How does Medicaid Estate Recovery work in practice?

As I understand it, the states handle it but the Feds require it now.

The general concept is that when somebody goes to a medical facility for their last years, if Medicaid is to pay for it then a certain amount of personal assets need to be used up before Medicaid will pay.

After those funds are paid down, the state then puts a lien on the home (and other assets?) so they can recover additional amounts when the individual dies.

My main question is … in practice does that mean that heirs will never recieve anything from the estate if the facility costs eat it all up??

Or are their certain small amounts that the heirs always get to keep?

When my mother in law passed away, we were presented with a bill payable to medicaid. She was only on medicaid as her insurance, she was not in a home. IIRC, The bill was around $1,000.00 and we just filled out some forms. The only assets she had was what she had in her room, value of $50.00. That was the end of that.

My friend though, both his grandmother and grandfather, who raised him, went into a home.
They had to auction all the home possessions, the house, and the only reason they couldn’t take his car, was he had it in his own name only. He used Grampa’s car for a trade-in.

He also had to be careful how he spent the money he was receiving, He could pay the gas and electric, etc. He could not buy food, sat tv, internet. He had to pay for luxury items himself, ((Yes, I know, food is a luxury???))

To be fair, some of those rules may have been imposed by a relative who had POA.
In the end, he only got the stuff in his room, and enough household stuff to move into an apt.

In about half of the states, a primary residence/homestead is protected from recovery, though the contents may be subject to it.

Anything that goes to a surviving spouse, permanently disabled heir or minor heir (minor for these purposes meaning <21) is protected regardless of jurisdiction*.

A home in which an adult child resided for 2 years or more prior to institutionalization of the deceased is protected if the child provided attendant care or nursing.

As a general rule, Medicaid can recover all of the estate if necessary to satisfy the cost of care provided after age 55. In some states, it can recover as much as is needed to satisfy the total cost of Medicare services provided including services provided prior to age 55.

If you are or expect to be an heir (or deceased) in the near future I strongly recommend you see a probate or estate attorney. You/your parent can move or transfer ownership of certain assets to protect them now, like a car, for example.

*stuff that is protected due to the status of the spouse or heir is still subject to recovery after the heir turns 21 or is no longer disabled, or the spouse dies. However, most states waive this option.