Federal law requires the state to attempt to recover the long-term care benefits from a Medi-Cal recipient’s estate after the recipient’s death. If steps aren’t taken to protect the Medi-Cal recipient’s house, it may need to be sold to settle the claim.
For Medi-Cal recipients age 55 or older, states must seek recovery of payments from the individual’s estate for nursing facility services, home and community-based services, and related hospital and prescription drug services. States also have the option of recovering all Medi-Cal benefits from individuals over age 55, including costs for any medical care, not just long-term care benefits.
There are a few exceptions. The state cannot recover from the estate of a Medi-Cal recipient who has a surviving spouse until after the spouse passes away. After the spouse dies, the state may file a claim against the spouse’s estate to recover money spent for the Medi-Cal recipient’s care. The state also cannot recover from the estate if the Medi-Cal recipient had a child who is under age 21 or a child who is blind or disabled.
While states must attempt to recover funds from the Medi-Cal recipient’s probate estate, meaning property that is held in the beneficiary’s name only, they have the option of seeking recovery against property in which the recipient had an interest but which passes outside of probate (this is called “expanded” estate recovery). This includes jointly held assets, assets in a living trust, or life estates. Given the rules for Medi-Cal eligibility, the only probate property of substantial value that a Medi-Cal recipient is likely to own at death is his or her home. However, states that have not opted to broaden their estate recovery to include non-probate assets may not make a claim against the Medi-Cal recipient’s home if it is not in his or her probate estate.
In addition to the right to recover from the estate of the Medi-Cal beneficiary, state Medi-Cal agencies may place a lien on real estate owned by a Medi-Cal beneficiary during his or her life unless certain dependent relatives are living in the property. The state cannot impose a lien if a spouse, a disabled or blind child, a child under age 21, or a sibling with an equity interest in the house is living there.
Once a lien is placed on the property, if the property is sold while the Medi-Cal beneficiary is living, not only will the beneficiary cease to be eligible for Medi-Cal due to the cash from the sale, but the beneficiary would have to satisfy the lien by paying back the state for its coverage of care to date. In some states, the lien may be removed upon the beneficiary’s death. In other states, the state can collect on the lien after the Medi-Cal recipient dies. Check with your attorney to see how your local agency handles this.
There are some circumstances under which the value of a house can be protected from Medi-Cal recovery. The state cannot recover if the Medi-Cal recipient and his or her spouse owned the home as tenants by the entireties or if the house is in the spouse’s name and the Medi-Cal recipient relinquished his or her interest. If the house is in an irrevocable trust, the state cannot recover from it.
In addition, some children or relatives may be able to protect a nursing home resident’s house if they qualify for an undue hardship waiver. For example, if a Medi-Cal recipient’s daughter took care of him before he entered the nursing home and she has no other permanent residence, she may be able to avoid a claim against his house after he dies. Consult with your attorney to find out if the undue hardship waiver may be applicable.