As an attorney who specializes in elder law, estate planning and Medicaid planning, clients frequently ask me, “Can Medicaid take a senior’s house to pay their nursing home bill?”
Medicaid is a complex program with overarching federal policies and unique state-level regulations. When it comes to Medicaid coverage for long-term care services and supports, there are several eligibility guidelines that apply specifically to seniors’ homes before the application process, during nursing home residency and after their death.
Long-Term Care Medicaid Guidelines for Homeowners
The basic rule is that a person's primary residence is an exempt asset and therefore will not be counted when they apply for Medicaid. However, when a senior specifically applies for Medicaid coverage of long-term care services, including nursing home care, their equity interest in their home must fall below $585,000 to be considered exempt in 2019. Some states, especially those with high property values, have chosen to raise this limit to $878,000. Equity interest is the Medicaid applicant’s interest in the equity value of the home (fair market value (FMV) minus any debts secured by the home).
If a Medicaid applicant is married and their spouse continues to live in the home (officially making them the “community spouse”), then the home is exempt regardless of its value. Furthermore, some states require that the Medicaid applicant indicate orally or in writing that they “intend to return” to their home should they ever become physically able to do so, regardless of how unlikely this may be. If the applicant is unable to understand or communicate this, then a family member can communicate this intention to the state Medicaid workers.
Note that, although the house may be exempt at the time the owner applies for Medicaid, a few states will begin to count the house once six months have passed, if it is clear the owner will never be able to return to the house based on a physician's examination and conclusion. However, this is the minority position. In most states the house will continue to be exempt for the duration of the Medicaid recipient’s lifetime.
Medicaid Estate Recovery and Home Ownership
Upon the death of a Medicaid recipient, the state may seek repayment of its outlays for the senior’s long-term care. This has become increasingly common as more seniors require long-term care but do not have the personal funds to pay for it. The Medicaid Estate Recovery Program (MERP) recoups this money by filing claims against any assets a Medicaid recipient held an interest in at the time of their death, such as a home. However, if a senior died without any assets (or with very few assets), then there is no way for the state to be repaid.
As a very basic example, say Mom was in a Medicaid-certified nursing home for two years and the state paid the nursing home $4,000 each month for her care. Once Mom passes away, MERP will file a claim against her estate in the amount of $96,000 ($4,000 x 24 months). If Mom’s house was still in her name at the time of her death, then to repay the state the $96,000, the house will have to be sold. Any amount of proceeds exceeding the $96,000 can then be distributed in accordance with Mom's will.
Each state handles MERP a little differently, and cases are often determined on an individual basis because they are so unique. I strongly advise families who are trying to achieve or maintain Medicaid eligibility for an aging loved one to seek out a reputable attorney with plenty of experience in Medicaid and estate planning strategies. Unless a senior has very low income and no assets, legal assistance is necessary to ensure all steps have been taken and prevent any surprises down the road.
In summary, the general rule is that, while a senior is alive, their home will not be “taken” or required to be sold to pay the nursing home or the state government. However, their home may need to be sold to repay the state after their death.