Life, death and health care costs: Long-standing estate recovery provisions and Medicaid expansion under Obamacare raise concerns

December 18, 2013

By Matthew E. Milliken
Dec. 18, 2013

On Sunday, The Seattle Times printed an interesting feature by Carol Ostrom about a presumably unintended effect of Medicaid expansion under Obamacare. Here’s the heart of the story:

If you’re 55 or over, Medicaid can come back after you’re dead and bill your estate for ordinary health-care expenses.

The way [Port Townsend, Wash., resident Sofia] Prins saw it, that meant health insurance via Medicaid is hardly “free” for Washington residents 55 or older. It’s a loan, one whose payback requirements aren’t well advertised. And it penalizes people who, despite having a low income, have managed to keep a home or some savings they hope to pass to heirs, Prins said.

With an estimated 223,000 adults seeking health insurance headed toward Washington’s expanded Medicaid program over the next three years, the state’s estate-recovery rules, which allow collection of nearly all medical expenses, have come under fire.

Medicaid, in keeping with federal policy, has long tapped into estates. But because most low-income adults without disabilities could not qualify for typical medical coverage through Medicaid, recovery primarily involved expenses for nursing homes and other long-term care.

The federal Affordable Care Act (ACA) changed that. Now many more low-income residents will qualify for Medicaid, called Apple Health in Washington state.

As Ostrom went on to write,

[This is] not the first time federal and state rules have clashed, and local officials now find themselves on the hook to ensure that the new law doesn’t create hardship.

In Oregon, state officials changed estate-recovery rules last month.

Recovery will no longer apply to health benefits for those 55 and over, the Oregon Health Authority said, although the state will collect expenses for long-term care.

On Friday, Washington Medicaid Director MaryAnne Lindeblad promised to draft an emergency rule very soon. The state also must revise the plan filed with federal authorities, but Lindeblad said she doesn’t expect problems or appeals of the rule.

I hadn’t heard about Medicaid estate recovery until I stumbled across a Breitbart post referencing Ostrom’s story. Blogger Debra Heine wrote, adopting the scornful tone required of conservatives discussing the Democrats’ health-care reform law:

Obama’s amazing, generous, compassionate, “signature achievement” enables the Federal government to go after your estate after you die in order to pay for the healthcare expenses you have incurred while on Medicaid.

Dr. Jane Orient, an official with the conservative Association of American Physicians and Surgeons, penned a March 2013 op-ed on Obamacare and Medicaid estate recovery that The Washington Times ominously headlined “Medicaid as a tax on the ‘estates’ of the poor: Assets become targets of the states.” Orient warned:

Federal and state governments are desperate for revenue. Pollyanna herself would find it hard to believe that estate recovery will diminish rather than increase.

Medicaid, supposed to be a program to help the poor, has become a cash cow for multibillion-dollar, managed-care companies, who milk federal and state taxpayers. Expanding Medicaid to persons with modest assets will enable estate recovery to become a cash cow for states to milk the poor and the middle class.

Alex Gimarc, a conservative blogger out of Alaska, had an even more alarmist take on the matter when he wrote about it last month, under the headline “Medicaid Estate Recovery — Another Assault on Property Rights?”

With ObamaCare’s Medicaid expansion, we will see an explosion of much younger Americans in the system. ObamaCare also requires the states to be far more aggressive in recovering those costs, which remember, include administrative fees. So even if you receive no services whatsoever, you are liable for repaying the government by funding the bureaucracy.

But this isn’t just a matter that’s of concern to conservatives. One blog focused on elder law in Wisconsin recently celebrated revisions to that state’s laws that undid some, but not all, relatively recent expansions to Medicaid recovery that the author found alarming. The blog has no obvious political leaning that I could discern in a very cursory survey of its contents. And last month, the Lund Report, an Oregon news outlet devoted to health care, which seems to have something of a liberal outlook, posted a cautionary op-ed piece about Medicaid expansion under the title “Poorest Oregonians Could Be Hurt By Obamacare.”

Beverly Woods, a New Hampshire resident, also published a pretty smart blog post on this topic last month at Daily Kos. Here’s part of what she wrote:

[I]f you go on Medicaid, you owe the entire amount that Medicaid spends on you from the day you turn 55.

And that amount is not just what is spent on your doctor visits and your treatments, whatever they may be. No, there is also something called a “capitation charge.” For each enrollee, a base cost is assigned to the entity that administers the program. How much will that charge be? It varies by state, and as far as I can tell by other variables as well, but it could be hundreds of dollars per month, or more. (If you have specific information on this, please do share it!)

How will this play out? No one knows, as far as I can tell. But it is easy to see how this could become a real problem. If someone is low income and goes on Medicaid, will Medicaid put a lien on their house? If they need to sell their house and move, will they then lose all their equity in paying off the lien? Will people get hit with bills and liens for many thousands of dollars, even if they were healthy and hardly ever went to the doctor?

Why is it that Medicaid is pretty much cost free to use up to age 54 if you qualify, and suddenly becomes a collateral loan at age 55, for which a state agency will do its best to collect payment in full for every cost assigned? It seems clear that the Estate Recovery law did not anticipate the current circumstance with the ACA, and that putting the two laws together makes for a terribly unfair situation for some.

Woods’ writing appealed to me in part because she admits that the consequences of this new interaction in Medicaid laws are ultimately unclear. She also raises a very good question: Why is the law free for people younger than 55 but not free for those above that cutoff?

Frankly, people should probably be asking a lot more questions about estate recovery and Obamacare’s Medicaid expansion. I’ll take another look at some of these issues next week.

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