A flap over recouping costs of Medicaid

James Napier and his family were shocked to receive a letter from the state of Texas about his ex-wife's home after she died in May 2005. She spent the last two months of her life in a nursing home. Now the family owes Medicaid $5,600, and the government has laid claim to the home Mr. Napier and his ex-wife bought together in 1977, which now is in poor condition and valued at $2,500. Texas's estate-recovery program took effect at about the same time Napier's ex-wife died. The state rejected the family's application for a hardship waiver.

"No one had any idea," says Napier, a media consultant in Hot Springs, Ark. "If they had told us up-front that to pay for nursing-home care we're going to want this back out of your estate, I know that we would have ... said we don't want your help. We'll find another way."

Altogether, estate-recovery programs earned $347 million in fiscal 2003, according to an AARP report. But the amounts varied widely: from $86,000 in Louisiana to nearly $54 million in California. The average amount recovered per estate was $8,116 nationally, but as little as $93 in Kentucky and as much as $25,139 in Hawaii.

These sums don't begin to pay for what Medicaid spends. Only eight states recovered more than 1 percent of long-term care expenses. But the report found that states are expanding their recovery programs.

The modest returns prompted Georgia to wait until this year to implement its program, says Fred Watson, president of the Georgia Health Care Association. Mr. Watson is concerned that people don't know about the program because it has received little publicity, and few social workers and hospital staffs know about it.

Some states have tried to remove themselves from the process altogether on grounds it could impoverish beneficiaries' families. In 2001, West Virginia filed suit against the US Department of Health and Human Services (HHS), challenging the law's constitutionality. A US circuit court ruled in 2002 in favor of HHS, noting that if states don't comply with Medicaid rules they could risk losing their federal matching funds.

In Tennessee, soaring TennCare costs have pushed the state to hire a consulting firm to help collect information from enrollees it later can use to help in estate recovery, and it has worked to get more time under statute-of-limitation laws to aid in estate recovery after beneficiaries' deaths. Repeated calls to a TennCare spokeswoman for comment were not returned.

States are required to exempt certain situations such as when there is a surviving spouse or a child under 21. But Tim Takacs, an attorney and expert on elder law in suburban Nashville, worries that fears of losing their homes, unfounded or not, will discourage some from seeking healthcare. "Our concern is that people will say, 'I don't want my husband to go to the nursing home because then the government will take my house,' " he says.

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