An older couple gathers wildflowers in a clearing near woods on a fall day.

Medicaid is a health insurance program jointly funded by state and federal governments. As part of the Medicaid program, low-income Americans, including seniors, adults, children, pregnant women, and people with disabilities, are provided with health insurance. The cost of care can be expensive, and in some cases, Medicaid may try to recover money it spent during a person’s lifetime. A person may have to give up their home through Medicaid estate recovery. There are exceptions to this rule, which may also vary by state. Here’s what you need to know about Medicaid estate recovery.

What is Medicaid estate recovery?

Medicaid estate recovery is the process of state governments recouping any money the program spent to care for a recipient during their lifetime if the recipient is permanently institutionalized or after the recipient passes away. The rules of Medicaid estate recovery apply to Medicaid beneficiaries aged 55 and older.

Medicaid estate recovery rules do not apply if you or your loved one does not receive full health insurance benefits from the program but participate in any one of the following Medicaid Savings Programs:

How does Medicaid estate recovery work?

If there is money in the beneficiary’s estate after they pass away, the state will attempt to recover the cost of care from the estate. An estate is the property a person owns when they die. Examples of property that might be included in someone’s estate include money, jewelry, land, cars, bank accounts, and their house. The federal government empowers the states to recoup the cost of hospitalizations, nursing home care, home and community-based care, and prescription medication through a claim against the recipient’s estate.

Medicaid estate recovery options are limited. For example, if the recipient’s estate is insolvent, the state cannot pursue the recipient’s spouse, children, or other heirs to repay the cost of care. Additionally, if the recipient is married when they die, the state cannot collect assets protected by the rule against causing spousal impoverishment. The surviving spouse must maintain the ability to care for themselves and remain independent. The spousal impoverishment standards were updated in June 2022. 

Can Medicaid take your house through Medicaid estate recovery?

A state may place a lien on the recipient’s property to recover the cost of care. Liens are legal claims against property to ensure the satisfaction of a debt. Liens ensure that state Medicaid programs receive repayment for the costs of care that beneficiaries receive during their lifetime. However, the state cannot place a lien against a beneficiary’s house in the following circumstances:

  • The surviving spouse is living in the house
  • A blind or disabled child of any age remains in the house 
  • A child under the age of 21 continues to live in the house
  • The recipient’s sibling has an equity interest in the house, and they lived in the house for at least one year before the recipient moved into a nursing home

Medicaid estate recovery FAQ

Whether Medicaid can take a recipient’s house depends on surrounding circumstances. Here are some scenarios that you can consider:

My spouse is covered by Medicaid. Will I lose my house if they pass away first?

If you live in the home when your spouse passes away, Medicaid will not take your house because it is exempt from the estate recovery process as long as you remain living in the house. Each state handles repayment requirements differently. The California Medicaid agency, for instance, does not attempt to include the home in its estate recovery process if the spouse who does not receive Medicaid outlives the recipient spouse. The Medicaid repayment requirement may be deferred until the surviving spouse dies in states like Oregon.

I Live in a Medicaid-funded nursing home, and my spouse lives in our house. Will I lose my house if they pass away first?

If your spouse passes away at home and you live in a nursing home, Medicaid may demand that your home be sold. The profits from the sale of your house are added to your Medicaid assets. Medicaid requires that its recipients have assets under a set amount. After your house is sold, you may lose your eligibility for Medicaid. The proceeds from the sale are used to pay off your debt. This is called spend-down. Once your costs are spent down, you can reapply for Medicaid.

I am single, and my adult children live in my home. Will Medicaid take my home after I die?

If you live with your adult children in your home and one of your children is blind or disabled, your house is exempt from estate recovery. On the other hand, if your adult children are able-bodied, then Medicaid may force the sale of your house after you die to reimburse Medicaid for the expenses it fronted during your lifetime.

I am single, and I live in my home alone. Will Medicaid take the house after I die?

If the home equity you have in your house is below a certain amount, Medicaid cannot take your house if you continue to live in it. Home equity is the amount of money that you own in your house outright. The limits on home equity vary by state. After your death, the state will seek reimbursement for home and community-based services from the sale of your home.

Tips for Medicaid planning 

  • Complete an intent to return home before moving into a nursing home

An intent to return home statement indicates that a Medicaid applicant makes to Medicaid before moving into a nursing home that they intend to move back into their house as soon as they can. An intent to return home can prevent your house from being sold to repay Medicaid.

  • Create a pooled trust  

Creating a pooled trust may be a good option for you if your countable assets are over the limit set by Medicaid. A pooled trust may help you qualify for Medicaid sooner.

  •  Spend-down on care

Medicaid allows people with a high income to spend money on qualifying medical care to gain Medicaid eligibility.