A flap over recouping costs of Medicaid

Ever since Judy Clifford's parents died, she had planned to move with her husband into their Nashville, Tenn., home, which she knew so well.

"I felt like they were still there," says Ms. Clifford, who is retired. "I could see my mother standing at the sink washing dishes and my daddy watching TV, and I wanted to stay in the house because of that."

Instead, the two-bedroom ranch-style home is for sale for $122,000, the subject of a bitter tug-of-war between the Cliffords and TennCare, Tennessee's healthcare program for the poor and uninsured. TennCare has laid claim to the home to recoup the cost of caring for Clifford's mother, who was on TennCare when she died three years ago.

In the face of soaring Medicaid costs, Tennessee and every other state are required to set up a Medicaid estate-recovery program. Many have been launched only recently, and some – like Tennessee's – are becoming more aggressive. Often, they target the home because it's all that's left after beneficiaries have spent their assets to pay for nursing-home care.

But the varied ways in which states are going after these assets have produced confusion, anger, and even lawsuits. When a loved one dies, some families are stunned to lose the home, too, advocates say.

"It's fine that these programs are required by federal law, but people need to know the rules of the game," says Wendy Fox-Grage, policy adviser with the AARP Public Policy Institute. "We're concerned that families are not being notified."

An AARP study determined that the inconsistency of notification was such a concern that the organization commissioned the American Bar Association to do another study focused on consumer protections, she says. Results are expected this spring.

States base their programs on a 1993 federal law mandating that they recover what Medicaid spends on a beneficiary's long-term care. Congress approved the law to prevent states from forcing the sale of beneficiaries' homes while they were still living, in case their conditions improve and they can return home, says Mary Kahn, spokeswoman for the Centers for Medicare and Medicaid Services.

"The point of the program is to be there for people with no alternative," she says. "If the state is able to recover expenses that they put forth, then that money will be there for the next person down the line who desperately needs help."

States generally notify families about their estate-recovery programs upfront when a beneficiary applies for Medicaid and then again when the beneficiary dies, during the judicial claims process, says Ms. Fox-Grage of AARP. But often, states provide the information as part of a long list of things a Medicaid applicant should know. Not all states inform families of the hardship waivers available to them, either, she says.

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