Although I don’t typically talk much about the Affordable Care Act here on the MediGap Advisors blog, I wanted to touch base with you about something that has recently been brought to the attention of the media. Many are calling it the “Obamacare death debt,” referring to the fact that the government requires your estate to pay back any Medicaid benefits you might have received while living.
Have You Heard of the Death Debt?
This so-called death debt was not created by the implementation of the ACA at all. The accurate name is the Medicaid Estate Recovery Program, and it has actually been around since 1993. This gives the government the right to recover any Medicaid funds you may have been the beneficiary of while living, and they can take your assets (such as your home, retirement accounts, etc.) to satisfy that debt.
Regardless of whether the Estate Recovery Program was in effect prior to the Affordable Care Act, however, the ACA has brought this issue to the forefront. The problem is that more and more seniors between the ages of 55 and 64 (when Medicare eligibility begins) are qualifying for Medicaid under the ACA. People are being told they qualify for Medicaid due to their income, but they are not being told of the impact this may have on their estate.
Two states, Washington and Oregon, have taken steps to lessen the likelihood that the government would seize Medicaid recipients’ assets by limiting what kinds of services require repayment. In these two states, only long-term care charges can be recovered from estates.
However, other states that have chosen to accept the Medicaid expansion under the ACA have not yet made any changes to their laws. This means that the government may require your estate to reimburse them for any medical services—even routine doctor visits!
There Are Ways You Can Protect Your Estate!
However, there are circumstances where the government can’t pursue your estate for Medicaid services received. Some of these scenarios include:
- If your spouse is still alive at the time of your death
- You have had an adult child living with you in a caretaking capacity for the two years prior to being placed in a long-term care facility. The child must continue to reside in the home, and also must be able to prove that his or her presence delayed your imminent placement in a facility (meaning they provided care that might otherwise have been provided in a nursing home)
- If you can prove that attaching the assets will create a financial hardship. This applies when beneficiaries of your estate receive income from the estate as their sole income
Other people in the vulnerable age bracket (senior citizens who fall below the poverty level under the ACA and hence qualify for Medicaid) have taken other steps to protect their assets. For example, one couple in Washington actually got married so that neither of them would fall below the poverty level and be forced to accept Medicaid as their insurance plan!
While this step may be a drastic one, situations such as this one may become much more common as the reality of the Affordable Care Act sinks in. Senior citizens need to be told right up front what the long-term repercussions to their estate might be, and they also need to be provided options!
Knowledge Gives You Power!
I believe that knowledge empowers you to make better decisions in every aspect of your life. Being aware of the different ways the government may continue to haunt you even after your death can help you take steps to prevent that from happening.
I encourage you to take a look at your finances now and make changes as needed to protect your heirs from paying the government for your health care. To prevent having to use Medicaid funds if you are placed in a nursing home, consider purchasing a long-term care insurance plan. If you are less than a year away from Medicare eligibility, consider a short-term insurance plan so that you do not have to rely on Medicaid to cover your medical expenses.
Perhaps the best thing I can recommend, though, is to keep up to date on the topic of the Medicaid Estate Recovery Program. It may be that more states change their estate recovery laws to limit how much the government can be reimbursed for. As this new potential issue with the Affordable Care Act becomes more public, I will keep you abreast of any changes.
Wiley Long is founder and president of Medigap Advisors, and is passionate about helping people navigate the confusing waters of Medicare. He is the author of The Medicare Playbook: Designing Your Successful Health Coverage Strategy, a clear and simple explanation so you can make the most of your Medicare coverage.