Medicaid’s Power to Recoup: Estate Recovery and Long-Term Care

Financing long-term services and supports (LTSS) presents a concern to older adults, lawmakers, and society at large. LTSS refers to those services that meet a person’s routine health and personal care needs when he no longer can perform these tasks on his own, often due to age or disability. Affording LTSS is a challenge, as few people have the necessary financial resources to meet its high costs, and many must eventually turn to Medicaid for help. Medicaid is the largest payer of LTSS, covering 43 percent of national LTSS spending in 2013 (Nguyen). Concerns arose over the sustainability of Medicaid’s role in financing LTSS in anticipation of an aging baby boomer population that will need LTSS. One solution intended to ameliorate LTSS financing is the Medicaid Estate Recovery Program (MERP), which requires states to recover payments from individual estates for long-term care services (Estate Recovery). However, this program which is characterized by Rachel Corbett as “Medicaid’s Dark Secret,” tends to bring more distress than actual revenue.

MERP intends to control LTSS costs by providing a way for states to recoup the money spent on a recipient’s care. Since the beginning of the Medicaid program in 1965, states have had the option to recover from the estates of deceased beneficiaries over age 65 when they received benefits (MACPAC).            However, the highly billed savings of estate recovery have yet to materialize.

In 2005, the AARP Public Policy Institute published a study analyzing the first decade of mandatory estate recovery. The study found that Massachusetts collected an average of $16,442 per estate in 2003; offsetting a little more than one percent of its LTSS costs in total. That one percent made its efforts among the most effective in the nation. In contrast, the average amount recovered from an estate in Kentucky was $93, representing just 0.25 percent of its LTSS costs. The total amount states recovered increased from $72 million in 1996 to $347 million in 2003. Nonetheless, estate recoveries accounted for less than one percent of Medicaid’s total nursing home costs in 2003. Corbett notes that the “overwhelming majority” of estates recovered under MERP are not worth the hundreds of thousands of dollars needed to make an impact on Medicaid LTSS spending.

MERP, thus, seems more punitive than economical. As described above, the average amount recovered from an estate is far from the amount needed to reimburse the billions of dollars spent on LTSS. Financing LTSS presents one of the greatest challenges our healthcare system will face in the upcoming years. While Medicaid has met this need for now, its role as the primary LTSS payer is unsustainable. MERP was billed as a solution to manage the strain LTSS puts on state and federal budgets, but the program, with its slim returns and human cost, is not the answer. A few states have already responded to these concerns by scaling back their estate recovery programs (Corbett). More state lawmakers should consider following their lead.