by Jane Orient, MD
Most people think they’re exempt from the estate tax (often called the “death tax”) because they don’t have $2 million. A lot of people with low incomes do have some assets, however, and if they have used any Medicaid benefits, their heirs may be in for a shock.
Depending on state law, the state may have the right to everything, up to the cost of Medicaid benefits received — house, car, bank accounts, tools, annuities, piano, furniture, everything — and not just 50 percent of it.
This situation is not exactly new. The Omnibus Reconciliation Act of 1993 requires states to pursue Medicaid asset recovery from persons who receive benefits at age 55 or older. At first, this applied mainly to nursing home benefits, but at state option, it could now include any items or services provided under Medicaid.
There are some limits on what the state can take, as in the case of hardship or to protect surviving spouses, but the law is extremely complex. “The only certainty is controversy,” writes lawyer David L. McGuffey, a member of a Georgia law firm specializing in estate law, in a 77-page document.
“Estate recovery tends to reach individuals of very modest means and has a chilling effect on low-income people seeking benefits to which they are entitled,” he notes. To enroll in Medicaid, people have had to sign a disclosure form explaining this requirement, and some decide to forgo the benefit.
A plaintiff who represented himself described estate recovery as “nothing more than a vast, unlawful conspiracy to deprive the plaintiff, an American who is black, of his property, his dignity and his constitutional rights, simply because they could.” (Drake v. Miller)
A potential for greatly expanded use of estate recovery was created in Obamacare, as pointed out in an anonymously authored, well-documented article distributed by economist Paul Craig Roberts. Obamacare increases the number of people eligible for Medicaid by dropping the asset test for enrollment (Page 162 of Obamacare).
It is not clear how disclosure can work if people are automatically enrolled — for example, if they appear to be eligible when they sign up for another program, such as food stamps. In addition, people who apply for mandated insurance through an exchange will have to enroll in Medicaid, if eligible, or pay the penalty — a “tax,” as determined by the U.S. Supreme Court — for being uninsured.
In Arizona, where all Medicaid beneficiaries are enrolled in a managed-care plan, their estates could be repaying “benefits” even if the enrollee never actually received any goods or services. Information provided by the Arizona Health Care Cost Containment System (Arizona’s Medicaid program) explains that the program makes a monthly capitation payment of around $3,340 to “program contractors,” who arrange for services, if any. It warns, in bold print: “It is important to be aware that capitation payments can exceed the actual costs of services provided during the month.”
For comparison, the privately paid cost for my father’s private room, decent meals, and kind and competent 24-hour care in a comfortable group home was around $2,500 per month. Many people would probably pay less for services they need and choose than their estates would be charged for merely being a “covered life” in a program contractor’s inventory.
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.
Dr. Jane M. Orient practices internal medicine in Tucson, Ariz., and is executive director of the Association of American Physicians and Surgeons.
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