If you enter the nursing home for long term care, you will likely need Medicaid to pay the bill. After you die Medicaid will want every dollar, dime, nickel and penny paid back. Blame Medicaid Estate Recovery. It doesn’t matter if you served our country, paid all your taxes and committed no crime – unless getting old is a crime – you will lose your home and everything you own. It’s the law and it’s called Medicaid estate recovery, but you can do something to change it. There is a bill in Congress to repeal the government grab. It’s called “Stop Unfair Medicaid Recoveries Act of 2022″ enrolled as H.R.6698.
Let’s first understand that Medicaid is a medical insurance program. It does not put any money into a recipient’s pocket. Secondly, Medicaid estate recovery only refers to benefits received by those aged 55 and up. Third, Medicaid estate recovery is not needed for the program to function. On the average states collect, after administrative expenses, only .55% of their budget. (See https://www.macpac.gov/publication/march-2021-report-to-congress-on-medicaid-and-chip/ )
How could you lose your home, and everything you own, to the government? For the sake of privacy let’s use a story that is typical of so many working families. No confidential personal details are revealed. Jack Stone died this year, he was 82 years old. Jack was a hard-working average guy. He served his country in Vietnam. He married his high school sweetheart Jane and they raised three children in their comfortable suburban home in Redford, Michigan. He began working at age 17 and except for his service in Vietnam, he worked and paid taxes until he retired at age 65. Seven years ago he was diagnosed with Alzheimer’s Disease. After taking care of Jack at home Jane, of frail health herself, could no longer handle him and had to place Jack in a nursing home, where three years later he died. Just weeks after his funeral Jane was shocked to learn that the state of Michigan wanted pay back in the amount of $244,000 in “Medicaid estate recovery.” They would allow her to live in their home until she died. If she tried to sell it they would collect out of the proceeds.
Why? Do you know of any other government program that wants money back? You don’t pay back for schools, roads, police or fire protection. You don’t have to pay back Medicare either. What’s going on?
Medicaid recovery has been part of the program since its inception in 1965. It was optional for the states. Most did not want it. The basic political idea was that people should not live off welfare and buy things like houses, or maybe “Cadillacs.” But things changed. As time went on families could no longer care for grandparents in their home. A two income household became a necessity. And in 1988 Congress changed the law to allow an at home spouse to retain a home and some savings for her/his needs.
Then the law changed again. In 1993 Congress then required all states to have Medicaid payback. The reason? The insurance industry wanted people to live “responsibly” and buy long term care insurance. ( See the US News article referenced below.) Have you seen the Ads by lawyers who have to fight the insurance industry for their injured clients?
There is a cruel irony in the “live responsibly” admonition. If people drink alcohol to excess and ruin their liver, Medicare will pay for treatment. If a person ignores diabetes and ultimately has to have amputations, Medicare will pay. No payback required by Medicare. But seniors who develop Alzheimer’s through no lifestyle fault, may lose everything they own because they did not “live responsibly.”
Aside from being fundamentally wrong, there is another reason why the law needs to change again. This time it is the world that changed. We will cover later the reasons why the estate tax on the rich was repealed. But in short, supporters argued that if the estates of millionaire business owners had to pay the inheritance tax, competition would be hurt since the family would have to sell or mortgage the business. Now America finds it must compete with China, India and southeast Asian countries for jobs and business. We are in a boat as was England 100 years ago when it was declining in world power. We need a 21st Century workforce that is highly trained, educated and skilled. Our best asset is our people who do the work. Just as millionaire businesses need money, families need money to get the education to be competitive. They need the equity of their homes to be able to take time to get that education.
You can help stop this unjust and wrong law. Call your Congressional Representatives and ask them to support H.R.6698 – Stop Unfair Medicaid Recoveries Act of 2022
If you want to read more about the effect of this unfair and simply wrong law read this article from the US News and World report.
Debt After Death: The Painful Blow of Medicaid Estate Recovery
I have started a new series of posts about problems with our programs for needy seniors. Let’s look at the Medicaid program. Here’s the basic problem: it is grossly unfair.
Most people know that Medicaid has a nursing home program. But what about help in home? Believe it or not, it has home benefits! But to get that help, well . . . .
You’ve heard of dirt-poor? Try to buy a load of dirt today — it’s expensive! The senior may have no more than $2000 in savings. So, to get help a senior has to be poorer than dirt.
$2,000? When did they decide on that? 1984. Yes, almost 40 years ago and NO adjustment for inflation. In today’s dollars that would be over $5,400. Still very, very poor. Why hasn’t it been raised? Nobody cares. Ask any Senator or Rep and you’ll get a “I’ll get back to you.”
But wait there’s more. A senior applying for Medicaid can have a house. A poorer than dirt house? NO. It can have a value up to $636,000! That is not a typo. And, the senior can have a car. A new one too. Yes, a Cadillac or more realistically a recent SUV.
But wait there’s more. If the senior needs nursing home care, then Medicaid will pay. But. Medicaid wants the house for payback. Yes, “the government” will “take your house.” (Technically it is by the claim procedure in probate.) You have committed no crime, you have served your country, you have paid your taxes. But, if you get dementia and need a nursing home you will lose everything because of Medicaid Estate Recovery. Some would say that’s fair – you’ve got to pay back the gov. Why? Because the gov – Medicaid – paid maybe $7,000 a month to the nursing home. They want every dollar back.
Fair? Has any family lost their home to pay back Medicare for all the treatment a senior received in the hospital? No. Quarter million dollars for heart operation? No problem. Million dollars for cancer treatment? No problem. Medicare does not come after your house after you die.
But. Have Medicaid pay $165,000 for a couple years in the nursing home because you had Alzheimer’s? Big problem. They want it all back.
That is not right!
This is what we’ll be talking about in this series. And I hope “somebody hears about it.”
Low-income seniors in Michigan are supposed to get a homestead property tax credit, worth up to $1,500. But due to rising home prices many cannot get ANY credit at all!
Seniors are eligible for the tax credit on the amount of property tax they pay that is more than 3.2% of their income.
How the credit is calculated?
Let’s use an example. A widow’s income is Social Security of $2,000 per month or $24,000 per year. 3.2% of her income is $768. Let’s say she lives in Farmington Hills in Oakland County. According to Realtor.com the median price of homes in Farmington Hills is $318,000. So if she has an average home worth $320,000., the taxable value of her home would be $160,000. According to the smartasset.com website, her property taxes would be $2,480. So it would seem that she should get the full $1,500 credit since $2,460 is $1,692 over her 3.2% of income ($768). BUT, she will get ZERO dollars.
Why? Because the taxable value of her home exceeds the $136,000 taxable value maximum. That’s right, if her home were worth $272,000 or less she would get the full $1,500 tax credit. It doesn’t make sense. Seniors with just average suburban homes get nothing in the tax credit.
I understand that Michigan state senator Runestad and The Michigan Elder Law Section is looking into this issue and we should expect a report in the spring. Contact your Michigan state senator and representative if you or your senior relatives don’t get their Michigan property tax credit.
I’ll post more information when it comes in.
There are zillions of articles on retirement saving, but one point that is always overlooked is the high cost of living as an elder.
I’ve worked with clients dealing with aging issues for over 30 years. I developed a rule of thumb that goes like this. In retirement the decade of the 60’s is about a new lifestyle of freedom. The decade of the 70’s is about fun engaging activities like travel and golf. The decade of the 80’s is when life gets scary.
Sure many retirees are still socking money away in savings in their 70’s. But, simply put life gets very, very expensive for folks in their 80’s. While the root cause is medical issues, medical bills are not a big impact on savings. Medicare and other insurance covers those. The expense is the cost of daily living. Many retirees in their 80’s can no longer maintain a single residence and so they move into senior apartments. These apartments offer many benefits including security, worry free maintenance, meals and other daily services. But this often doubles the cost of living. In addition folks in their 80’s more often need help with all activities of life including personal hygiene, paying bills, managing healthcare including insurance and so on. For some elders chronic medical conditions can require “assisted living” and for a couple the monthly rent may rocket to over $10,000 per month!
So, how much should you save for retirement? I say make a personal asset inventory. And here consider your “financial” assets and your “human” assets. For example elders with a big supportive family will need less in savings than a childless elder. When the elder with the big family needs help it will come from family members. A couple sharing living space with family will not have to pay over $10,000 per month. But the childless elder will have to pay “market rate” for ALL services.
So, there it is. If you have a big supportive family you will not need hundreds of thousands of dollars to live out your retirement. If you don’t have such a family, then save every dollar you can. Aging gets scary expensive.
It’s a fact. Everybody knows that many elder seniors can only remain in their homes with help. It might be help with general upkeep, or financial matters, or it might be for personal assistance items like help with bathing or preparing meals. What if Mom pays a neighbor or daughter to help her and some years later needs a nursing home?
It will shock many to know that the Michigan Medicaid Department will penalize seniors who use money to stay out of the nursing home. Those payments will be deemed “divestment of assets” so that the senior can qualify for Medicaid financial assistance in a nursing home sooner. Talk about bureaucratic logic! Elders get help in home to stay out of a nursing home not to get in it sooner!
Note: So far we have not heard of problems for families who hire a commercial agency to provide these personal, in-home services.
Michigan Elder Law Attorneys gave notice to the Michigan Department of Health and Human Services that its policy is not in compliance with the law. So far the Department has not made changes, but reports are that families who hire lawyers to apply for Medicaid don’t have any problems getting approved.
The Elder Law and Disability Rights Section of the Michigan Bar will meet in early January to review the problem further. We’ll be updating as soon as more information comes in.
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