Estate Planning Vault

ABA Study Questions Benefit of Estate Recovery Programs

The average amount of Medicaid costs that states recovered per estate in 2003 was $8,116 nationwide and ranges from a low of $93 per estate in Louisiana to $25,139 in Hawaii, according to a just-released nationwide study of state Medicaid estate recovery programs and practices conducted by the America Bar Association’s Commission on Law and Aging.

The study concludes that while estate recovery amounts are "not insignificant" overall, it questions "whether the real costs of operating estate recovery programs – taking into account administrative costs as well as the potential long-range cost of deterring individuals from obtaining early care – justify the financial benefit to the state." In addition, a number of states appear to be violating federal law in their effort to use estate recovery as a way to bolster distressed Medicaid budgets.

The 97-page report, supported by the AARP public Policy Institute, was conducted in 2004 and updates and expands a similar study done in 1996. The new study's authors are Naomi Karp and Charles P. Sabatino of the ABA Commission on Law and Aging, and Erica F. Wood of the ABA.

The authors surveyed Medicaid officials, reviewed all estate recovery statutes and selected state case law, and chose 10 states for further analysis by an elder law practitioner in that state. Among the findings:

·         States recovered a total of $347.4 million in fiscal year 2003 – an increase from $99.6 million in 1996.

·         Estate recovery amounts, measured per estate, are

·         "modest but not insignificant." The average and median recovery per estate was $8,116 and $5,081, respectively. But there was tremendous variation in average recovery, ranging from $93 per estate in Kentucky to $25,139 in Hawaii.

·         Revenues as a percentage of state Medicaid long-term care expenses ranged from .01 percent (Louisiana) to 2.2 percent (Oregon), with only eight states above 1 percent.

·         The costs of operating an estate recovery program averaged nearly 7 percent of total recoveries, based on the handful of cases where comparable information was available.

·         Thirty-three states were determined to recover assets beyond the probate estate. Twelve states seek recovery against property in which the beneficiary had a life estate

·         Investigators were unable to determine the number of states that seek recovery against trusts and annuities because of the number of reported qualifiers and conditions.

·         Contrary to federal law, 13 states require residency in the home as a prerequisite to deferral or exemption when there is a spouse or a minor or disabled child.

·         Nineteen states provide for pre-death TEFRA liens. Also contrary to federal law, only 6 of these states reported giving notice upon a determination of permanent institutionalization.

·         Three responding states -- Alabama, North Dakota and Tennessee -- lacked criteria for determining undue hardship.

The authors note that their work was hampered by inconsistencies in state reporting of many important data elements pertaining to estate recovery. They go on to note that their survey focused on the dollars and cents impact of estate recovery, and did not seek to answer the human questions that arise in connection with estate recovery, such as whether it is barrier to timely receipt of Medicaid services or fosters spousal impoverishment. These, the authors maintain, are questions that must be answered.

"It is still an open question whether the costs justify the financial benefit to the states," they conclude.