Imagine the following situation: your last surviving parent is very sick. In fact, they have been sick for years. They promised to give you the family home after they die.
You sit there and think to yourself about how thankful you are that Medicaid (or Medicare) helps keep them healthy at a nursing home. You go to sleep and wake up the next day, only to hear your parent passed away.
You’re grieving, but at least you have the family home. Or do you? Weeks later, you get a letter from an agency that Medicaid hired for your late parents. They are taking your childhood home to recoup the cost of care.
This sounds like a cruel nightmare scenario, but it’s a scenario millions of people will face in the future.
America has a lot of problems dealing with its healthcare system. In fact, it often seems like our country takes pride in being as twisted, cruel, and inhumane as possible when it comes to the way we treat healthcare.
As it turns out, even the state-sponsored programs have dirty little secrets that twist the knife into you when you’re most vulnerable. Here’s what every single parent and elder caretaker needs to know.
What is Medicaid?
Medicaid is supposed to be a state and federal program meant to alleviate some of the financial burden that comes with the healthcare system. This program is meant to support low-income people with disabilities and give them basic healthcare at a low (or no) cost.
You do not have to be 65 years old to qualify for Medicaid. Each state has its own requirements, but it’s generally meant for families or disabled people who live on a low income.
States all have their own asset maximums for qualifying for Medicaid. Houses are not included in that asset maximum, but that doesn’t mean you’re totally exempt from having your home taken.
What is Medicare?
Medicare is the healthcare program that everyone has to join once they reach the age of 65. As a program, it’s the closest we have to socialized healthcare.
In this program, seniors sign up for different parts (Parts A, B, C, and D). They pay a fraction of what a typical person would pay. Medicare does not involve any kind of premiums, only copays.
Medicare does not cover all your medical costs. In most cases, it will cover around 80 percent of the costs. If you need long-term care and are disabled, you might have to turn to Medicaid to get that care.
That’s where the problem lies.
How can Medicaid take your home?
Officially, Medicare cannot take your home. However, if you need long-term institutional care and turn to Medicaid during your end-of-life treatment, things get sticky.
Since 1993, all 50 states participate Medicaid Estate Recovery Programs (abbreviated as MERP or MER). Medicaid Estate Recovery Programs are meant to help the state recover money they paid to care for patients.
After a Medicaid patient dies, the state can try to take your home and sell it as a part of MERP. It’s their way to recover costs if the heirs in question cannot pay off the medical bills of long-term care.
It’s disgusting, isn’t it? You work for 50 years to buy a home you adore, a home that you want to pass along to your kids. You get sick and don’t die fast enough? Oh, yeah, that dream home is gone and sold to vultures.
When can Medicaid take your home?
There are several rules about Medicaid recovery that every person should know. Medicaid can not take your home if…
- You have a surviving spouse living in the home.
- You have a child under 21 living in the home or a person who is blind or officially disabled living there.
- A sibling lived in the home for at least a year and has equal share in the house.
- The will doesn’t go through probate or the house doesn’t go through probate. (Probates are ways of checking the validity of a will.)
How can you protect your home from getting seized by Medicaid?
Medicaid is absolutely brutal, so being prepared for issues with it is your best line of defense. It’s important to note that Medicaid seizure rules are state-specific, so hiring an estate planner to help you out is your best option.
With that said, these options tend to work well for any family looking to keep their homes out of Uncle Sam’s grasp:
Irrevocable Trusts
Irrevocable Trusts are the best way to ensure that your home (and all other assets) stay in the family regardless of what happens. Putting the home in an irrevocable trust is the most common way to keep a MERP lien from hitting your home.
Long-Term Care Partnership Programs
These programs are a partnership between private insurers and Medicaid programs. Long-term care partnership programs give you a monetary amount of protection against home seizures. It’s a form of insurance.
How much these programs pay out is equal to how much of your house’s equity is protected from asset recovery. For example, let’s say that your parent buys a policy with a LTCPP that pays out $500,000.
If they go into a nursing home and the total cost is $450,000, the program will pay the entirety of their stay and the home remains yours. If they go into a nursing home and the cost is $502,000, you would only need to pay back $2,000.
Caregiver Exemptions
If you have an adult child who has lived in the house for two years or more who acted as a caregiver, you might be able to get a Caregiver Exemption. This bars Medicaid from taking your home while you transfer ownership to your adult child.
This really should not be legal.
The more you look at the American healthcare system, the harder it is to believe that we’re a civilized country. It’s almost like the cruelty is the point.
Regardless of where you stand on the political spectrum, make sure to keep your assets yours. Plan ahead for the worst, ask a lawyer about your local laws, and make sure that your home stays yours.
Sources:
HHS.gov’s Medicaid and Medicare Site
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