Under federal law, if a state Medicaid program pays long-term care expenses for someone 55 years or older, the state must attempt to collect those expenses from the person’s property after their death, before the property passes to the person’s family or other heirs. This process is called “estate recovery.” The state often collects against the person’s house because their savings are usually minimal: most of their life savings have been spent on nursing home care or other long-term care in order to become Medicaid-eligible. New Jersey goes beyond these federal minimums, seeking repayment for a broader range of services and from a wider pool of assets than the law requires.
The amount the state pursues can be very large, since long-term care can cost well over $100,000 per year. The state may take all of the person’s property if needed to cover the long-term care expenses. If long-term care expenses exceed the property’s value, however, the family is not responsible for the difference.
In recent years, New Jersey collected less than one-half percent of its Medicaid long-term care expenses.
New Jersey Collects Relatively Little of Its Long-Term Care Expenses
In recent years, New Jersey collected less than one-half percent of its Medicaid long-term care expenses. In one year, for example, the state spent approximately $3.3 billion on long-term care and collected only $13.8 million, for a recovery rate of 0.42%. This level of recovery is relatively typical among states: the Medicaid and CHIP Payment and Access Commission (MACPAC) reports an annual national recovery rate varying between 0.52% and 0.62% over a five-year period.
This small recovery amount becomes even smaller when considering the administrative costs of collection, along with New Jersey’s obligation to return a percentage of collected funds back to the federal government. While the amount recouped by the state is minimal, the impact that recovery has on families is devastating.
Why Collecting Medicaid Costs from Heirs is Harmful to Low-Income Families
Medicaid collection unfairly penalizes low-income older adults and people with disabilities because they need long-term care.
The fear of losing their home or burdening their family causes many people to delay or avoid applying for Medicaid altogether. As a result, some families go into debt to pay for care themselves, while others forgo care entirely, leading to preventable health crises and costly hospital stays.
When Medicaid collection is pursued, surviving family members may be forced to sell the decedent’s home to come up with the funds the state is seeking. This deepens housing and financial instability and prevents the ability to pass down even modest assets, keeping families in poverty and widening racial and economic gaps.
New Jersey Offers Limited Waivers for “Undue Hardship”
Federal law prohibits collection when it would cause “undue hardship” to heirs, and federal guidance instructs states as to which situations should be considered “undue hardship.” The guidance suggests, for instance, that states waive collection against homes with a “modest value,” against income-producing property such as family farms or businesses, or when there are other “compelling circumstances.” States can go beyond these suggested situations; various states waive recovery if the heir (family member) has a very low income, has been living in the home, or served as a caregiver for the person.
In New Jersey, hardship is only recognized in very limited circumstances: when the deceased’s property is the sole source of income for one or more surviving family members, and pursuing recovery would likely cause those survivors to become eligible for public assistance or Medicaid.
The state will delay recovery—not waive it—if a family member of the deceased was continuously living in the decedent’s home and the home was, and remains, that family member’s primary residence. In such cases, the state places a lien on the property but does not enforce it until the property is voluntarily sold or the surviving family member dies or moves out.
New Jersey Exceeds Federal Requirements for Minimum Collection
Recognizing the significant administrative costs associated with Medicaid recovery, states can also adopt policies to forego collection if the estate or the claim are relatively small. New Jersey pursues collection when claims exceed $500 and the total value of the estate is greater than $3,000. Other states, however, follow more generous policies that both reduce administrative costs and avoid punishing surviving family members with limited assets. Illinois and Georgia, for example, only seek collection if the claim exceeds $25,000. South Carolina and Georgia only pursue collection for estates valued above $25,000, while North Carolina sets this limit at $50,000.
New Jersey’s Recovery Exceeds Federal Requirements
Federal law requires states to recover for Medicaid expenses related to long-term care for individuals ages 55 and older. Fourteen states, including Arkansas, Louisiana, Mississippi, Montana, South Dakota, and Texas, limit collection to only the federal minimums, thereby reducing the scope of recovery and its impact on low-income families. New Jersey, however, collects for the cost of all Medicaid covered services for persons ages 55 and older.
Similarly, federal law requires states to pursue collection for assets passing through probate, a legal process used to settle an estate’s affairs after an individual’s death. New Jersey, however, permits collection of non-probate transfers, expanding the pool of assets subject to recovery beyond the federal minimums.
Impact on New Jersey Families
“Medicaid recovery is age discrimination! The system has failed me when I needed help. I also know people who refused Medicaid [due to] recovery and have no health insurance.”
-Steve is a New Jersey resident who, after two massive heart attacks, has relied on Medicaid for critical health benefits. He lives in constant fear of his ever-growing recovery claim.
“While New Jersey does not take action to force sales of property for estate recovery, at the point where an estate could be liquid and administered to needy beneficiaries, New Jersey’s rules for hardship waivers in estate recovery are probably some of the toughest in the country. There are many estate beneficiaries where access to a portion of an estate could be life-changing, but due to the strictness of New Jersey’s hardship waiver, most beneficiaries would not qualify unless they had absolutely no other source of income, which is a pretty unlikely scenario.”
-Lauren Marinaro, New Jersey NAELA Public Policy Steering Committee co-chair and Partner at Fink Rosner Ershow-Levenberg, Marinaro, LLC.
“Even when New Jersey delays enforcement of a Medicaid lien, the existence of the lien itself can cause serious financial obstacles for surviving family members. For example, if the family needs to access equity in the home to cover essential expenses—such as property taxes, electricity, water, or other basic living costs—they may be unable to obtain a home equity line of credit (HELOC), as lenders typically will not approve financing when a lien is on the property. Similarly, if there is an existing mortgage on the home and the family needs to refinance to reduce monthly payments or avoid foreclosure, the lien may prevent them from doing so. These limitations can leave surviving family members housing-insecure or financially trapped in a home they cannot afford to maintain, even though the state may not pursue repayment until years later.”
–Ryann Siclari of Porzio Bromberg and Newman, Past President of NJ NAELA Chapter and Member of the NAELA Foundation Board
For a national analysis of state mitigation strategies regarding Medicaid estate recovery, see Justice in Aging’s Advocate Guide: Mitigating the Harmful Effects of Medicaid Estate Recovery: Strategies for States.
For more information about New Jersey’s Medicaid recovery policy, its impact on low-income families, and state-specific practices, please contact New Jersey NAELA. And if you would like to join New Jersey Citizen Action’s advocacy efforts to advance a New Jersey state policy solution to improve Medicaid Estate Recovery, scan the QR Code below:
