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.
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.