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Debt After Death: The Painful Blow of Medicaid Estate Recovery | Healthiest Communities Health News

Jaunice Stanford has lived in the same stone rowhouse in the Central Park Heights neighborhood of northwest Baltimore for the last 30 years. Before she retired, Stanford worked as a nanny, usually for doctors or lawyers: “I raised their kids,” she says. Now 76 years old, she lives on $615 per month in Social Security, and since her house has been paid off for years, she is able to squeak by.

When Stanford bought the house decades ago, she lacked the credit to put it in her name, so her mother, Ada Brooks-Young, helped out by putting hers on the deed. Stanford paid the mortgage every month, and Brooks-Young lived in the same neighborhood, around the corner from Pimlico Race Course.

Around 2010, Brooks-Young began to show signs of dementia, and eventually it became clear she was not safe living alone. Stanford and her brother and sister asked their mother to choose one of them to live with, and Brooks-Young chose Stanford, moving into the rowhouse around 2012.

“It was our turn to take care of her,” Stanford says.

Stanford cared for her mother for the next five years until her death in October 2017. She passed away peacefully in the living room with her entire extended family gathered around, some of whom had flown in to say goodbye. In Brooks-Young’s last days, Stanford had a hospital bed set up in the living room for her, and would sleep on the couch so she could stay close.

Following her mother’s death, Stanford was able to secure some much-needed home repairs free of charge through a Baltimore nonprofit, but the organization required the home’s deed, which had never been switched over, to be in her name. In late 2019, Stanford engaged a pro bono attorney to administer her mother’s estate, as Brooks-Young “left me my own house” in her will, Stanford explains.

While helping Stanford transfer the deed, the attorney discovered a $76,000 claim against the home filed by the Maryland Department of Health for long-term care services provided to Brooks-Young by the state’s Medicaid plan.

For the next year-and-a-half, Stanford feared she would be forced to sell her house and move elsewhere to pay off the claim.

“I’m old now,” she says. “I can’t pick up and just move.”

A Federal Mandate With Little Return

BALTIMORE, MD - SEPTEMBER 12, 2021: Pictures of family members fill the home of Jaunice Elain Stanford, 76. The Maryland Department of Health placed a claim against her home for $76,000, attempting to collect for long-term care services provided to her mother under Medicaid.

Pictures of family members fill the home of Jaunice Stanford, 76, in Baltimore.(Rosem Morton for USN&WR)

In the 1993 Omnibus Budget Reconciliation Act, the federal government made it mandatory for states to attempt to recover long-term care costs from Medicaid beneficiaries age 55 and older after death – a policy that previously had been optional. Some states rebelled against the practice, most notably West Virginia, which argued the federal mandate was unconstitutional. Texas, Georgia and Michigan also balked at implementing the law, with Michigan holding out until 2007 after the federal government threatened to cut its Medicaid funds.

Stephen Moses, president and co-founder of the Center for Long-Term Care Reform, co-authored a 1988 report for the Department of Health and Human Services Office of Inspector General that laid the groundwork for the 1993 bill and later legislation by recommending that the federal government mandate estate recovery as well as tighten the rules around eligibility for Medicaid long-term care benefits. Moses says this expansion of estate recovery was intended to remove the “moral hazard” – an economics term for a person’s greater willingness to bear risk if it’s unlikely to result in repercussions – that he believes Medicaid for long-term care represents. Medicaid acts as the fallback plan for a nation that has few attractive options for financing long-term care and a general lack of awareness of the need to plan for it.

Estate recovery is intended to “create an incentive for people to plan responsibly” in order to avoid it, Moses says.

When accessing long-term care, Medicaid beneficiaries, though they are allowed to possess little income and often no more than $2,000 in assets to qualify, can retain their place of residence and one vehicle, as well as other limited assets that are excluded from the eligibility determination process. But, proponents say, cost-containing measures are necessary, and it’s a smart trade-off to replenish state Medicaid funds to the extent possible by pursuing assets left after death that were exempted when eligibility was determined. Medicaid beneficiaries generally are also required to contribute monthly income, often Social Security, to funding long-term care while they’re receiving it.

New Jersey-based elder law attorney Lauren Marinaro says Medicaid policy regarding estate recovery intends to strike a balance between ensuring eligibility is reserved for the truly needy and not forcing individuals into homelessness to qualify. “People do need a place to live, but the swap for that would be that for those services that Medicaid pays for, they will keep a tab,” Marinaro says.

But how much of that tab are states collecting through estate recovery? The Medicaid and CHIP Payment and Access Commission, or MACPAC – a legislative branch agency tasked with analyzing Medicaid policy and advising Congress and states – released a report this year that found states recouped an average of less than 1% of total national spending on fee-for-service long-term care services from estate claims between 2015 and 2019. Research by AARP and others also found that estate claims recover little in proportion to spending on long-term care.

At the state level, just eight states recovered more than 1% of total fee-for-service spending on long-term care, and 28 recovered less than 0.5% in fiscal 2019, according to the MACPAC report. Iowa recovered the greatest share of state spending at 14.5%, and its administrative costs – as one of only five states to provide this data – ranged from 32% of total recoveries in 2018 to 11% in 2020.

Administrative and legal costs incurred by states to carry out estate recovery, while largely unknown, are thought to be substantial. Notably, the figures in the MACPAC study also do not include the cost of long-term care administered through Medicaid managed care plans, which cover at least some long-term care benefits in half of states.

Still, the MACPAC report indicates the net wealth and home equity of older Medicaid decedents has generally been low: Among a survey sample, average home equity was about $27,000, with net wealth averaging roughly $47,000. Three-quarters of beneficiaries had net wealth less than $48,500 after death. States are required to collect from assets that go through the probate estate, but may elect to pursue other assets as well.

Such data indicates that Medicaid estate recovery falls hardest on those whom the MACPAC report deems beneficiaries of “modest means.” And it may particularly impact people of color, given long-standing disparities in intergenerational wealth.

“These are not people sitting on half a million dollars’ worth of resources – these are people sitting on $40,000 worth of resources, from their whole life,” says Eric Carlson, directing attorney for legal advocacy organization Justice in Aging. Collecting what little wealth these beneficiaries accumulate punishes their descendants and impacts the economic prospects of future generations, impeding their ability to better their circumstances, he says.

Wealthier beneficiaries, on the other hand, are more likely to avoid estate claims through estate planning. Signed in 2006, the Deficit Reduction Act established additional guardrails for Medicaid eligibility by creating a five-year lookback period during which enrollees cannot transfer assets at less than fair market value without penalty – a move intended to prevent people from off-loading cash or other assets to parties like friends or family members to qualify for Medicaid. If such transfers are made, eligibility is postponed.

Still, through estate planning with an attorney, people can prepare for a future need for Medicaid by transferring assets prior to the lookback period or planning to pay for care out of pocket during a penalty period. Certain transfers are exempt from penalty, and there are various financial maneuvers that can be used to shelter assets and avoid estate recovery altogether.

Since Medicaid rules and state laws governing these matters are complex and vary widely, the advice of an attorney can be crucial to protecting assets from estate recovery. But this type of help is more likely to be sought by those who can more easily afford it.

“Why do estate planning when you only have a house?” asks Patricia McGinnis, executive director of California Advocates for Nursing Home Reform, or CANHR, which advocated for legislation in California that significantly restricted recoveries there. For low-income beneficiaries, a home is likely to be their only asset of value, McGinnis says, and their only means of passing wealth to subsequent generations.

Moses blames estate planning for the disappointing returns of the estate recovery program. Recoveries themselves are not the problem, he says; rather, it’s beneficiaries’ legal ability to protect their assets. He believes the current system “does not hurt poor people significantly,” and instead serves as a “free inheritance indemnity” for the heirs of beneficiaries with greater wealth.

THOUSAND OAKS, CA - OCTOBER 07, 2021: Armando Mares holds a photograph of his parents, Antonio and Socorro, from their wedding day. Mares fought against a state Medicaid claim against his late parents' estate.

Armando Mares holds a photograph of his parents, Antonio and Socorro, from their wedding day. (Jessica Pons for USN&WR)

Mares is the third of four siblings born to farmworkers. His father, Antonio, was born in Imperial County, and his mother, Socorro, was born in Mexico and became a naturalized citizen. Antonio Mares was a World War II veteran who, his son says, took great pride in having returned to the U.S. from Europe in 1945 aboard the infamous Queen Mary, the luxurious ocean liner that transported troops during the war.

Before Armando Mares’ birth, his parents would migrate north with their two older daughters to harvest crops during the summer months, when harvest season in Imperial County was over and the temperature rose to triple digits. His parents decided to “drop anchor” around the time he was born, Mares says, to avoid disruption to their children’s schooling.

“My father’s skill was strictly farmworking. That’s what he did, that’s what he knew,” but he got a job as a janitor at an elementary school “for stability,” Mares says. “It didn’t pay very well, but at least they didn’t have to migrate.” Mares’ mother worked in the home, except for a few months every year during harvest season, when she would work in crop-packing sheds to supplement the family income.

Until Mares was 9, the family rented a “tiny, rat-infested, broken-down house” with a leaky roof, where all the kids slept in a single room, he says. Desperate to get out, his parents bought a vacant lot at auction for $50 in 1962, and were able to finance the construction of a four-bedroom, one-bath house of about 1,000 square feet.

This was a proud moment for his parents, Mares says, “and for all of us. It was a major step up.” His mother lived in the house until she passed away in 2009 at the age of 86. She began receiving in-home long-term care services through Medicaid after developing Parkinson’s disease about three years before her death.

Mares’ father required a hip replacement in 2010, and though he received rehabilitation services after surgery, Mares says “he never really recovered.” Since his father was confined to a wheelchair and needed around-the-clock care, he entered a nursing home and lived there for about eight years, until his death in 2018 at age 97.

The Mares estate was placed in probate following Antonio’s death. In 2019, Mares was informed by the probate attorney that Medi-Cal, California’s Medicaid program, had filed a claim on his parents’ estate for $251,000.

Families who haven’t engaged in estate planning are often taken by surprise when they discover there’s a claim against the family house filed by a state Medicaid program. Although states are required to inform beneficiaries of the possibility of estate recovery, the information is often buried in a complex application, escaping notice or comprehension.

“The possibility of an estate claim being assessed is one more item on one more piece of paper, so it’s not necessarily something that sticks with people,” Justice in Aging’s Carlson says. “Also, this can be done in times of great difficulty,” when applicants are “scrambling to provide the necessary information” so they or their family members can get urgently needed care.

The need to protect one’s assets simply isn’t intuitive when filling out health care-related paperwork, Marinaro says. “It’s very difficult for families who really don’t see this area as some reason to see a lawyer – it’s just caregiving, it’s just elder care, right? Then to find out that this home, which has been in the family for generations perhaps, that there’s no equity because of Medicaid estate recovery.”

State Medicaid programs themselves cannot be relied upon to provide families with information on their options. “That will not happen,” Marinaro says. “They will not advise you as to what is allowable to avoid estate recovery because, you know, I don’t think they think it’s their job, and I don’t think they think it’s in their interest.”

THOUSAND OAKS, CA - OCTOBER 07, 2021: Portrait of Armando Mares who fought against a state Medicaid claim against his late parents' estate.

Armando Mares poses for a portrait inside his home in Thousand Oaks, Calif. Mares fought against a state Medicaid claim against his late parents’ estate.(Jessica Pons for USN&WR)

Efrain Gutierrez, a long-term care advocate with CANHR, says California’s Medicaid program functions “more like collectors” than helpers. “People that work for the Medi-Cal system collecting, they don’t explain and they don’t give [people] options. They just say, ‘You’ve got to give us this and that’s that.’”

Yet state agencies also may misinform potential applicants, says Katie Hopper, a community engagement coordinator for the Tennessee Justice Center, a Nashville-based nonprofit that assists people in accessing Medicaid for long-term care – available through the CHOICES program in Tennessee – and other public benefits programs.

“I see it very frequently,” Hopper says. “People call concerned about estate recovery, and one of the most disheartening or alarming things is that they call with misinformation that was given to them by state agencies.” She says state workers typically will mention the possibility of an estate claim without providing additional context, which can end up “scaring people away” from enrollment.

McGinnis, with CANHR, says the threat of estate recovery is “absolutely a detriment to people signing up for coverage.’’ She notes the refusal of long-term care benefits impacts individual well-being and drives up costs at a system level as well, resulting in a person’s premature decline and institutionalization, which is more costly than home and community-based services – often the first step for individuals needing care. In California, she says, a political reckoning with these “unintended consequences” helped facilitate passage of the 2016 estate-recovery reform legislation there.

Carlson agrees that postponing the inevitable for fear of financial repercussions can come at great personal cost: “Estate claims disincentivize Medicaid coverage and disincentivize people from seeking the care that they need,” he says. But “by delaying care, it doesn’t mean that you can forever ignore your own medical needs – it just means when it happens, the crash tends to be harder and more dramatic.”

Not all experts are convinced estate recovery deters individuals from accessing long-term care, however. David Grabowski, a professor of health care policy at Harvard Medical School, says he’s skeptical because, in the end, “there aren’t many other options” for long-term care beyond Medicaid coverage.

“We cover long-term care in this country largely through Medicaid and families, and there’s a lot of unmet needs that are out there,” Grabowski says. “Very few individuals have private insurance. Some individuals are wealthy enough to self-insure and pay out of pocket, but the vast majority of individuals are sort of stuck.”

Moses, who helped design current estate recovery policy in large part to incentivize the purchase of private long-term care policies, acknowledges this hasn’t worked. He blames shoddy federal and state enforcement and lack of attention by the media, leading to a lack of public awareness.

“The public has just gone merrily on ignoring long-term care until they need it and then getting Medicaid to pay,” he says.

THOUSAND OAKS, CA - OCTOBER 07, 2021: : Portrait of Armando Mares who fought against a state Medicaid claim against his late parents' estate. CREDIT: Jessica Pons for US NEWS.

Armando Mares counts himself lucky to have found an advocacy organization – California Advocates for Nursing Home Reform – with expertise in estate recovery. “I don’t know how it would’ve turned out if I hadn’t found CANHR,” he says.(Jessica Pons for USN&WR)

While researching estate recovery following the discovery of a Medicaid claim on his parents’ house, Armando Mares found that a home of “modest value” qualifies for a hardship waiver in California – a reform provision included in the legislation backed by CANHR. Mares thought his parents’ home, just appraised for $76,000, must qualify for this exemption. Nevertheless, his application for hardship was denied in October 2019.

Not convinced by the state’s decision, Mares chased the paper trail and found that their assessment of the home’s value was based on faulty data. The caseworker, tasked with proving whether his parents’ home had been valued at 50% or less than the county average when Mares’ father died in order to grant the waiver, was unable to obtain information from her usual source. “So she improvised,” Mares says, and came up with an artificially low average value.

Mares decided to appeal the hardship denial and knew this likely would trigger a hearing, so he enlisted the help of CANHR and Gutierrez. In March 2020, nine months before the appeal hearing was scheduled to take place, Mares received a letter from the state informing him the hardship request was granted and the estate claim rescinded. Gutierrez says the evidence they submitted with Mares’ appeal exposed the inaccuracies in the home value data, but he was troubled by the state’s refusal to disclose the final outcome – whether the claim would stand or be canceled – until Mares signed documents agreeing to cancel the hearing.

Gutierrez and Mares acknowledge the latter’s ability to navigate the system and track down information worked in his favor, and that others who lack such skills may struggle to achieve the same outcome. “He was more on the savvy side,” Gutierrez says.

Mares also counts himself lucky to have found an advocacy organization with expertise in estate recovery. “I don’t know how it would’ve turned out if I hadn’t found CANHR,” he says.

His parents’ house, which the family sold last year, was “the only investment they ever made,” Mares says, and “a big lifelong accomplishment.” He says his father set aside a small amount from every Social Security check – his only income post-retirement – to cover his own funeral expenses, because he feared “being a burden” to his children.

“It’s a huge source of pride for him to be able to say, ‘I left my kids an inheritance,’ no matter how meager, no matter how modest,” Mares says. “That’s why it was very important to me to carry out his wishes and save that house.”

Limited Options for Long-Term Care

Medicaid is the biggest payer of long-term care services in the country, whether those services are provided in the home or in an institution such as a nursing home. Contrary to popular belief, Medicare, the public insurance program for people 65 and over, does not cover long-term care.

Under certain conditions, Medicare will pay for up to 100 days in a nursing home following a hospitalization, as well as some home health services such as those provided by a nurse or a physical or occupational therapist. But long-term care services and supports, which typically fall under the definition of “custodial care,” are not covered. These services are often provided by home care aides who assist with basic activities of daily living such as bathing, dressing and feeding, as well as essential tasks such as preparing meals, managing medication and housekeeping.

Many people assume Medicare will pay for long-term care and neglect to plan for future needs. Others who purchase private long-term care insurance are subject to underwriting, as such policies are not bound by laws protecting people from coverage denial based on pre-existing conditions. That means adults who’ve had cancer or other conditions and want to purchase private long-term care coverage may not be able to do so.

Carlson says the cost of private long-term care policies is prohibitive for many, especially since premiums can escalate over time. This creates a disincentive to purchase a private policy, and “beneficiaries sometimes pay into policies for years and then drop them before they’re ever used because premiums get too expensive,” Carlson says.

Moses is less sympathetic. “We will have to come to terms with the reality that you have to take personal responsibility and pay your own way,” he says. “If people can’t pay the premiums for their private insurance, they’re going to lose the insurance.”

In the absence of a private policy or the ability to pay tens of thousands per year out of pocket, individuals needing long-term care often have no alternative but to apply for Medicaid.

A ‘Windfall’ for Managed Care

Anita Kite first started noticing her dad’s memory was declining around 2015, when he was in his mid-70s and she would go back to her childhood home to visit. Kite is one of eight siblings, most of whom are still scattered around the town in eastern Tennessee where they grew up. (At the family’s request, U.S. News is withholding the exact location, as well as the names of Anita’s siblings and father, for privacy reasons.)

After an incident when their father drove down the wrong side of the road and was clearly disoriented when a police officer stopped him, the siblings knew they had to act. Kite’s brother and his family moved in to care for him, and her sister came during the day when their brother was at work.

After a few months, it became difficult for the two siblings to keep up with their father’s needs, so the family decided to enroll him in Medicaid for help with in-home care. It was a stopgap measure – the caregiver would come for a few hours when the two siblings couldn’t be there. Their father received in-home care for about seven months in 2017.

Kite’s father, a retired machinist, lacked any savings and was living on Social Security: “If he was not in poverty, he was on the verge of being so,” Kite says. Her parents divorced around 1990, and the four children still at home stayed there with their dad. The three-bedroom, one-bathroom house was purchased around 1971 when Kite’s two oldest sisters were small; she believes it was the first home her parents ever owned.

Kite’s father declined rapidly, and by the end of 2017, he could no longer bathe, dress or feed himself independently. The siblings decided to put him in an assisted-living facility, where he lived for just over a year until his death in February 2019, at age 77.

The family knew estate recovery could happen and planned accordingly. Kite got documentation from the assisted-living facility that her father’s care cost $2,900 per month. They contributed their dad’s $1,800 monthly Social Security check to the cost, with a balance of $1,100 for Medicaid left over.

BALTIMORE, MD - SEPTEMBER 12, 2021: Jaunice Elain Stanford, 76, looks out from her home in Baltimore, Maryland on September 12, 2021. She  had a claim placed against her home by the Maryland Department of Health, attempting to collect for long-term care services provided to her mother by the state’s Medicaid plan. “I think this is terrible. People walk all their life to be able to pass something on to their children. And then, other people try to take away everything. I am fortunate because people were able to help me," says Stanford. (Photo by: Rosem Morton)

Jaunice Stanford looks out from her home in Baltimore. Data indicates Medicaid estate recovery falls hardest on beneficiaries of “modest means,” and a recent report says it may particularly impact people of color, given disparities in poverty and household wealth.(Rosem Morton for USN&WR)

After their father passed away, the siblings calculated that the total estate claim would equal between $20,000 and $30,000 for the combined costs of institutional and in-home care. They planned to use their father’s small life insurance payout to cover some of it and discuss how to pay for the rest, Kite says. Then, a letter from TennCare – Tennessee’s Medicaid program – arrived. It said the family owed nearly $67,000.

TennCare referred Kite to Amerigroup, the managed care organization overseeing her father’s plan, for an explanation. After months of trying to get answers by phone, Kite finally received a list of monthly expenses and noticed the amount did not vary month to month, regardless of whether her father was still at home or in assisted living. TennCare paid $3,252 per month, far more than the $1,100 balance billed by the facility.

Frustrated with getting the runaround, Kite contacted the Tennessee Justice Center and spoke with Hopper, who explained that the uniform monthly amount was a capitation payment paid by TennCare to Amerigroup, which in turn paid the facility. When Medicaid is administered through managed care organizations, or MCOs, states typically pay a flat capitation rate to the MCO instead of paying on a fee-for-service basis. In Kite’s father’s case, this payment ended up being more than the actual cost of care.

Pam Wright, an elder law attorney in Jackson, Tennessee, calls this system a “windfall” for MCOs, and confirms a family contribution is not deducted from the capitation payment or from the total long-term care costs that make up an estate claim. After paying the balance of care for Kite’s father, Amerigroup recouped about $2,150 monthly, which now makes up a substantial part of the claim against his estate. An Amerigroup spokesperson declined a request for comment and referred U.S. News to TennCare on matters pertaining to estate recovery.

Kite wishes she had known from the beginning that her dad’s Social Security retirement income would not count toward the cost of his care – if she had, she says, the family would have used the money “to help him enjoy his life more.” She says she was given no counsel or documents disclosing the capitation payment when her father enrolled in the CHOICES program or began his stay in the assisted-living facility.

A TennCare spokesperson says that although they cannot comment on specific cases for privacy reasons, they “make every effort to inform members and their families of the estate recovery process both when a member applies for TennCare and after the member’s death.” The spokesperson also notes that states like Tennessee that administer long-term care programs through MCOs are federally required to pursue estate recovery tied to capitation payments paid by the state to the managed care plan, and that such payments “may differ from the actual cost of services that a person subject to estate recovery has received.”

In its recent report, MACPAC recommends Congress amend the law to allow states to recover for the actual cost of care – an approach the commission says would be more equitable and easier to understand, and one that would protect beneficiaries who use relatively little care from being overcharged.

Marinaro notes this would be particularly important in light of the COVID-19 pandemic, as there was “not much care taking place” in beneficiaries’ homes early on due to fears of infection.

After discovering the source of the discrepancy in charges, Kite and her brother decided to apply for an exception to estate recovery, which would delay the claim as long as her brother and his family continued to live in their father’s house.

As part of that process, TennCare requested a long list of documents pertaining to Kite’s brother, few of which seemed to establish that he cared for their father for two years prior to his admission to a facility and had lived in the house since then – requirements to qualify for an exception. The state requested mostly financial documents, including five years of tax returns and a recent credit report, and made these requests separately, one after the other. The family, Kite says, would fulfill one document request and TennCare then would ask for something else.

Confused about the relevance of financial documents to proving her brother’s eligibility, Anita asked Ben Thomas, a senior estate recovery attorney for TennCare, why such personal and detailed financial information was required. Thomas responded via email: “I am sorry I can’t get into the specifics of why we request certain documents.”

A TennCare spokesperson later told U.S. News that the program “seeks to strike a balance between giving applicants every opportunity to prove the residency, relationship, and care requirements of the exception while also meeting the agency’s federal obligations to verify the criteria for the exception has been met.” The spokesperson notes multiple documents are often needed to prove an applicant qualifies.

Wright, the elder law attorney, says there’s not much guidance in federal policy about what’s allowed and not allowed in estate recovery pursuits. In Tennessee, she says, “there’s no policy at all, no regulation that says, ‘This is what you have to show.’”

As a result, TennCare officials can ask for anything they want, Wright says. The type of documents requested for Kite’s brother suggest that rather than trying to determine if he was qualified for the exception, “they’re looking to see if he deserves it,” she says. Another reason for TennCare’s tactics could be an effort to “wear out” families with relentless hoop-jumping, Wright says, hoping “they’ll give up and go away.”

Federal law prohibits state enforcement of a home lien for the exact conditions met by Kite’s brother. Still, Kite and her brother fear that TennCare will move to collect the debt and the family will have to move out.

“I don’t honestly know how the deferral works because they have never explained it,” Kite says. “I have not pushed the envelope too much because I don’t want to make waves.”

Apart from a small, decades-old pickup truck and “buckets of rocks” he collected and polished as a hobby, her father’s house is all he left behind, and “he worked really hard for it,” Kite says.

“It’s the family house,” she says. “It’s nothing fancy. It’s the memories.” The siblings occasionally toss around the idea of trying to purchase the house in the event they lose it. But, Kite says, “you shouldn’t have to buy your own house back from the government.”

A Hard Road for Hardship Waivers

In an attempt to keep her home, Jaunice Stanford, in Baltimore, applied for a hardship waiver with the help of Tim Chance, staff attorney with Maryland Volunteer Lawyers Service. The state also could offer Stanford a non-interest-bearing mortgage on the home as an alternative option to settle the claim, Chance says, but for Stanford that was a no-go. “I’m old, I don’t work anywhere, and I get $615 a month. How the heck can I pay a mortgage?” she asks. “If I had to pay any kind of rent I’d be out there with a sign, you know, begging for help.”

Although Chance was “not optimistic” the waiver would be granted given Maryland’s bar for eligibility, it was approved shortly after submission. Recent data shows Stanford’s experience is exceptional in her state: Maryland received only five hardship requests in 2019 and approved two of them, according to the MACPAC report, while recovering an average of $15,500 each from 498 estates that year.

BALTIMORE, MD - SEPTEMBER 12, 2021: Jaunice Elain Stanford, 76, poses outside her home in Baltimore, Maryland on September 12, 2021. She had a claim placed against her home by the Maryland Department of Health, attempting to collect for long-term care services provided to her mother by the state’s Medicaid plan. “I think this is terrible. People work all their life to be able to pass something on to their children. And then, other people try to take away everything. I am fortunate because people were able to help me," says Stanford. (Photo by: Rosem Morton)

“People work all their life to be able to pass something on to their children. And then other people try to take away everything. I am fortunate because people were able to help me,” Jaunice Stanford says. (Rosem Morton for USN&WR)

States are required to establish procedures for waiving estate recovery due to undue hardship, and federal guidance provides examples of what such a hardship can look like: An estate, such as a farm, that’s a family’s sole income-producing asset could qualify, as could a home of modest value, like the Mares home in California. Yet states are not required to use these examples, and the criteria for obtaining hardship waivers, as well as the ease of getting one, varies widely.

In Tennessee, which reported 910 recoveries in 2019 averaging $30,000 each but did not provide data on hardship waivers for the MACPAC report, the single hardship circumstance that will cause the state’s claim to be permanently waived is when the estate is the sole income-producing asset. New Jersey, where Marinaro practices, uses a similar standard, and hardship waivers are “almost impossible to get” as a result, she says. If a family member has any other source of income, she says – even just a small pension or Social Security check – they will likely fail to meet the criteria.

“I don’t think that the hardship standard as it currently reads, at least in my state, is meant to provide any sort of real fighting chance to someone who could otherwise truly benefit from the asset in a life-changing way,” Marinaro says.

In general, “states are loath to grant hardship waivers,” Carlson says. “One reason for that is there’s a lot of hardship out there. In a lot of these situations, family members are significantly reliant on a resource, most likely the home, and states find it easier to deny most of these requests than to delve into the individual situations and draw lines.”

Only eight states allow hardship waivers for homes of modest value, according to the data available in the MACPAC report. The commission recommends the federal government set minimum standards for hardship waivers that encompass homes of modest value, estates that are the sole income-producing asset of survivors and estates valued under a certain threshold. States could add other criteria.

“Pursuit of modest estates contributes to generational poverty and wealth inequity, placing particular burdens on people of color,” the report says.

Chance specializes in resolving “tangled titles” such as Stanford’s, in which someone has a legal interest in their home but lacks legal ownership. Such situations, he notes, are common in Baltimore’s Black community. “Many people are living in family homes, and the property’s title is in the grandmother or mother’s name, and it’s never transferred out of title, and people really don’t have a sense of urgency or feel a need to [transfer it] until some crisis arises,” he says.

Pam Wright says she also commonly encounters this issue – referred to as “heir property” in the South – among clients in Tennessee. Unless they have a pressing reason to do so, families often “never clean up the title and just keep living there, for multiple generations,” she says. “That’s when the TennCare estate recovery will come in and it creates a lot of issues.”

Chance helps conduct community outreach through Maryland Volunteer Lawyers Service’s “My Home, My Deed, My Legacy” project, which aims to spread awareness in Baltimore’s communities of color about the importance of estate planning and how to protect assets.

“For a lot of families, the home is the only asset they have, and for families of color, this is a hard-won asset,” Chance says, due to discriminatory practices – some historical and some ongoing – such as redlining and predatory mortgage lending.

Dania Francis, an assistant professor of economics at the University of Massachusetts Boston, says Stanford’s situation is indicative of how “Black families in particular, but also other minority groups such as Latino households, often take on financial responsibility for their kin networks.” This can hurt people in the long run, she says, because “there’s a lot of these informal arrangements that put you at a disadvantage in the formal institutions that we have.”

In its report, MACPAC also recommends that Congress make estate recovery optional for states. If that occurred, Carlson says he’s “cautiously optimistic” many states would cease the practice, due to “a growing willingness to consider the impact of public policy on low-income individuals and communities of color.” Still, he says, establishing a uniform nationwide policy that abolishes estate recovery altogether would have greater impact.

Marinaro agrees that giving states the option to pursue estate claims is a step in the right direction, although she thinks states likely would respond in a manner that reflects their dominant political viewpoints, and some people who could benefit would be left behind simply due to where they live. A uniform federal standard, she says, would ensure a more equitable effect.

For Moses – barring more aggressive enforcement of estate recovery by the states, combined with harsher punishment for their failure to do so – the answer is to remove or drastically reduce Medicaid’s up-front exemption of beneficiaries’ homes, but not the federal mandate. States would begin to collect for long-term care costs as soon as they commence by accessing home equity “through various means of conversion,” including reverse mortgages. This would allow the estate recovery program to be “largely dropped,” he says, because once their home equity runs out, beneficiaries would be “genuinely eligible” for Medicaid.

“That would direct a tremendous amount of revenue, up to $8 trillion of home equity held by the elderly now, into the long-term care service delivery system,” Moses says.

Estate recovery is just one symptom of long-standing, systemic problems with long-term care financing and access in the U.S., says Harvard’s Grabowski.

“This current system, it’s just not well-formulated to really take on the complex needs of this population,” he says. “You end up with far too many individuals being asked to impoverish themselves and their families in order to get these services. That’s why I think this really speaks to the need for something much more comprehensive.”

In large part, a person’s need for long-term care services and vulnerability to Medicaid estate recovery are luck-of-the-draw, Marinaro says, calling that the “fundamental unfairness” of estate recovery. Older individuals needing costly surgeries or treatments for conditions such as cancer or stroke can count on their Medicare coverage to pay for most costs, but those with degenerative illnesses who “need the same $300,000 worth of long-term care” will face recovery simply because Medicaid coverage is meant for low-income people, she says. The program is a payer of last resort in the U.S., yet simultaneously forms the backbone of its long-term care system.

For Stanford, “words really can’t explain” the sense of joy and relief she feels now that the state has withdrawn its claim against her house, and she can move forward with transferring the deed and getting repairs done.

“I can have something to leave for my kids,” she says. “It ain’t much. But it’s something.”

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