When a family member needs long-term care but the family cannot take care of their loved one at home, many times the only alternative is a nursing home. However, nursing home care can be expensive, requiring many families to obtain government assistance, such as Medicaid, to help pay for the care. However, upon the loved one’s passing, there may be financial consequences.

In this article, we will discuss the Medicaid Estate Recovery Program in Texas and, in particular, how an estate or a homestead in an estate may be affected. Austin elder law attorney Farren Sheehan can help answer questions and assist families with Medicaid applications, qualification planning, and the Medicaid Estate Recovery Program.

Basics of the Medicaid Estate Recovery Program (MERP)

Medicaid is a joint Federal and State program that assists individuals who have limited income in Texas. Medicaid pays for services that help people stay in their own homes as they get older, and it also pays for people to obtain medical care in a nursing facility if they qualify. Often, a person will first receive care at home and, as their health deteriorates, they will then be moved to a nursing home for more advanced care.

Like most states, Texas has a Medicaid Estate Recovery Program. However, if a loved one received Medicaid for long-term care services paid by the State, the State of Texas has the right to ask for money back from the person’s estate after he or she dies. Often, the only asset left in the estate is the family home. There are exceptions and, in some cases, the State may not ask for anything to be paid back. In all cases, however, the State will never ask for more money back than it paid in providing health care services under the Medicaid program.

Individuals Affected by MERP

Under Texas law, the MERP program affects only long-term care services the person receives after the age of 55, and only for care applied for after March 1, 2005. If a person applied for long-term care services before March 1, 2005, then MERP does not affect that estate. Some of the services and programs affected by MERP are as follows:

  • Nursing homes
  • Intermediate care facilities for individuals with an intellectual disability
  • Costs of certain hospital and prescription drug services
  • Home and community-based services
  • Community living assistance and support services
  • Community based alternatives
  • Deaf-blind with multiple disabilities
  • Community attendant services.

When a loved one applies for Medicaid to pay for long-term care services, the State provides a notice that explains the Texas Medicaid Estate Recovery Program. When the person dies, the State of Texas may send another notice to the estate representative or heirs asking for information so the State can decide whether to file a MERP claim.

What is Considered an Estate for MERP?

An estate is property, such as money, a house, or other things of value that a person leaves to family members or others (heirs) when he or she dies. Generally, the house is the primary asset in the Medicaid recipient’s estate because other assets are considered countable assets and are essentially limited to $2,000 or less. Upon opening a probate by the family to change title to a family homestead, the State may step in to ensure that it is paid back for the cost of medical services provided.

When Does the State Not Implement the Medicaid Estate Recovery Program?

There are exceptions to Medicaid estate recovery, when the State may not ask for anything to be paid back. These exceptions include when:

  • There is a spouse who is still alive
  • There is a child under 21 years of age
  • There is a child of any age who is blind or permanently and totally disabled under Social Security requirements
  • The value of the estate is $10,000 or less (which is rarely the case when there is a homestead involved)
  • The amount of Medicaid costs is $3,000 or less (generally only occurs when your loved on passes away within a very short time of initiation of Medicaid benefits)
  • There is an unmarried adult child who lived full-time in the Medicaid person’s home for at least one year before the person died
  • The cost of selling the property is more than the property is worth
  • The recovery of the home would cause an undue hardship for the heirs.

Undue Hardship and the Homestead

If the value of the homestead is less than $100,000, and if one or more of the heirs have family income under a certain amount, the State may not ask for money back. These limits are established by the Federal Poverty Limits and are adjusted yearly. However, to be granted a hardship by the State, the person’s heirs must ask for it and provide the requested proof of the hardship. If the estate has debts, such as funeral costs, legal costs, or a home mortgage, those costs are paid before the Medicaid Estate Recovery Program claim is paid.

Negotiating the MERP Claim to a Smaller Amount

The family’s estate representative (or attorney) can sometimes negotiate the amount of a MERP claim to a smaller amount. The State may allow deductions from an estate recovery claim for necessary and reasonable expenses, such as:

  • Home maintenance costs, such as real estate taxes, utility bills, insurance, home repairs, and home maintenance expenses; and
  • Payment of the costs of care provided for a deceased Medicaid recipient that enabled the recipient to remain in his or her home and delayed institutionalization.

Please note that the heirs or estate representative must have receipts to show what was spent on the person’s home or services when they ask the State to deduct these amounts from the MERP claim.

Lady Bird Deeds (Enhanced Life Estates)

The primary way to avoid probate for a house and ultimately avoid the enforcement of a MERP claim on the family home is called a Lady Bird Deed or Enhanced Life Estate Deed. It offers Texas residents a simple, inexpensive way to transfer real estate at the time of death, without probate.

Advantages of an enhanced life estate deed (also known as a Lady Bird deed) include the ability to:

  • Avoid probate of the property
  • Keep the right to use and profit from the property for a lifetime
  • Keep the right to sell the property at any time
  • Avoid making a gift that might be subject to federal gift tax
  • Avoid jeopardizing eligibility for Medicaid
  • Prevent the property from being sold after death to repay the cost of Medicaid benefits received

How an Elder Law Attorney Can Help

Dealing with the bureaucracy of the State, a probate court, and a MERP claim generally becomes complicated. An experienced elder law attorney can draft a Lady Bird Deed, review a MERP claim, and determine if any exceptions apply. They can also draft a response to the State, and frequently are the ones who begin negotiations to reduce any claim amount.

Attorney Farren Sheehan is an experienced elder law attorney who can determine how to best proceed with a potential Medicaid Estate Recovery Program claim and provide options for families in Travis county or the Austin area.

Questions?

If you have any questions about Texas probate or real estate law, please do not hesitate to contact us by phone at (512) 251-4553 for an initial consultation. Other contact information is listed in the upper right-hand area of this page, and a contact form is also available on our contact page.