with other programs said Texas can expect to reap about $8 million annually within several years, though they warn that state-to-state comparisons are unreliable because programs vary widely.
Recovery average: 1%
The national average for estate recovery has been less than 1 percent of overall Medicaid spending. Even so, almost all states are leaving no stones – even gravestones – unturned when searching for ways to pay for long-term care.
Long-term care costs Texas about $2 billion a year and accounts for about 30 percent of the state's Medicaid spending, according to the Health and Human Services Commission.
People who work with Texas seniors disagree about the merits of the new rules.
Lynda Ender, chairman of the Texas Senior Advocacy Coalition, said the state is being a good guardian of taxpayers' money.
"We're strapped for Medicaid dollars in this state – many seniors are having to wait for at-home care," she said. "Estate recovery will produce some revenue that may make that care more readily available."
Patricia Sitchler, president of the Texas chapter of the National Academy of Elder Law Attorneys, says the rules are hardhearted.
"One way families improve their economic standing is for elders to pass on something to the next generation," she said. "The state's new rules will take that opportunity away from many Texas families."
Hardship waivers
Some senior advocates say the state was careful to make allowances for lower-income families.
"These rules have been misportrayed as seizing the homes of poor folk – that's just not true," said Bruce Bower, director of advocacy and client services with the Texas Legal Services Center. "There will be no liens against homes."
The hardship waivers are among the most generous of any state's, he said.
Texas will exempt $100,000 of a homestead's appraised value in lower- and middle-income families and exclude farms and ranches that provide at least half of families' livelihood, Mr. Bower explained.
But specialists in elder law warn that the exemptions are narrowly drawn and that much property will be subject to recovery, particularly in the state's urban areas, where home values generally are higher.
"Many older Texans will be tempted to transfer their property directly to their children to avoid falling under the estate recovery law," said H. Clyde Farrell, an elder law attorney in Austin.
Yet that has its own risks, especially if the children get into financial trouble and have to sell the house, Mr. Farrell said.
"The family would have escaped the state's grasp, but it still would be left with nothing," he said.
Elder law attorneys urge older adults and their families to seek professional help to find legal ways to protect their assets.
"One is to transfer the homestead into a revocable trust," Mr. Clyde said. "After death, the title passes to the heirs. And because the property doesn't go through probate, it won't be subject to recovery."
Avoiding Medicaid
Both critics and supporters agree that estate recovery may cause families to think twice about applying for Medicaid when an elder requires long-term care.
"I'm advising clients to avoid using Medicaid, if they can, by purchasing long-term care insurance or better managing their assets," Mr. Clyde said.
Mr. Bower of the Texas Legal Services Center believes estate recovery will give families another incentive to care for elders themselves.
"As long as the family is capable, that would be good," he explained. "Some adult children have been too eager to put Mom or Dad in a nursing home and let Medicaid foot the bill."
Some health policy experts say the contentious debate over estate recovery laws shows how poorly this nation has prepared for the long-term care of its aging population.
"The only publicly financed system we have for paying for long-term care is Medicaid," Ms. Matthew said. "A system that was meant to be a safety net for the poor has turned into a middle-class entitlement."
Taxpayers can't sustain the current system, she said.
Nationally, Medicaid spending has increased 63 percent in the last five years, and the Congressional Budget Office projects it will grow an average of almost 8 percent annually in the next decade.
Policy experts say the nation needs a comprehensive solution to the mounting costs of long-term care.
"Someone's nursing care can easily approach six figures," Ms. Matthews said. "What will we do when 76 million baby boomers begin to require it?"