Established to offer one other supply of Medicaid funding and promote program integrity, the restoration of sure Medicaid prices after an enrollee dies (property restoration) has been criticized for a number of causes, together with that it falls totally on people with restricted incomes, raises little income, and is utilized very inconsistently throughout the states. Members of the family could also be unaware of the coverage on the time of enrollment and solely be taught that the household house could also be repossessed after the dying of a cherished one. Such criticisms have led to proposals (Field 1) that will modify or cut back the apply of property restoration by Democrats, Republicans, and the Medicaid and CHIP Fee and Entry Fee (MACPAC).
Property restoration is a course of that primarily impacts older Medicaid enrollees who use long-term providers and helps (LTSS). To be eligible for Medicaid protection of LTSS, individuals should often display having restricted incomes (sometimes under $3,000 monthly in 2024 for a person) and monetary sources (typically under $2,000 for a person), however some belongings, together with their house, are excluded from the calculation of monetary sources. Many individuals solely qualify after spending their belongings on the out-of-pocket prices for LTSS, which can simply exceed $100,000 per yr. The 1993 Omnibus Price range Reconciliation Act required state Medicaid packages to recuperate the prices of sure Medicaid advantages by way of a course of known as property restoration. Particularly, states are required to recuperate the prices of LTSS and associated hospital and prescription drug providers for Medicaid enrollees ages 55 and older; and have the choice to recuperate the prices for different providers and populations. States might not take the household house whether it is occupied by a partner, baby below the age of 21, baby who’s blind or has a incapacity, or a sibling with an fairness curiosity within the house, however they might place a lien on actual property for people who’re alive however completely institutionalized.
This problem temporary sheds mild on states’ insurance policies in the direction of property restoration, drawing from KFF’s Survey of Medicaid Monetary Eligibility & Enrollment Insurance policies for Seniors & Individuals with Disabilities which was carried out in March 2024 by KFF and Watts Well being Coverage Consulting. Total, 49 states and the District of Columbia (hereafter known as a state) responded to the survey, although response charges to particular questions assorted (Florida was the one state that didn’t reply).
Key takeaways embrace:
Over half of states reported utilizing property restoration for the prices of populations and providers for which federal regulation doesn’t require property restoration, with 28 states reporting property restoration for some people below age 55 and 32 states reporting property restoration for the prices of all Medicaid advantages for people ages 55 and older, and an extra 5 states reporting property restoration for some non-compulsory advantages (Determine 1).
Over half of states (30) reported utilizing property restoration to recoup the prices of premiums paid to managed care organizations on behalf of Medicaid enrollees.
Federal regulation requires states to ascertain procedures for waiving property restoration when restoration would trigger hardships, however there are not any particular procedures required. States reported waiving property restoration below the next circumstances: when the person meets state-defined hardship necessities (49 states), if the property is the only income-producing asset of survivors (35 states), and when the house is of modest worth (15 states). (The definition of “modest worth” varies by state and will mirror greenback values, market worth relative to native property values, or different measures.)
Why was property restoration established and why is it a supply of concern for policymakers?
Property restoration was established as a instrument to advertise program integrity and make sure that individuals contribute to the prices of their well being care. Individuals should usually have very restricted earnings and belongings to qualify for Medicaid, however the worth of the house just isn’t counted in the direction of the preliminary eligibility willpower. Most eligibility pathways for individuals who use LTSS require individuals to have incomes below $3,000 every month and solely $2,000 of financial savings for a person or $3,000 for a pair. Regardless of stringent monetary eligibility ranges, some individuals with reasonable incomes throughout their working years might turn out to be eligible for Medicaid throughout their retirement years in the event that they want LTSS. Most Medicare beneficiaries stay on fastened incomes, with half dwelling on incomes under $36,000 per yr and half having financial savings under $103,800 in 2023. The excessive prices of LTSS, simply exceeding $100,000 per yr, might trigger individuals to qualify for Medicaid after exhausting their financial savings even when they stay in a house of some worth. Proponents of property restoration have indicated that it ensures Medicaid funding is used for essentially the most needy, prevents individuals from counting on Medicaid as an alternative of utilizing their private sources to pay for LTSS, and permits states to spend extra on different Medicaid bills. States are additionally required to ascertain a cost-effectiveness threshold, which determines whether or not the worth of the property is price efficient relative to the executive prices of restoration; and is meant to preclude states from pursuing small estates.
Property restoration is a supply of concern to some policymakers as a result of it disproportionately impacts low-income households, creates excessive administrative prices relative to the income generated, and will deter eligible individuals from making use of for Medicaid. A 2021 report back to Congress by MACPAC summarizes these issues, which embrace:
Medicaid enrollees are usually low-income and property restoration might perpetuate intergenerational poverty.
People with larger consciousness of property restoration and sources are sometimes in a position to leverage authorized mechanisms permitting them to bypass Medicaid property restoration however protect Medicaid eligibility. People with fewer sources or solely a household house typically don’t have the earnings to rent an lawyer to assist implement such methods.
Property restoration ends in administrative prices to states that would exceed the worth of the collections.
Property restoration raises comparatively few revenues: $733 million in 2019, which offset 0.1% of the over $600 billion that Medicaid spent in 2019. Even in states with the best relative restoration revenues, these revenues offset lower than 1.0% of the states’ Medicaid spending.
Property restoration might deter some individuals from making use of to Medicaid who’re eligible even when they’d not be topic to property restoration. For instance, Medicare beneficiaries who’re solely eligible for Medicaid protection of Medicare premiums and value sharing wouldn’t be topic to property restoration, however restricted understanding of this system might forestall them from making use of.
States’ use of property restoration varies significantly, with a small variety of states accounting for a lot of the collections. 5 states (Massachusetts, New York, Pennsylvania, Ohio, and Wisconsin) with the most important property recoveries accounted for almost 40% of all collections in FY 2019, the newest yr for which knowledge are publicly obtainable about all states’ collections. The identical report confirmed survey knowledge for 10 states, with these states reporting various numbers of estates pursued, estates recovered, and the quantities recovered per state. Alaska pursued the fewest estates of the responding states (below 500 per yr). On the different finish of the spectrum had been Iowa (pursuing over 15,000 estates every year) and New York (pursuing round 30,000 per yr). The common quantity recovered per property ranged from round $5,000 or much less in Missouri and Wisconsin to $30,000 per yr or extra in Alaska and Georgia.
Field 1: What are the present coverage proposals to get rid of or cut back states’ use of property restoration?
Democrats, Republicans, and the Medicaid and CHIP Fee and Entry Fee (MACPAC) have all proposed adjustments to the property restoration program. Such proposals embrace the next:
H.R. 7573 – Cease Unfair Medicaid Recoveries Act: H.R. 7573 would get rid of property restoration packages completely.
H.R. 8094 – To amend title XIX of the Social Safety Act to change sure asset restoration guidelines: H.R. 8094 would prohibit states from conducting property restoration in instances the place the household house is transferred to a different one that is eligible for Medicaid or has earnings under 138% of the federal poverty stage.
MACPAC – Medicaid Property Restoration: Bettering Coverage and Selling Fairness: MACPAC beneficial three legislative adjustments to Title XIX of the Social Safety Act. These adjustments embrace making property restoration non-compulsory for states, permitting states that present long-term providers and helps (LTSS) by way of managed care plans to recuperate the prices of providers used somewhat than the prices of the premiums the state paid, and directing the Division of Well being and Human Providers to ascertain minimal requirements for hardship waivers. Minimal requirements for hardship waivers would forestall states from pursuing restoration for belongings which might be the only income-producing asset of survivors, properties of modest worth, and estates valued below a sure threshold.
When does Medicaid property restoration apply?
States should conduct property restoration for some providers and enrollees however might select to use property restoration in extra circumstances, which contributes to the variation in what number of estates are pursued and the quantity states are recovering. Property restoration is required for enrollees ages 55 and older who use LTSS, together with enrollees eligible for Medicaid by way of the Inexpensive Care Act’s Medicaid enlargement. For individuals ages 55 and older who use LTSS, states should recuperate the prices of nursing facility providers, home- and community-based providers (HCBS), and associated hospital and prescription drug providers (outlined as these providers offered throughout a nursing facility keep or whereas receiving HCBS). States might elect to recuperate the prices of all Medicaid-covered providers. They might additionally elect to conduct property restoration for people who’re below the age of 55 if they’ve been decided to be completely institutionalized.
Most states apply property restoration past the federally-required circumstances: 37 states apply property restoration to providers for which it’s non-compulsory and 28 decide everlasting institutional standing for people below age 55 (Appendix Desk). For people below age 55, property restoration most ceaselessly applies to individuals in nursing services and in intermediate care services for people with mental disabilities. Among the many states making use of property restoration for non-compulsory providers, 5 states reported making use of it to some non-compulsory providers and 32 states reported making use of it to all Medicaid-covered providers, however a number of states famous that restoration might solely happen if LTSS providers had been additionally rendered.
For individuals enrolled in managed care, property restoration relies on the premium funds states make somewhat than on the providers individuals use, which suggests some persons are topic to property restoration regardless of not utilizing relevant providers. When states present advantages by way of managed care, states are required to hunt restoration for the premiums paid if the enrollee would have been topic to property restoration below a fee-for-service system. If the state recovers the prices of all Medicaid providers, property restoration should apply to the total Medicaid premium. If the state solely recovers the prices of a subset of advantages, property restoration should apply to the portion of the premium attributable to these advantages.
Over half of states apply property restoration to the prices of managed care premiums. Among the many 27 states with capitated managed care that features LTSS, 11 states pursue property restoration for your complete premium for individuals who use LTSS, and 10 states recuperate your complete premium for everybody enrolled within the plan. Fewer states (5) pursue solely the premium attributable to LTSS used. Pennsylvania reported a novel method, taking the smaller of the premium or the quantity of declare spending on LTSS and associated providers every month. There isn’t a restoration for months with out LTSS spending. Amongst states with stand-alone LTSS managed care plans, 8 states recuperate your complete premium however just for individuals who use LTSS and 5 states recuperate your complete premium for everybody enrolled within the plan. Indiana’s managed LTSS program started in July 2024 and the state will pursue restoration for your complete capitation and every other quantities paid.
When do states waive property restoration necessities?
Federal regulation requires states to waive property restoration necessities once they impose “undue hardships,” however doesn’t specify what constitutes a hardship, resulting in important variation in when states waive property restoration. Steering from the Facilities for Medicare and Medicaid Providers (CMS) gives three examples of potential hardships which embrace:
Property is sole income-producing asset of survivors similar to a household farm;
House is of modest worth, outlined as roughly half the typical house worth within the county; or
Different compelling circumstances.
The variable method to hardship waivers has raised fairness issues as a result of the convenience with which they’re granted varies throughout states. In some states, securing a hardship waiver might require an lawyer, and the households with the fewest sources are least doubtless to have the ability to afford such providers. Within the 10 states included in MACPAC’s survey, the share of hardship purposes granted in 2019 ranged from 29% in New York to 95% in Iowa.
In KFF’s survey, almost all states (49) reported adopting no less than one of many three potential hardship exemptions in CMS steerage, with the most typical being to waiver the property if it was the only income-producing asset of survivors (Appendix Desk). Particularly, 35 states reported utilizing the income-producing asset standards, though Arizona additionally required that the inheritor should personal a enterprise positioned on actual property that’s a part of the property and Georgia limits the hardship to farms with annual earnings of $25,000 or much less. Washington doesn’t waive restoration, solely delays, when hardship exists. Standards for delaying restoration embrace estates which might be the only income-producing property of survivors, when restoration would deprive the inheritor of shelter they usually can’t afford various shelter, and when the survivor is a state-registered home accomplice.
Solely 15 states reported waiving property restoration for properties of modest worth however the definition of “modest” was unclear in lots of instances. Solely 4 states reported greenback thresholds to outline “modest,” together with: West Virginia $50,000 or much less; Texas lower than $10,000; Mississippi and North Dakota, lower than $5,000. Seven states (California, Louisiana, Michigan, New Mexico, New York, South Carolina, and Virginia) outlined modest worth as one whose market worth is 50% or lower than the typical or median worth of properties in a county. Different states used extra assorted approaches together with the next.
Two states (Arkansas and Maine) waive property restoration when it’s not price efficient however didn’t present one other definition for properties of modest worth.
In some instances, states reported exempting parts of the house for all descendants. For instance, Louisiana exempts both the primary $15,000 or half of the median worth of a house throughout the parish from the homestead and South Carolina exempts 50% or much less of the typical house worth inside a county from the house’s worth. Such exemptions would additionally preclude property restoration for properties below these exemption ranges.
Hawaii and Vermont didn’t describe basic definitions of modest worth, however each have exemptions that mirror the worth of the house in circumstances when heirs cared for the descendent previous to their dying.
Most states (40) described different circumstances that will set off a hardship exemption. Lots of these circumstances associated to federal insurance policies similar to exempting properties that had been occupied by surviving minors and when the property is the only income-producing asset of a household enterprise. The most typical different exemptions included these for heirs who had offered care within the house for enrollees previous to their dying and exemptions that thought-about the earnings and sources of the inheritor. Idaho, Ohio, and Wisconsin waive property restoration when it could end result within the survivor turning into eligible for Medicaid or different public help.
This work was supported partially by Arnold Ventures. KFF maintains full editorial management over all of its coverage evaluation, polling, and journalism actions.
