Understanding Medicaid’s Estate Recovery Program (MERP) & How to Protect the Home

Last updated: June 07, 2023


What is the Medicaid Estate Recovery Program?

Medicaid’s Estate Recovery Program, abbreviated as MERP or MER, is a program through which a state’s Medicaid agency seeks reimbursement of all long-term care costs for which it paid for a Medicaid beneficiary. This includes nursing home care, home and community based services to prevent premature institutionalization, and hospital / prescription drug costs related to long-term care. Medicaid Estate Recovery follows the Medicaid recipient’s death, and it is through their remaining estate (typically one’s home) that the Medicaid agency attempts repayment.

One’s estate might include cash, checking and savings accounts, stocks and bonds, remaining funds in a Qualified Income Trust and / or Irrevocable Funeral Trust, a vehicle, and most any other items of value. Frequently, one’s home is the last remaining asset of any real value from which Medicaid can seek reimbursement. This might come as a surprise since the home is generally exempt from Medicaid’s asset limit. However, unless planning strategies have been implemented, one’s home is often not safe from MERP. Learn more here. A life insurance policy is generally safe from Estate Recovery if a beneficiary is named other than one’s estate.

The 1993 Omnibus Budget Reconciliation Act (OBRA) required that all states seek reimbursement of long-term care costs via Medicaid Estate Recovery for persons 55+ years of age and those under the age of 55 who were permanently institutionalized (i.e., in a nursing home). Prior to OBRA, the decision to implement a Medicaid Estate Recovery Program was left to the discretion of each state. Outside of the federal guidelines for MERP, the particulars of Estate Recovery are state-specific. As an example, some states attempt reimbursement of costs for other Medicaid services outside of long-term care. All funds collected via MERP go back into a state’s Medicaid program and are used to pay for Medicaid services for other beneficiaries.


How Does MERP Work?

Following the death of a Medicaid recipient, Medicaid generally sends a letter to a relative of the deceased, usually a beneficiary or the executor of the estate, asking for reimbursement of all long-term care costs for which it previously paid for the deceased. Essentially, the letter informs the family that the Medicaid agency intends to file a claim of repayment. A Medicaid agency cannot collect more from one’s estate than the amount in which it paid. For example, if the state paid $153,000, but one’s estate is worth $300,000, Medicaid can only take $153,000.

With MERP, all states are required to seek recovery from the deceased Medicaid recipient’s “probate estate”. Not all assets go through probate, a court process in which the deceased’s will is validated (if there is one), the value of the estate is determined, debts are paid, and any remaining assets are distributed to beneficiaries. Assets that go through probate include those strictly in the deceased’s name, or if jointly owned, ones that are “tenants in common”. With tenants in common, the beneficiary of the deceased’s share is named in the will. This means the other owner does not automatically inherit the deceased’s share. It is important to note that probate laws differ by state.

States also have the option to attempt recovery from assets that do not go through probate. This is known as an “expanded” definition of estate recovery and includes assets that are jointly held other than “tenants in common”, life estates, and assets in a living trust. See probate only states versus expanded recovery states here.


Can Medicaid Put a Lien on the Home?

Yes, Medicaid can put a lien on a Medicaid recipient’s home, but not all states do. A lien is a way to guarantee payment of a debt, or in this case, reimbursement of long-term care costs. Essentially, it does not allow one’s home to be sold without existing debt paid first. With the passing of the Tax Equity and Fiscal Responsibility Act (TEFRA) in 1982, states were given the option to use liens to prevent Medicaid beneficiaries from transferring their home to a loved one shortly before they die as a means to avoid Estate Recovery. Note that if a Medicaid recipient were to transfer their home, the transfer would be a violation of Medicaid’s Look-Back Rule, resulting in a Penalty Period of disqualification. The family would then have to pay out-of-pocket for long-term care costs during disqualification. However, a lien prevents the Medicaid recipient from transferring their home.

Generally, a lien is filed by the state when the Medicaid recipient is institutionalized and not expected to return home. If the individual does return home, the lien is removed. A lien is also removed if the home is sold and Medicaid is reimbursed. Selling the home while the recipient is still living, however, is not advised. It will most likely result in Medicaid disqualification for long-term care due to “excess” assets (being over Medicaid’s asset limit). Essentially, the home is exempt from Medicaid’s asset limit prior to sale, but if it is sold, it turns an exempt asset into a countable asset (cash). In some states, a lien may be removed following the death of the Medicaid recipient, while in other states, Medicaid will collect on the lien.

A lien cannot be put on a Medicaid recipient’s home if one of the following relatives lives in it:

• A spouse
• A child under 21 years old
• A disabled or blind child of any age
• A sibling who has an equity interest (ownership) in the home and has lived in it a minimum of one year immediately preceding the Medicaid recipient’s nursing home admittance

In addition to the pre-death lien discussed above, some states may put a lien on the home following a Medicaid recipient’s death. This is done when there is a survivor, such as a spouse, still occupying the home and the state intends to collect repayment following that individual’s death. The lien may be lifted if the survivor wishes to sell the home.


Does MERP Differ Based on the State?

Yes, the laws governing a state’s Medicaid Estate Recovery program varies based on the state in which one resides. For instance, some states will not attempt recovery if the deceased’s estate is under a specified value. Georgia will not seek recovery if one’s estate is less than $25,000, and in Texas, recovery will not be sought on an estate less than $10,000. Some states may also waiver Estate Recovery if the cost of Medicaid long-term care is under a specific amount. For example, Texas will not attempt recovery if the costs were $3,000 or less.

While Medicaid cannot attempt Estate Recovery if there is a surviving spouse, some states will attempt to collect after the death of the surviving spouse, while other states will not. California and Texas are two states that prohibit Estate Recovery after the death of the non-Medicaid spouse. Furthermore, some states only seek Estate Recovery through assets that go through probate, while other states use an expanded definition of estate and seeks reimbursement through assets that do not go through probate.

Medicaid Estate Recovery Program: Probate Only vs. Expanded Definition States
Probate Only States Expanded Definition of Estate States
Alabama Arkansas (though limited)
Alaska Connecticut
Arizona Georgia
California Idaho
Colorado Indiana
Delaware Iowa
Florida Kansas
Hawaii Kentucky
Illinois Maine
Louisiana Minnesota
Maryland Mississippi
Massachusetts Montana
Michigan Nevada
Missouri New Hampshire
Nebraska New Jersey
New Mexico North Dakota
New York Ohio
North Carolina Oregon
Oklahoma Utah
Pennsylvania Virginia
Rhode Island Washington
South Carolina Wisconsin
South Dakota Wyoming
Washington DC
West Virginia


How Often is MERP Enforced?

All states have a Medicaid Estate Recovery Program and must attempt reimbursement for long-term care costs. However, there are some circumstances in which a state cannot seek reimbursement. These exceptions include the following:

1. The deceased Medicaid recipient has a living spouse. While it is possible for a state to attempt recovery following the death of the surviving spouse, not all states do. Even in those that do, there is usually a statute of limitation, or put differently, a maximum amount of time in which Medicaid is able to initiate Estate Recovery. In most cases, the statute of limitation is one year.

2. The deceased has a child who is not yet 21 years old. It is possible for Medicaid to initiate Estate Recovery after the child turns 21. However, as with the above situation, there is generally a statute of limitation of one year. This means that in most cases, if the child does not turn 21 within a year of the Medicaid recipient’s passing, the state cannot attempt Estate Recovery.

3. The deceased has a child of any age who is blind or disabled (as defined by the Social Security Administration).

4. A brother / sister who has equity interest (ownership) in the home lives there and first moved in a minimum of 1 year prior to a Medicaid recipient’s institutionalization.

5. An adult child lives in the home and lived in it with their parent for at least 2 years preceding the parent’s institutionalization. During this time, the adult child provided care that delayed the need for facility care.

Recall that there are state-specific Estate Recovery regulations. Some states will not file for recovery if one’s estate is under a specified value, if Medicaid did not pay more than a specified amount for long-term care, or if the cost of selling the home will be more than the home is worth.

In addition, all states have an Undue Hardship Exception, which is covered in detail below.


What is the Undue Hardship Waiver?

The Undue Hardship Waiver (Undue Hardship Exception) enables a state to waive Estate Recovery if it would cause “undue hardship” for the beneficiaries / survivors of a deceased Medicaid recipient’s estate. What defines undue hardship varies based on the state, but examples include the following.

– It is an income-producing asset, such as a farm or ranch, and without it, livelihood would be lost
– The home is the primary home of the survivor
– The home is of “modest” value – this is defined differently based on the state, but may be approximately 50% of the average home value in one’s county
– The survivor would require medical and / or public assistance if Estate Recovery took place

The process for applying for an Undue Hardship Exception should be included with the notice of intent of Estate Recovery. The process is state-specific and the timeframe for which one can apply for a waiver is also state-specific. For example, in New York and Minnesota, the application must be submitted within 30 days of receiving the Medicaid estate claim notice, while Texas allows 60 days. Supporting documentation is required along with the completed application and may include tax returns, a copy of the will, pay stubs, Social Security benefit letter, and bank statements.


Protecting Assets from MERP

Understanding Medicaid Estate Recovery and Estate Planning techniques can be complicated, particularly since the rules are not consistent across states. For this reason, it is highly suggested one consult with a professional Medicaid Planner regarding their particular situation. Medicaid Planners can educate one as to the specifics in the state in which they reside and assist in implementing strategies to protect their assets from Estate Recovery and instead preserve them for family as inheritance. For example, in some states, a Ladybird Deed, a type of life estate deed, can be utilized to protect one’s home. With this arrangement, the Medicaid beneficiary is the homeowner while living, but upon death, the home automatically transfers to the listed beneficiary, avoiding Estate Recovery. For probate-only states, simply keeping assets out of probate will protect them from Estate Recovery. As Medicaid Planners are knowledgeable about state-specific probate rules, they are well equipped to assist with this.

Another way to protect one’s home from MERP is via the Sibling Exemption or the Child Caregiver Exception. These exceptions allow ownership of the home to be transferred by a living Medicaid beneficiary without violating Medicaid’s Look Back Rule and causing Medicaid ineligibility. The Sibling Exemption allows the transfer of a Medicaid applicant’s home to a sibling. The brother or sister must have equity interest in the home and lived there for a minimum of one year immediately preceding institutionalization (i.e., nursing home care) of the Medicaid applicant. The Child Caregiver Exception allows a Medicaid applicant to transfer their home to their healthy adult child. To fulfill the requirements of this exception, the child must have lived in their parent’s home for at least two years prior to the Medicaid applicant’s institutionalization. Furthermore, the child must have provided a level of care during this timeframe that prevented the aging parent from requiring nursing home care.

An Expert Medicaid Planner can be helpful regardless of whether one has yet to apply for long-term care Medicaid or is a Medicaid recipient. Ultimately, the ideal time to contact a Professional Planner is well in advance of the need for long-term care Medicaid. This allows more options, such as Medicaid Asset Protection Trusts and Long-Term Care Partnership Programs. Medicaid Planners can also provide assistance to a family member of a deceased Medicaid recipient who would like to pursue an Undue Hardship Exception. A Medicaid Planner will be familiar with a state’s rules, if a beneficiary’s situation might warrant an Undue Hardship, and can assist in pursuing and providing proof that one will endure a hardship if a state moves forward with Estate Recovery. Find a Professional Medicaid Planner here.

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