, ..
  .
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...
MEDICAID ESTATE RECOVERIES 
National Program Inspection 
.. SlIlVl(1ES . 
to' 
r' 
Ji? 
OFFICE OF INSPECTOR 
GENERAL 
. OFFICE OF ANALYSIS AND INSPECTIONS

JUNE 1988  . . - _ -- !,
Office of 

ector General

The .ission Of the Office of rnspector 

promote the efficiency, effectiveness and integrity of

Pror.ms in the Dnit'd St.tes Dep.rtenGt eer"
Services 
(OrG, is to 
(HHS). It 
d.teCt 'nd preVent frd.oueos  this by develoPinOgf  m-e"t'htohd sa ntdo


Dum 
statute  1976  , waste and abos

s.cret.ryin  .nd th,e  tChoen gIrnesspse cftUolrl yG e'nnedr aclu rkreeenptsl yb
oth the
. or.... 

about programs 

ccororenctdiveu acctitoni. Tnheg  aUditors m anagement 
 problems and recomminenfOdsr
md 
.pproxi..tely 1  , investOIGi  gapteirofnos ramnsd  iitnss pmeicstsiioonns  bwyith

cOuntry .  200 st.ff str.t.gic."y loc.ted 'round 
the 
Office Of 
 Analvs 
InSDect 
This report  and  . r

rnspeCtions (is OAlp)r,o douncee dO fb yt hteh et hOrfefei cme. joofr  AonfafliYcseiss  waintdhin the

orG. Th. oth.r
of rnVestig.tiontsw.o  T.hree  
the Offic. of AUdit and the Office

tyPic."y, 
OA conduct inspections
effectivenesSsb ort-term stUOies deSigned to determine progr..
abuse.  , efficiency 'nd VUlnerability to fr'Wuhdc ohr ar

This stUdy was conducted to

reCOvery programs

enhancements.  evaluate State Medicaid estate

, document 
best practices

, and recommend

Th. repOrt w.s prep'red under the direction of Kaye D.

'idwe" "'io", 
Of An"y, stihse  .ndrnsPections.
rnspector Gener" Of Region rx
Were the
. fOllowing People: 
P.rticip.ting in this project
, Offic.

StePhen A. Moses

. L..

Kathy L. Admire  , Project Director

Leonard CZajka  , Program Analyst

Carlson,  Program Analyst

Ruth 
JeffreE. y Balentin,e 
 Program Assistant 
Zimlicn 
SNortm ate Of WashinFgotrom, nePr
orje ctP
 rojectL iDaiisroenctorHeadquarters
, now with the
 MEDICAD ESTATE RECOVEES 
RICH 
P. KUSSEROW 
JU 
INZ  ECTOn GE  1988

OAI-09-86-00078  . ..  ;....     .....     ..
....      .........        ..........          .............             ................               .....................         .           .........................                         ..........................                          ..........................                          ...........................  .                       ............................                           ............................                            ..............................                              ...............................                             ..................................                                  ..................................                                  .................................                                 ......................
TABLE OF CONTNTS

Page 
SUKY . . . 
EXECUIV 
AN ANALYSIS OF TH MEDICA CATASTROPHIC BILL
IN TH CONTXT OF TH OFFICE OF INSPECTR
GEN'S 
REPORT ON MEDICAID ESTATE RECOVEES 
INTODUCTION 
FINDINGS
TRSFE 
OF ASSETS. 
state Statutes on Transfer of Assets

state Procedures

Affect
How TrPanesfeor pof lAesse ts  Provisions 
The Intent to Return Rule. 

state Staff Speak out on Transfer of Assets

Problems 
State Recommendations. 

WH PEOPLE WITH SIZEALE ESTATES END UP ON 
. MEDICAD 
LIENS 
Problems with Liens. 

Alternatives to Liens. 

state Recommendations. 

ESTATE RECOVEES 
Chart:  . 0

state Performance. 

Medicaid Estate Recovery Programs 
by Type of Program

Table I : Active Medicaid Estate Recovery

Programs 
Estate Recovery Effectiveness Ratios

Table 2: Effectiveness Measures

National Projections 
Table 3: National Estate Recovery

proj ections 

OrCganhizaartti:o n and Procedures. .

Medicaid Estate Recoveries: Actual 
and Potential for United States. 

Spousal Recoveries

other Practices. 

Accounts Receivable. 

Exemplary Practices. 

state statutes

Table 4: State Characteristics. . . 

State Recommendations on Estate Recoveries

CONCWSION 
Illustration: Tip of the Iceberg. 

RECOMMNDATIONS. . 
BIBLIOGRAHY 
APPENDIX  . . A-I  EXECUIV SUKY

PURSE: 
The purpose of this study was to: 
Evaluate the extent and effectiveness of Medicaid

estate recovery programs implemented pursuant to the Tax

Equity and Fiscal Responsibility Act (TEFRA) of 1982.

Document State statutory authorities, methods, best

practices and problems related to the recovery of

benefits correctly paid from the estates of deceased

Medicaid recipients.

Solicit and report the advice of states concerning the

best Federal approach to improving Medicaid estate

recoveries. 
BACKGROUND  The TEFRA authorized States to (1) restrict
transfers of assets for purposes of obtaining Medicaid

eligibility, 
(2) place liens on the real property of Medicaid 
I s availability for later
recipients to insure the property 
recovery and (3) recover the cost of care from the estates

of deceased recipients. Evidence from many sources--

including law journal articles, the popular media, the

National Governors' Association, State Medicaid programs
, and

an unpublished Health Care Financing Administration 
(HCFA)
study--suggest that the new TEFR authorities may be less
than fully effectual.

MAOR FINDINGS : Al though Medicaid covers only about one-
third of poor people over age 65, many elderly recipients

retain sizeable estates which pass to their heirs without

reimbursement of public costs.

Only 23 States and the District of Columia recover benefits 
correctly paid from the estates of deceased Medicaid

recipients. They recover less than $42 million annually. 

Cost effectiveness ratios range from less than $2 to over $51

recovered for every dollar invested. If every state

recovered: 
At the same level of Then, the national recovery

effectiveness as: 
potential would be: 
The most effective

State 
(O:!egon)  $589 million 
The mean of current

recovery States 
$ 74 million 
A large, urban

State (California) 
$123 million  The states report that Medicaid eligibility rules permit

knowledgeable individuals to transfer or shelter property

from Medicaid resource limitations in a manner reminiscent

of income tax avoidance. Less savv 
applicants are denied
eligibility and have to liquidate their assets and spend

down to Medicaid limits at great inconvenience and financial

loss to their families. Whether assets are transferred or

liquidated, they are lost as a future source of revenue to

the Medicaid program through estate recoveries.

Despite congressional intent that "
resources available to an

institutionalized individual

, including equity in a home

which are not needed for the support of a spouse or

dependent children will be used to defray the costs of

supporting the individual in the institution,

two
States have implemented TEFRA  only 
I s  provisions to secure

property for estate recovery.
 lien
Many State Medicaid staff believe that program resources

could be enhanced and inequities reduced by 
(1) stronger

restrictions against transfer of assets to qualify for

assistance 
liens
, (2) fewer restrictions against the use of 

to secure property for estate recovery and 
(3) mandatory

estate recovery programs.

RECOMMNDATIONS We recommend that appropriate actions be
taken to: 
Change  Medicaid rules to permit families to retain and 
manage  property while their elders receive long-term
care. 
Strengthen the transfer of assets rules so that people

cannot give away property to qualify for Medicaid.

Require a legal instruent as a condition of 
Medicaid
eligibility to secure property owned by applicants and

ecipients for later recovery.

Increase estate recoveries as a nontax revenue Source

for the Medicaid program while steadfastly protecting

the personal and property rights of recipients and their

families. 
Conduct (a) a thorough audit of current estate recovery

programs 
, (b) a study to determine how much equity is
he i ng diverted through liquidation or transfer of assets 
from long-term care costs at the expense of the Medicaid

program 
, and (c) a review to evaluate how large a
chilling effect the availability of Medicaid without

encumering assets has 
on the marketability of private
sjlaring solutions like 
long-term care insurance.  . -. - -
AN ANALYSIS OF TH MEDICA CATASTROPHIC BILL

IN TH  GEN'S 
CONTXT OF TH OFFICE OF INSPECTR 
REPORT ON MEDICAD ESTATE RECOVEES 
The Medicare Catastrophic Loss Prevention Act of 1987 (H.

2470) as passed and amended by the Senate on October 27,

1987 (S. 1127), contains several provisions related to

matters discussed in this report. 
The germane section of

the catastrophic bill is "SEC. 14C. 
PROTECTION OF INCOME

AND RESOURCES OF COUPLE FOR MAINTENANCE OF 
COMMITY 
SPOUSE. " This section would make two maj or changes to the

Social Security Act in addition to requiring the Secretary

of Health and Human Resources to conduct a major national

study. The first change would add a new section 1921 to the
act entitled
"TRETMNT OF 
INCOME AND RESOURCES FOR CERTAIN 
INSTITUTIONALIZED SPOUSES.  The purpose of this section is

to ameliorate the spou al impoverishment problem. The
second change, entitled "TAKING INTO ACCOUN CERTAIN TRS
FERS OF ASSETS, " would amend subsection (c) of section 1917

of the act to require a Medicaid State plan provision

delimiting transfers of assets to qualify for assistance.

Finally, the bill would require the Secretary to conduct a

study of Medicaid estate recoveries. 
We will discuss each

of these provisions in sequence.

Spousal Impoverishment

Under current law, spouses of institutionalized Medicaid

recipients are sometimes forced into impoverishment by

Medicaid eligibility rules. 
This usually occurs because the

husband is institutionalized first. If, 
as is often the

case 
, most of the family' s income such as Social Security 
and/or a pension is  in  the husband's name, Medicaid rules

provide that all but a small amount must be applied toward

his cost of care. The wife who  the home, i.
the community spouse, retains onisl lyeft  a pitin tance. 
On the other

hand 
, if the wife  is  institutionalized first, and the income
is still in the husband's name, he keeps the money, because

the community spouse has no legal obligation to contribute

toward the cost of the institutionalized spouse'
s care.

The catastrophic bill addresses this problem by increasing

the amount of income and resources that the community spouse

may retain without affecting the Medicaid eligibility of the

institutionalized spouse. Because more people would 
qualify
for assistance and less family income would apply toward the

cost of institutional care, the fiscal impact of this solu

tion would be to increase Medicaid expenditures. 
We found 
iii
 that 3-year cost estimates on similar provisions in dif

ferent bills varied from $410 million (Congressional Budget

Office) to $1, 275 million (HCFA actuaries) depending on

implementation assumptions. All estimates ascend steeply

into future years.

I S Medicaid Estate Recoveries 
Certain findings from the OIG 
report have a direct bearing on the spousal impoverishment

issue. In fact, 
we believe this problem can be resolved at 
considerably less public expense than is comtemplated in the

current legislation. We found, for example, that many

"impoverished spouses" own their homes free and clear.

Their problem is cash flow Der se . We found 
, not poverty 
t two-thirds of the elderly poor are unable to qualify

for any Medicaid services, although many individuals with

large assets are eligible for the program'
s most valuable

(i.  institutional care). 
We documented that 
benefit 
recovery of Medicaid payments from the estates of property-

holding recipients is very unusual. 
This is true because 
assets are (1) transferred, sheltered, expended or concealed

by recipients and their families and/or (2) public officials
have taken no action to recover. 
In light of these facts

we recommended that propertied recipients be permitted to

retain their income and assets while receiving Medicaid

lsoneg-cterum rcaree dben efbitsy,  buta o nlyl egal encumrance, to inr  epeaxyc htahneg ec ofsotr  ao fp rtohmeiisre
 ,

care when they no longer need their property. 
This repay

ment would be made from their estates or the estates of

their last surviving dependent relatives after the property

is no longer needed for a livelihood. 
Such a plan would

resolve the spousal impoverishment problem, eliminate the

most catastrophic financial impact of long-term illness

and  add a major nontax revenue source for Medicaid. 
More
importantly, the risk of losing their financial legacy

would influence the elderly and their heirs to seek private

long-term care insurance protection and thus further relieve

fiscal pressure on public programs.

Transfer of Assets

the
The catastrophic bill would make several changes 
handling of asset transfers to qualify for Medicaiind.

Transfers to a community spouse up to but not exceeding a

newly created "resource allowance" would be allowed. 
any amount pursuant to a court order would be

pTranesfersr  mittedin.   Finally, a 
State plan amendment would be
required which delays eligibility for a period of time

commensurate with the amount of uncompensated value

transferred within 26 months of application for Medicaid.
 restrictions.
In most other respects, the transfer of assets 
would remain the same as in the Tax Equity and
 Fiscal 
Responsibility Act of 1982 (TEFRA). 
considerable body of evidence

Trhee OIlG erepvorta conntatin s t
o these legislative proposals. 
For example
assets transferred to a spouse or any other exempt dependent

may then be transferred by the grantee to someone else such

as an adult child or a charity without affecting Medicaid

eligibility. As a consequence, even very large estates are

eliminated forever as a source of private funding for long-

term care. This welfare resource avoidance technique is

widely recommended by lawyers who counsel the well-to-do

elderly on how to qualify for Medicaid. 
We also discovered

many other similar techniques. For example, community

spouses (and adult heirs and their attorneys) sometimes

(1) seek court ordered support from spouses insti tutional
ized at Medicaid' s expense, (2) obtain divorces to

tirmuposvtesr,i sh the ill spouse, (3) set up Medicaid qualifying

(4) fail to disclose property or transfers 
(5) purchase exempt property to shelter liquid assets,
(6) relocate institutionalized elders to States with more
lenient eligibility rules, (7) deed homes and automobiles

over to themselves and (8) use j oint tenancy ownership as a
shel ter. These actions and many others are taken to pre

serve income and assets for the family by shifting long-term

care expenses to Medicaid. Finally, we found 
that the

practice of transfering assets to qualify for Medicaid is

quite common even though all states but one already have

rules restricting such transfers. 
In other words, making

transfer of assets rules mandatory will not alone resolve

the problem.

Perhaps our most important finding on asset transfers

that they are not nearly as important as another

hMoweveer, dicaid i"s loophole. " A much larger source of private long-
term care funding is lost because of the relatively obscure

"intent to return" rule than will ever be lost because of

asset transfers. The home of an institutionalized Medicaid

recipient who expresses an intent to return home remains

exempt indefinitely whether or not such a return is medi

cally feasible. 
Thus, people do not have to transfer assets 
to protect their property for heirs. Unless the state has

unusual 
an effective estate recovery program, and this 

is 
an exempted home inures to the heir upon the death of the

recipient. With 70 percent of the net worth of the elderly

their homes, the intent to return rule means

invested  in 
that most of this wealth is easily protected from long-term

care costs and preserved for heirs at public expense.
 We do not advocate forcing families to sell their homes to

pay for nursing home care. This is done in many States
despite the "intent to return" rule. 
the prac
uneconomical as public fiscal pWeo  libelicevey   as well as

tice  is 
financially devastating to impacted families. Rather, 

propose to let families
, including community spouses, keep

their real and liquid assets subject to a 
 to repay

Medicaid benefits from their estates. Recipropmiise ents or heirs

who wish to protect estates may purchase private long-term

care insurance to do so. 
With such requirements in place

demand for, and hence availability of
, this insurance can

be expected to increase rapidly. 
The rules requiring

estate recovery could be grand 
fathered in to safeguard

individuals who are already too old or infirmed to obtain

long-term care insurance  the private market place.

this manner, we can proteicn t more people from catastrophic

long-term care costs at less public expense.

Medicaid Estate Recoveries Study

The catastrophic bill provides that the Secretary shall

conduct a "
study of means of recovering costs of nursing 
facility services from estates of beneficiaries.
" A report
to Congress on this study would be due by December 31, 
1988. 
We believe that it  important to observe that three major

studies on this subijs  ect have already been conducted. 
The
Afirsdt rmeseaircnh pirsojtecrt awats i
on'  one by the Health Care Financing

s Seattle Regional Office. 
Although unpub
lished by HCFA, this study spurred major national reviews

of estate recoveries by both the Office of Inspector General

and the General Accounting Office 

(GAO). The GAO report 

due for publication s
  findings. If the  expected to corroborate

the OIG'  in  1988 and  is 
OIG report is correct
estate recovery programs are relatively easy to im,p lMeemdeincta
id
and highly profitable for State and Federal treasuries. 

IG estimates that each year we delay implementing estate The 
recqveries may cost the taxpayers as much as $500 million

even under current law. 
With enhancements to current law as

recommended in the OIG report
still.  , savings could be much higher
 INTODUCTION

1965 severely limited

The Federal Medicaid statute passed 
 in 
State authority to restrict asset transfers, impose liens,

I estates 
or recover the cost of care from recipients 
(Deford, p. 134). For many years, anyone in need of long-

away everyhing and qualify for nursing

term care could  give 
home institutionalization paid for by Medicaid without any

concern for repayment.  Then, in the Tax Equity and Fiscal

Responsibility Act of 1982 (TEFR), Congress enacted a

three-
pronged plan intended 
to assure that all of the resources available to an

insti tutionalized individual, 
including equity in a 
home, which are not needed for the support of a

spouse or dependent children will be used to defray

the cost of supporting the individual in the

institution. (U.s. Code, p. 814)

The TEFRA allowed states to (1) count the uncompensated value

of an asset transferred for less than fair market price

toward the Medicaid eligibility resource limits, (2) place
liens on the property of living recipients to insure the

availability of the property in their estates and (3) recover

the cost of benefits correctly paid from the estates of

deceased recipients. These new authorities were restricted

in many critical ways as we will discuss below. 
In theory, 
however, if States chose to exercise the new TEFRA authority,

people would no longer be able to jettison property, nor

have it divested by others, to qualify for Medicaid. states 
could recover the cost of care from the retained property

when it was no longer needed by the recipients or their

dependents. Furthermore, the recovered funds could be used

to help other people in their time of need.

In the fall of 1985, the Office of Inspector General became

aware of information which brought into doubt the effective

ness of the new TEFR procedures.  We reviewed a draft report 
prepared by region X of the Health Care Financing

There was no Federal authority to restrict transfe

of assets to qualify for assistance. Some states restricted

asset transfers anyway, and this led to litigation. The 
Boren-Long Amendment of 1980 was supposed to resolve the

problem. It permitted states to restrict asset transfers,

but only if the assets transferred were nonexempt. Thus,

Boren-Long excluded most recoverable assets from transfer of

assets restrictions.  , ,.
Administration 
(HCFA). This unpublished report2 explained
(1) how people even with large assets can qualify for
Medicaid, (2) how "loopholes" 
 TEFRA' s transfer of assets
lien and estate recovery authorin ity weakened the law'

and (3) what might be done to achieve the original  s impact

congressional objectives without sacrificing important

safeguards. The report 
contained extensive documentation: 
bexceirlptis  ftroym le gal journals recommending Medicaid 
 eligi
resource avoidance as a routine estate planning 
technique; information on transfer of assets

, lien, and

estate recovery practices around the country; 

recovery practices  2 diverse States; and oveanarlysi s  140 actual

case examples of thein  impact of these policies on recipients'

lives and Medicaid program resources. 

draft projected a large nontax revenue sFoiunraclel yt,o  tthhee  HMCeFdAi
 caid

program, based on actual results in one very successful

State 
, if the TEFR provisions 
were uniformly and efficiently
implemented nationally.

Faced with strong evidence of a potentially large new nontax

revenue source
, we decided to find out exactly what States

have done since 1982 to implement TEFRA' 

authori ties.  s asset control

We sought to determine the extent and effec

tiveness of Medicaid estate recovery programs throughout the

country. We wanted 
to report on "best practices" that could

other States. We also saw 

bse tusaed te Medin icaid eligibility policy with trheeg anrede dt ot ot reaxnasmfienre 
 of

assets and liens
, because estate recoveries are obviously

mtooht iaf tno  prcopeartny 
 be recovereisd   areftainted er theiin r dreeactihpsi.e n
ts' possession
necessary information, we used a questionnaiTroe  owbhtiacihn  wtahse


reviewed  in  advance by HCFA and approved by the Executive
Office of Management and Budget 

(EOMB). All 50 States and

the District of 
 responded. We did extensive
telephone follow-Coluumpia  with about three-fourths of the

respondents. 
Almost simultaneously with our work

Office  , the General Accounting

(GAO) in region X undertook a national study of
TEFRA' s asset control provisions with a focus on estate
recoveries. The 
potential  in  eightGA OS't ast eempshas is based ois n roenv iaecwt uoafl  sdtoaltliasrt irceaclolvyery

valid case samples. Its study is 

due for publication

1988. We have 
sometime  in  met frequently, worked closely,

and shared extensively with GAO staff on this project. 

collaboration was very beneficial.  The 
Some of the material 
 the HCFA report was published

a volume entitled
in  , "Medicaid 
Oct.o1:e:! 1985.  Transfer of Assets"
 others who have studied this subject are Russ Hereford and

Bruce Spitz of Brandeis Uni 

National Senior Citizens Lawver siC tye, nter, GillR  ick DCeufrotrids  oafn dt hJeo
 hn

Luehrs of the National Governors I Association 
Studies  (NGA) Center

for Health  Policy  , and the Office of Inspector
General, Office of Audit. 
first  Hereford and Spitz wrote the
, path-breaking paper on transfer of assets in December
1983. In 
June 1984, Deford published the most thorough legal
analysis of "Medicaid Liens
, Recoveries and Transfer of

Assets After TEFRA" available to this day. 

at NGA have examined and compiled the literatCUurtisre  and Luehrs

State officials 
, interviewed

, and offered a sounding board and clearing
house on transfer of assets policy.
 , "

FININGS

Our study began with a definite focus on estate recoveries.

We realized quickly, however
authorities are an integrate,d  tthraipt atrhtei teT EpFRaAc kaassgeet.  control

Transfer
of assets,  liens  and estate recoveries are inextricably
linked. They 
are the tools Congress gave the states to

secure a person'
s property before and during Medicaid

eligibili  ty so that equity  the property can help pay,

after death, for the person'in s cost of care. Therefore

the following order: tran,s fwee
r
will present our findings 
of assets, liens, recoveriine  s. Each section 
brief explanation of the law, followed by a d(ias)c ubsesgiionns  owfi tthh ea


relevant questionnaire responses
, and (b) includes examples

Tand hdesecri prtieonsp ofo berstt p rcactoicens ucsedl u
 des with a sumary of  various States. 
in
estate recovery

activity and an estimate of the recovery potential

nationally with and without changes to the Social Security

Act. 
TRSFE 
OF ASSETS 
Section 1917(c) of the Social Security Act codifies TEFRA'

transfer of assets provisions. It says that

. . . an individual who would otherwise be eligible
for medical ' assistance under the State plan.. . 
be denied such assistance if such individual womualyd

not be eligible for such medical assistance but for

the fact that he disposed of resources for less

than fair market value.

Having granted this authority, the remainder of the section

restricts its Scope. With regard to institutionalized
recipients who must contribute most of their income to the

cost of their care, 
 the nursing home population most

likely to possess excluded assets who are the principal

subjects of this study, the law provides:

The "look back" period for a home transfer at less than

fair market value 
 limited to 2 years immediately

before the Medicaiids   application. 
3 A 

HCFA Memorandum dated 
 31, 1986, from the

Acting Director of the Bureau of JulyE  ligibility, Reimbursement

and Coverage 
(BERC) to the Regional Administrator of HCFA'

Atlanta Region 
the law.  (IV) conveyed an unexpected interpretation of

According to BERC 
If an individual may be made
ineligible for more than 24 months

no reason to 
iev 
State may not look b, athecrek 
 for is the same period 
3t The period of ineligibility after disposal of the home

may be less than 2 years or more, but it must bear a

reasonable relationship... to the uncompensated value of

the home.

Ineligibility may not be imposed if the individual

is expected to return home

transferred the home to a spouse or minor or

disabled child, or

intended to dispose of the home for fair market

value. 
Ineligibility may not be imposed if the state determines

that "denial of eligibility would work an undue

hardship. " 
Because the act specifies that Medicaid limitations on

transfer of assets may not be more restrictive than

Supplemental Security Income (SSI) limitations, except under

specified conditions which do not apply to this point, ineli

gibility will also not occur if an individual or spouse

"furnishes convincing evidence" that an otherwise disquali

fying transfer was done "exclusively for some other purpose"

than to become eligible for assistance.

The law on transfer of assets is extremely complex

confus ing, and litigable. Al though HCFA has not yet pub

lished regulations to clarify the statutory language, sucn

regulations are under development.

According to our questionnaire responses, 49 States have 
opted to apply the transfer of assets restrictions.  Alaska 
did not. Assets may be given away with impunity to qualify 
for Medicaid in that state.

State statutes on Transfer of Assets

Some States have their own statutes dealing with transfer of

assets. These  strength. Alabama makes an

vary widely  in 
of ineligibility to determine whether there was a transfer

of assets for less than fair market value which would have

made the individual ineligible at the time of the transfer.

Deford disagreed strongly with such an interpretation

(Deford, p. 138). Only the courts can decide definitively

whether look-backs beyond 2 years are permissible under

these special circumstances. In practice, 
however, such
circumstances occur infrequently.  ---  - - - .- -..-
"inter-
wi thoutv ivos" gift of assets void if the donor  left
means of support. 
Connecticut law makesis  transfer of
property for less than fair market value for purposes of

obtaining assistance a fraudulent conveyance and provides

for civil action. Virginia makes 

recipients of such

property liable for the uncompensated value. 

the transfer of money or property  Illinois says

of' a current or 
former
erecvipiiendt eintno ca ejoi nto tefna ncya ancc ounit n
 tent to defeat the claiims  "against fhaicsie

estate.  prima 
Oregon law authorizes the State to 
(1) petition
for judicial appointment of a conservator to protect

incapacitated recipients from inappropriate or victimizing

divestitures and 
(2) "
prosecute a civil suit or action to set
aside the transfer, gift
, or other disposition of any money

violation" of transfer of assets rules.
Aor ptro pterhty emad e other end inof the spectru 
oth  are Montana and several
r States which do not apply transfer of assets 
restrictions to property which 
 exempt or would have been

exempt if the grantor had been ois n assistance at the time of

the transfer. 
Finally, one person responded that "
the
general tone in ;my 
State) is that it is ethical and

appropriate to rearrange assets to insure an inheritance for

heirs. What 
often happens at the time of death is that there

no estate to open. 
is  The family can distribute and move
assets so nothing is left.... 

conserving assets for the dearlyIt  inis tensdeeedn. 
 as appropriately

Most States which restrict transfer of assets follow the

Federal statute'

the 2-year look-sb praesccrikpt ionps eandr HiCFAo podl .
   regarding
use a 5- A few do not. icyF  our States
year look-back; two States use 3 years; and
two States use I year. 
State Procedures

Aallp Stpatels iuctilaizet ia odocnume nt, 
 the Medicaid

, which describes assets and their value and
which must be signed by the applicant. 

normally the applicant'  Home equity,

s largest asset
recorded  , is usually not
, however, if the home is exempt at the time of
application. The 
failure of eligibility workers to place a

value on exempt homes was roundly criticized by one estate

recoveries official. Exempt property 

e. g. can become nonexempt

, when a resident SpOuse dies, and may be recoverable 
from an estate. 
For this reason
, all property is important

even if it does not immediately obstruct eligibility.

States 
Many 
Califor, ninciluadi ng some active  estate recoveries such as

, Montana and North Din akota, do not apply transfer
of assets restrictions to exempt property. 

a recipient can transfer exempt property to aI nt hsiurcdh  pSatrattye,s


receive long-term care benefits for the rest of his life

",ild never have to worry 
about recovery from the estate.  Nearly all States do routine training for eligibility

workers on treatment of resources including transfer of

assets. Only three states reported doing special training

on transfer of assets and/or estate recoveries. 
One State
alone 
, Oregon, routinely provides annual training for field 
staff on the importance of and the relationship between

enforcing transfer of assets provisions and recovering from

estates. 
Based on the assumption that transfer of assets restrictions

are moot if States are unaware of the asset or transfer, we

asked about routine verification procedures to determine if

assets and real property were investigated even if

liquid 
denied by the applicant. We found that 39 states indepen

dently verify assets, usually by contacting banks. 
Only
18. States, however
, routinely check with county assessors and 
recorders concerning home ownership and transfers. Verifica
tion of the real property of nursing home recipients is by

far the most important procedure, because most of the net

their homes. Liquid assets, we

worth of the elderly  is in 

were told, are so easy to dispose or convert to excluded

resources that they hardly matter. Real property, on the

other hand  registered and relatively difficult to hide or

is 
convert. Some States said that checking for property in all

cases was time-consuming and unproductive. One State made a

this 
vaerny taelllinyg rsemiarks w:hic h p"reSsagoes  whmat afonllyows  
transfers are legitimate, thein re is no use

checking. 
Nevertheless, a single "hit" which disqualifies 
a recovery of benefits

pan ianeilidgib lec reacipnien tj our rsesutltisf 
 y considerable lookini ng. 
Oregon estimates that 
a full-time employee could be profitably employed verifying

(i. 
out of State) property which was 
nothing but foreign 

unreported by recipients. It "recently tracked down a

Massachusetts who then put their

property sold by a family 
 in 
a nursing home in

Oeldrere (wghoo hnad  owonedn t heM preopdertiy)c 
aid and moved to Arizino  na.  California 
actually keeps property records on microfiche in their

office. The records are obtained from a Florida company

which compiles such information. 
How Transfer of Assets Provisions Affect People

To understand better how transfer of assets restrictions

affect people, we asked what options are given to an

applicant or recipient if the state discovers a disqualifying

transfer. In 
almost all States, there are no options. The 
the form of an opportunity to

preresobn ruecetiv e,s  daue ppropceses 
al, or argue hardin ship. 
The uncompensated value 
counted toward the personal asset

of disposed assets 
 is 
reserve standard. Then the application is denied or the

current eligibility terminated if appropriate. 
An applicant

or recipient may reverse the disqualifying transfer or
 obtain full compensation, but these alternatives usually

cause ineligibility anyway because of excessive resources.

The next step is to determine a period of ineligibility

which may be shortened based on high medical costs
, urgent

home repairs, or other justifiable expenditures.

A few states offered some creative options to the transfer

of assets dilemma. Recipients disqualified 
after a period

of receiving inappropriate benefits might be permitted to

repay the cost of their care as  in  Alabama , Colorado and
Oregon, in order to shorten their periods of ineligibility

their exposure to higher, private-pay nursing
and  minimize 
home rates. "Avoiding probate" might be accepted as a valid

rebuttal of the presumption that a transfer was for the

purpose of obtaining Medicaid eligibility as in California

and Idaho. Or perhaps the state would intercede on behalf of

the client to reverse a victimizing transfer and seek

financial recourse from the grantees. Colorado, Connecticut

cases of financial abuse. 
and Oregon will do this 
 in  The 
most creative option to the transfer of assets dilemma,

Oregon' s "open ended mortgage. " Grantees, i. e. ,
however,  is 
the people to whom recipients have given their assets
, are

permitted to retain the transferred property. 
In exchange,
however, they must agree to pay back the full cost of

Medicaid benefits upon the recipient I 
s death up to the
uncompensated value of the property secured.

Several States lamented HCFA and SSI policies on "contracts 
for deeds,

"Until recently, Minnesota allowed people to keep

their contracts and the income would apply toward

their cost of care in a nursing home under

Medicaid. Now, we have to treat the contracts as

disqualifying property. That means the people

have to sell the contracts at a severe discount.

This value is lost to the recipient, the State and

the Federal Government. Then the recipient ends 
a short time anyway. If
up back on Medicaid 
 in 
the contracts were kept, they would go on paying

even after the recipient dies, frequently paying

the whole cost of care sooner or later.

For example, says Utah:

"A person sells their $50, 000 home and this

generates $500 a month for 30 years--that'
$180, 000 we could use toward the cost of nursing 
home care. The SSI regs say we have to count this

as an asset, so the recipient sells the contract

for $20 , 000 , which makes him ineligible for 1 or 
2 months , and then he' s right back on Medicaid,
 when we could have been applying the $500 per month

almost indefinitely. The Medicaid program would be

much better off, if we could have continued to 

operate allowing recipients to keep their con

tracts 
, but HCFA says we have to count these as an
asset. " 
Colorado concurs. At least one other state, sharing these

concerns, simply ignores the HCFA/SSI rules without being

challenged, a not uncommon State strategy on eligibility

policy compliance issues.

One other option available to Medicaid applicants with

disqualifying assets or transfers has been eliminated by

departmental policy. Until september 1985, SSI and HCFA

allowed recipients to receive benefits while they made a

4 Now

"bona fide effort to sell" their excess resources.
recipients must liquidate their resources and s end down to

eligibility limits before they can be eligible. 
The states

often observed that this new policy can lead to "fire sale"

liquidations, loss of asset value, and family disruption.

According to Connecticut, "By forcing this kind of loss

just enriching someone else at the expense of

Medicaid  is 
the client, the State and the Federal Governent.

We asked how States handle this situation with regard to

home property. Thirty-seven States said that  the
in 
absence of some other reason to exempt the home, it would

have to be sold and the proceeds spent. Thirteen of these

States reminded us that another reason to exempt the home,

Le. 
, the "intent to return" rule discussed below, is almost 
always available. Eight States, however, made some

reference to an extended exemption based on the effort to

sell a nonexempt resource despite the policy restriction on

such exemptions. Some States permit eligibility if the

recipient agrees to pay back benefits received when the

willing to secure this responsibility

property  is  sold and  is 
wi th a lien or assignment on the property. Other States do

not require the lien and mayor may  a pay back.
not  require 
Connecticut allows an applicant with disqualifying resources

The sources for this statement are a HCFA Memorandum

dated September 20, 1985, and Transmittal No. 14 of the

Supplemental Security Income (SSI) Program Operations Manual

System 
(POMS) dated November 14, 1985. 
The Omnibus Budget Reconciliation Act of 1987 has

partially reinstated "bona fide effort to sell."
 to " 
sign a mortgage with the state, list the property, sell 
it within 9 months, reimburse Medicaid for all benefits

received, and then become ineligible if the remaining

balance is still disqualifying.  New York uses an

assignment of proceeds.  Oregon will even petition the

court to appoint a conservator to sell the property and turn

the proceeds over to the agency if the appl 
icant is incapac
itated and unrepresented or financially abused. Two states

exempt with no qualifications, and one

said home property  is 
State has no restriction on transfer of assets so its

procedure for nonexempt home equity does not matter.

The Intent to Return Rule

The only good news about the transfer of assets restrictions

that the rules
cfora Mendic auid sappulicaantlsl aynd  rebcipeie ntcs ircumvented.  is 
Obviously, the law itself 
exempts many transfers such as those which occurred more

than 2 years before application or benefited an exempt

relative. The most important factor putting property outside

the reach of eligibility and transfer of assets limitations,

the "intent to return" rule. According to HCFA

however,  is 
and SSI policy, if an applicant or recipient expresses an

uncontradictory intent to return home, the home shall remain

post-eligibility treat
exempt indefinitely. Unlike certain 
ment of income rules and lien requirements, the probability

of a recipient'  and
s actually returning home is not the  issue 
need not be medically verified. Subjective intent of the

recipient, according to explicit HCFA policy clarifications,

what matters. 6 
is 
We asked states how they handle the intent to return rule.

This policy is very important, because it determines whether

an institution-bound applicant' 
s most valuable assets will 
be exempt or not. If recipients are allowed to claim intent

to return with near impunity and a State has no estate

recovery program for benefits correctly received, then these

large assets go entirely unencumered to heirs. We found 
' subjective intent 
that half the states accept recipients 
according to SSI and HCFA policy and half require objective

verification from a medical doctor. We asked one state

which requires verification if it knew its policy violated

SSI rules, and the response was positive. Georgia said 
"this (intent to return) ruling places virtually all home

ty in an exempt status. 

equi  Wisconsin remarked that it
The sources for these statements are a HCFA

Memorandum dated January 14 , 1986, and Transmittal No.  13 of 
the SSI-POMS dated November 1985.
 actually " 
compelled by Federal quality control to have a
physician' 
s statement in the case record. 
Al though the 
intent to return rule is the most important 
exemption from property and transfer of assets restrictions

there are many other techniques to achieve the same purpose.

We asked states how they dealt with divorce, trusts, and

nonsupport suits 7 when these actions are taken for the 
purpose of divestment to qualify for Medicaid. Twenty-four
states said they would permit divorce; 17, trusts; and 12, 
nonsupport suits. Twenty-one States said they would not

permit divorce; 28 did not allow trusts; and 30 ruled out

nonsupport suits. The rest of the States did not know.

Most, States were very vague on what, if anything, they would 
do to discover or counteract techniques that they claim to

disallow. A few, however, are quite active. Connecticut, 
for example, told us it "had a case recently where an

employed working man divorced his wife when she got

Parkinson I s disease. He would not give her anything except 
the small coverage she was entitled to for free through his

employment-related insurance. The State required that he

give her half the house and alimony. We got her a sizeable

al imony and he has to increase the insurance.  Oregon has 
used conservators appointed by the court to relitigate

divorce decrees, invade trusts, and partition property

interests. It 
does this to protect the recipient' s ownership 
rights, but also to secure the state' s claim on the assets.

California has a law which provides for the automatic divi

of community property for Medicaid eligibility purposes

sion 
when one spouse enters long-term care. This eliminates the

need to divorce in order to shelter the well spouse's share.

Oregon recommends a similar procedure to people who inquire.

"Why force the well spouse into poverty, " it reasons. The

HCFA objects to such property divisions and has placed these

states on the "  spousal
compliance list.  The result is "
impoverishment. 
The term " 
nonsupport suits" refers to the strategy, 
New York, whereby a well spouse at home

used successfully  in 
files a legal action against an institutionalized Medicaid

spouse for failure to support.  to redirect

The objective  is 
income of the Medicaid spouse  supposed to be

, which  is 
applied toward cost of care, to the well spouse, without

sacrificing Medicaid eligibility of the institutionalized

spouse.  State Staff Speak Out on Transfer of Assets Problems

During telephone follow-up on the questionnaire responses

state staff were very candid about the issues related to

treatment of resources and transfer of assets.

Some typical comments from big and small States all around

the country are: 
"Recoveries are going down because people are giving

away their property leaving less and less in estates.

(MT) 
"We recover from people who are not clever enough to

transfer their property, and everyone else goes
scot-free. 
(CA) 
"We frequently see deeds quitclaiming excluded

property to sons or daughters days before death.  (CA) 
" (Some) people... get a new doctor' s statement every 
6 months saying the recipient would be coming home just

to keep the home exempt and the recipient on

assistance. 
(MT) 
"People are starting to use a lot of fancy footwork to

avoid losing the' family fortune. I They 
ask three 
questions: how should the recipient spend the money;

what does the family have to lose; and how can we get

around the rules.  (MD) 
over assets, they can

"If an applicant or recipient  is 
reduce their assets by buying any exempt or excluded

asset and requalify for assistance.... Families buy

vehicles and even diamond pendants to qualify (exclude)
the assets. 
excluded so it can be
Personal property  is 
at any time.  (MN) 
given  away 
"Many, many, many attorneys call on a daily basis

I There 
looking for' loopholes.  are lots of welfare

specialists who help people avoid welfare resource

limits. 
(MN) 
"People are actually planning for Medicaid more and

I re 
more. They  looking for ways to get the Government to 
take care of them. Any eligibility worker would be

terepted to game the 
system to get benefits for a 
relative. They are torn about what to do when they know

of a loophole and are talking to people with a serious

problem. . . . The people we collect from are the ones not

planning ahead or not smart enough to figure how the
 system works and take advantage of it.  It I S really
unfair. " 
(MT) 
the last few years with law

"We have had a problem  in 
how to avoid payments and still be

firms specializing 
 in 
eligibile for Medicaid. Couched in terms of recipients'
rights , they go on radio and ,
TV talk shows. They picked
up on the Federal Government I s policy on 'intent to
return' where the house remains exempt if you only say

intend to return.... The lawyers put it 
you  in terms of

'how to avoid having Medicaid take everything you own. 

(NY) 
"More and more recent refugees from the middle class' are
ending up on Medicaid. Especially in 
States with medi

cally needy programs. People are 
carefully shepherding

their assets to bring them under the exclusions allowed.

(They put disqualifying cash into a new exempt car or

payoff a 
order to qualify
mortgage on an exempt home  in 
for Medicaid.  These are people who are used to dealing

with accountants and attorneys. They are familiar with

the intricacies of tax avoidance, and they put the same

principles to work to get within resource limitations.

social workers in hospitals advise people how to qualify

for Medicaid by getting rid of their property. 
(ND) 
exempt.
"Property transferred prior to 2 years 
Ridiculous! The State had a statutory 7is -year limit, but

was told it was unconstitutional. People should be

required to take care of their foreseeable needs before

they give property away. 
When you are older, foresee
able needs automatically include possible catastrophic

medical costs. It's not right to shirk that

responsibility and depend on assistance. 
(CT) 
Financial abuse cases are becoming more and more

common. The family  I how can 
we get their assets wmemibetrs'h moaju ort c oncgerin viIn g"  anything is to the

nursing home or the Government? 
(MN) 
Life estates go to remaindermen after death. Sky
rockets go off when we see one of these
, because an

illegal transfer has almost surely occurred. 
(OR) 
joint tenancy passes by survivorship

"Property held  in 
without probate. Joint 
being used as a

tenancy  is 
sheltering tool and not just with spouses. 
(CA) 
"Once a recipient understands the implications of estate

recovery, there will be no estate left to capture--they

will legally dispose of their property. 
We get calls
from attorneys representing recipients every day. 
Once  involved, they inevitably blow us away.

an attorney 
 is 
They always figure out a way to shelter the resources.

We only recoup from ,
and uninformed. Congress
the  naive
has to decide if the intent of public assistance

I s medical care 
to pay for a person 
(Medicaid)  is 
shel ter income for their kids I inheritance. 
(UT) 
"Attorneys are getting very innovative with trusts.

They are constantly looking for language that will make

eligibility criteria. 
trusts okay within Medicaid 
(NJ) 
that we have to follow the SSI regs

"The big problem 
 is 
even though the SSI population  different from the

aged nursing home population. Sis SI people
, for the most

part, have minimal or no work history, thus minimal

opportunity to attain property and other assets, but

that' 
cares.  not true of a lot of people who need nursing home
Following the SSI regs virtually assures there 
"S 
will be nothing to recoup when the patient dies. 
(UT) 
"SSI recipients would be less likely to have resources

than our nursing home Medicaid population. 
The problem

is, the latter ones are the ones with the attorneys....

(VT) 
"Disposal of assets prior to death 
 much more of a

problem to us than estate (recoveryis ) limitation::. 
(MN) 
teaching attorneys to
"The bar offers courses 
 in 
rearrange assets so as to throw the cost of medical

expenses onto the public. 
They blatantly advertise the

concept. They promote that it is proper to manage an

estate so as to make a person eligible for a public

recommended and the preferred way to 
bdenoefi t.b Thuiss 
 iness.  is 
(PA) 
8 We 
have data from the Supplemental Security Income

program which show that only approximately 1 to 10 percent

of aged SSI recipients  own homes, depending on the State.

rThies cmeainsp veirye linttlte s-- in itself, because institutionalized

who are eligible because of the excessive cost of 
their institutionalization--are the people most likely to

have homes (and other assets) and to know (or have relatives

who know) how to protect them. 
Data on home ownership within

this sub-group are not available.
 State Recommendations

We asked States to recommend any changes in Federal law

regulation, or practice which would enhance Medicaid estate

recoveries. Eighteen States contributed five strong recom

mendations related to treatment of resources and transfer of

assets. Two States suggested tightening up the " intent 
return" rules "to prevent virtually all nursing home

recipients from remaining eligible indefinitely despite home

ownership. 
Four States wanted the "bona fide effort to 
sell" policy reinstated so people would not be forced to

liquidate property hastily and wastefully to the benefit of

neither the family nor the State. 
 six  states said we should

close the "loopholes" in transfer of assets rules such as

the ability of an institutionalized spouse to give away

property to a well spouse who can then give it to anyone

thereby protecting the property permanently from recovery to

pay for the cost of care. Five states would like to see the

transfer of assets look-back authority extended from 2 to

3-to-5 years. Seven States asked for restrictions on trusts

which go beyond the provisions of the Consolidated

omnibus Budget Reconciliation Act (COBRA). 9 
Clearly, what happens to the property of applicants and

very
recipients before they qualify for Medicaid 
 is 
important to the success or failure of estate recovery

programs. 
a recipient I 
s possession
Retention of property  in 
equally critical. The lien provisions 
during eligibility  is 
TEFRA were designed to help states achieve this latter

in 
purpose. We discuss liens after the following inset.

Section 9506 of COBRA provided that maximum

distributions allowable from trusts are to be counted toward

Medicaid eligibility limits whether or not the distributions

are actually made. 
(National Health Law Program, p. 247.
Some States believe this provision will not solve their

problem with "Medicaid-qualifying trusts.  WH PEOPLE WITH SIZEALE ESTATES EN UP ON MEDICAID 
a means-tested public assistance program,

Medicaid  , welisf are. a 
How do people who possess appreciable 
i. 
assets qualify? We can explain this phenomenon best

with a hypothetical, but stereotypical, example.

1900 when life 
John and Mary Smith were born  in 
expectancy was 46 years for men and 48 years for women.

1920, began payments on a home, and

They married  in 
started a family. Theirs was the American dream--
happiness and prosperity--unti1 the early 1980s. At age

80, with an actuarial life expectancy of 8 years remain

ing, c John was stricken by Alzheimer I s Disease. d  After 
a gradual onset, he began to require almost full-time

care. Even with daily help from a home health aide and

the children--
in their late 50s themselves--the 
responsibility finally overwhelmed Mary. By 1985, the
family concluded that nursing home institutionalization

could no longer be postponed. 

I s 
Robert, the couple  first child and a successful tax 
attorney, did some research. He located several excel

lent long-term care facilities, but was alarmed to learn

that they charge from $20, 000 to $25, 000 per year. f Dad 
could easily live several more years.  With Mom getting

frailer every day, their combined care costs could con

sume the family I s 
entire net worth (a $65, 000 home owned 
free and clear and $35,  certificates of deposit)

very rapidly. h But 000  in
, wait a minute, the folks have had 
Medicare for 20 years. It does not cover everything,

but surely it will ease the burden.

When Bob visited the local Social Security office, how

ever, he learne  that Medicare does not cover custodial

He checked his parents ' Medicare sup
long-term care. 

plemental in$urance policies and found that they were no

help either. J Furthermore, the couple had not purchased

a special nursing home insurance policy which would have

covered custodial long-term care. They did not know

they were unprotected,k and no one ever tried to market

such a policy to them.

As he began really to worry, Bob got some advice from a

colleague 
w'ho had been through the same wringer. "Talk 
Pulic 
to the people at the Department of  Assistance
abc'.': Medicaid, " she said. It has its shortcomings
but Medicaid can be a big help. Somewhat abashed, Bob

eligibility
arranged an appointment with a Medicaid "
worker" (EW). He learned that 
John could have $1020 per
month of income and still qualify for Medicaid. 
 This  presented no apparent problem, because John' s only income

was Social Security and interest on his and Mary'

sav ings .  , however, was another

matter. AlT he resource I  imi
though their home would be exempt because Mary 
continues to live there, John could retain only $1, 
SOO in

other assets. "Not much, " said Bob. The EW explained,
however, that John could keep another $1, 500 if it were

earmarked for burial costs or contained in a cash value

life insurance policy. Bob observed that $3 300 was

still a long way from $35, 000. He described the situa

tion his parents faced and explained that Mary, having

little income of her own, would be genuinely impoverished

when John I s income was diverted to his cost of care
under Medicaid rules. 0 
At this point, the EW asked who really owned the

certificates of deposit. 
Bob explained that his parents
held them jointly. For purposes of determining Medicaid

eligibility, such funds are considered available in full

to the applicant; but they are . 
also considered fully 
available to the other spouse as well, the EW clarified.

"Have your mother open a different account in her name

, only. Put your 
Dad in a nursing home for a couple months. 
Then come and see me and we will cut the paperwork. lIP 
Relieved 
, but with his interest piqued, Bob decided to 
do a little legal research. q He learned that if the

j oint tenancy 
gambit had not worked, there were many, 
many others to try. He also found two important pieces

of advice which he immediately acted upon. 
First, John 
should enter the nursing home of choice as a private-pay
patient for several months before converting to Medicaid.

He might have trouble getting in as a Med caid recipi

ent.  Second , John and Mary' s home, exempt now because 
of Mary' s residence, could become nonexempt if Mary died

or needed institutionalization herself. The State might

also recover the home's value from John and/or Mary'

estate. The smart thing to do is transfer John'  equity
to Mary and then have Mary deed the whole property to

the family. That legally puts the home out of the

State' 
s reach. 
"Heck of a way to run a railroad, " Bob thought. "Had we

known , we could have transferred all the assets when Dad 
first got sick and avoided these complications. Better
yet 
, we could have helped the folks buy insurance to 
All I know for sure--it' s a 
protect against the  risk. 
darn good thing Dad's too sick to understand that he

spending the end of his life on welfare.

(The appendix contains documentation for this scenario.
 LIENS 
section 1917 (a) of the Social Security Act codifies TEFRA'

lien provisions. The HCFA has published regulations on liens

36. 
and recoveries at 42 CFR 433.  Unlike the statutory
provision on transfer of assets, which grants an authority

and then restricts it, the provision on liens imposes a

prohibition and then delineates exceptions.

No lien may be imposed against the property of any

individual prior to his death on account of medical 
assistance paid or to be paid on his behalf under 
the State plan, except--

The first exception allows States to encumer property,
pursuant to a court judgment, for the recovery of benefits

incorrectly paid. Liens placed after death or for fraud

only are not as important for purposes of this study,

because (1) they do not fall under the strict limitations

for liens filed before death pursuant to' benefits correctly
paid and (2) they are not as important for preventing

transfer of assets to assure availability of an estate. 

found this aspect of the lien authority to be little used

and the recovery potential only nominal when compared with

the expense of administration and recovery.

The second exception applies to the real property of

institutionalized individuals who must contribute most of

their income toward their cost of care, i. e. 
, the same 
nursing home population we encountered in the transfer of

assets provision. A lien may be placed on the real property

of such an individual prior to death to secure recovery of

benefits correctly paid only if: 
the State determines , subj ect to a hearing, that "he
. cannot reasonably be expected to be discharged from the 
medical institution and to return home " and

or dependent child,  nor a

neither the spouse,  minor 
sibling with an equity interest and residency exceeding
one year lawfully resides in the home.

Any such lien must "dissolve upon that individual'

discharge from the medical institution and return home.

We asked States whether they used liens to secure property

for estate recovery purposes; if so, how; and if not

whether State legislation would be necessary to authorize

their use. 
Fifteen states said they use liens and 35 States 
said they do not. Of the 35 states which do not use liens

2'" sa; d legislation would be required to begin using them;

5 said legislation would not be required; and 4 did not
 know. Of the 
15 states that use liens, 8 use them only 
after a recipient I s death and 3 only 
 cases of fraud.

Thus , only four States place liens priin or to death to secure 
benefits correctly paid. These four, however, do not all

utilize the special authority granted in the second excep

tion above. New Hampshire has a crafty way to get around

Federal lien restrictions. It does not place liens on the

real property of living recipients who are "Medicaid only.

It does use such liens, however, on all otlh0er  cases financed

by the State even if Medicaid is involved.  This has the 
effect of securing the property for Medicaid recovery also.

Another State seemed unaware of Federal regulations and did

not specify when liens could be used legally: ' 
''Our rule 
doubt, file a lien.  Thus, only two states (Alabama

when  in 
and Maryland) intentionally utilize the TEFRA authority to

place liens prior to death to secure property for recovery

of benefits correctly paid.

California uses liens in two specialized ways. 
Some other 
States have similar programs. California is in deadlock 
with HCFA over "judgIent liens" which are the state

substitute for5 )th.e  "bona fide effort to sell" policy (see

footnote No.  allow the rare individual 
JudgIent  liens
who. does not exempt the home by claiming an intent to return 
to receive assistance while disposing of the nonexempt

property. 
Connecticut has a similar program called 
voluntary mortgages.  These techniques ameliorate a major

problem for many elderly people who are asset rich and cash

poor by permitting home equity conversion over a long enough

period to allow due diligence and dignity. "Voluntary
liens, 
" on the other hand, are used only after a recipient'
death. 
California allows the elderly son or daughter of a 
the home if they agree to a

deceased recipient to remain 
 in 
: lien securing the property for recovery of the State' s claim.

To take the home immediately would be pointless, because the

residents might become dependent on public assistance them

selves. Oregon gives offspring and other relatives the same

consideration 
, although without requiring a formal lien. 
Problems With Liens 
We did not have to ask the States why they fail to use the

TEFRA lien authority more extensively. They volunteered

comments like these:

10 
Only approximately one-third of Medicaid cases in New 
Hampshire are also state supplemental cases and therefore

Furthermore 
, none of these 
covered by the lien  provision. 
are the high cost nursing home cases.
 "Liens are too difficult to administer because of

Federal restrictions. Other property retention

techniques 
, such as aggressive identification of assets 
reversing illegal transfers, and challenging every

possible resource shelter, are more effective under the

circumstances. 
(OR) 
"Liens are very important, because they allow the state

to keep track of property easily. Now it is too easy to

lose property on the way to a probated estate. The 
property is transferred, reverts to a spouse, or the

recipient goes off assistance and gets lost. But liens

legislature 
are too political. We cannot go to our 
lien authority. 
Citizens' associations accuse 
seeking 
us of taking their life savings. It is very sensitive.

But if the Federal Government said that to receive

" Medicaid, you must agree to a lien, we would

participate. 
(MT) 
impossible to administer.

The lien provision  is 
Effectively, TEFRA made liens impossible. Recipients

transfer to spouse and spouse to child. The game is so

easily played. We have a long  liens
active history  in 
but our eligibility people took a close look at the

TEFRA lien rules and said' not 'even remotely

interested. '" (ND) 
hell."  worth the powder to blow it to

"The lien provision  isn't 
(CT) 
Several States told us that they used to have strong lien

laws and other legal mechanisms to assure personal respon

sibility by people with means. We know that such programs

were very common prior to the establishment of Medicaid.

Today, however, few States have strong statutes on public

assistance liens even for State-only programs. 
Some excep
tions are Alabama, which may require an individual eligible

for benefits (because of a temporary property or resource

exclusion) to grant the agericy a lien on the property, and

Utah, which makes receipt of medical assistance, in itself, a

s estate. 
lien on the recipient'  Likewise, Ohio law says "to 
the maximum extent permitted by Federal law and regulations

medical assistance is a lien and shall remain a lien until

satisfied. 
New Hampshire's policy manual says "the client 
spouse, if any, must as a condition of eligibility

and  his 
acknowledge reimbursement and agree to the imposition of a

lien before assistance can be granted.  Missouri may propose

legislation soon to permit a "quasi-lien " or claim on real 
important to note that

estate held  in  j oint tenancy. It  is 
states which do have lien laws do not necessarily enforce

. At the other end of the spectrum are States like

Texas, whose homestead law precludes the filing of liens
 against homes, and Colorado, which interprets a State

constitutional prohibition on making old age pensions

condi tional  to repay as forbidding Medicaid 
upon a  promise 
liens and estate recoveries.

The main objections to liens expressed by States were

, " administrative
poli tical  ty, TEFRA "loopholes 
sensi ti  vi 
difficulties and expense, and the possibility that liens

would discourage the elderly from seeking care. On the other

side of the ledger are Alabama and Maryland' s experience.

Alabama said, "Public acceptance has been very good. We see 
some irate people, but not many. Most people appreciate what

the State contributes for their elder' s care. They are
willing to accept the (elder' 
s) obligation to repay up to the
elder I s equity. 
Maryland said, "Advocacy groups for the 
elderly support the lien program and enabled its passage.

Both Alabama and Maryland indicated their lien programs were

not excessively difficult to administer. As to whether liens

and estate recoveries discourage the elderly from seeking

claartee,r .O r"e gon said it is . a question of "pay me now, or pay me
By the time people are so desperate that they seek 
Medicaid, their only other option is to sell their home

immediately to pay for care. Many people are grateful for

the opportunity to receive long-term care at Medicaid rates

and repay the State after their own death and when the

no longer needed by dependents.

residence  is 
Perhaps the most important reason for the unpopularity of

liens 
the authorizing legislation itself. The
, however,  is 
TEFRA proscribed the States from placing a lien unless an

individual is permanently institutionalized and the home is

unoccupied by specified dependent relatives. Those exclu

cover much of the real property of the elderly. What 
sions 
remains would presumably be countable toward eligibility

limits  prin
, and hence usually disqualifying anyway, on the 
ciple that a permanently institutionalized recipient with no

qualifying dependents can hardly "intend to return" home.

Thus, the population covered by the lien statute is very

nearly a null set. 
11 
The proscription on liens is strongly enforced
sometimes. Connecticut 
used to require people with term life 
(i. 
no cash value, so not disquali
insurance policies 

fying) to make the State partial beneficiary of the policy.

That way, if the recipient died, his nursing home costs would

be reimbursed. The HCFA stopped this practice saying the

s assets. 
State may not encumber a recipient'  Now, "Someone 
receives the benefits from the policy who did not contribute

to the cost of care. 
They enrich themselves from Medicaid 
recipients at the expense of the taxpayers.
 Alternatives to Liens

In the absence of a strong lien program to retain property

in recipients I possession 
during their period of Medicaid 
eligibility, states must either employ alternatives or allow

the transfer of assets section
tohe fte cthnhiqueiss di scrusesedp  ort to erode tihn  e estate. 
It is very much to the 
I s family 
advantage of a recipient  and frequently recommended 
in the legal literature, for example, to transfer even exempt

property from a recipient to a spouse and thence to an adult

child or other third party. This procedure prevents the

property from becoming nonexempt if the well spouse dies, and

it places the property permanently beyond the reach of estate

recovery . 
The State of Oregon compensates for the ineffectuality of

liens by taking a strong legal stance on behalf of the

recipient and the state. We have explained above how

Oregon, pursuant to State statute, has conservators

appointed to protect the property rights of recipients,

files suits to reverse illegal transfers, relitigates

abusive divorce decrees, partitions undivided property and

invades trusts. These techniques, although they do not

combat the statutory interspousal transfer "loophole"

discussed above, help the state in other ways to retain

property in the name of the recipient from whose estate it

may legally be recovered to reimburse, in whole or in part,

the cost of the long-term care. In combination with strong

property ownership identification techniques and the chilling

effect of strong enforcement on concealment and evasion,

Oregon believes that it retains property in recipient estates

as well as can be done under current Federal law.

To find out if other states use similar techniques, we asked

about the use of guardianships or other legal action to

contest property settlements, trusts or inappropriate trans

fers. We found that 12 states do so intervene, at least

occasionally, and 38 do not. None, however, is as active or

effective in these endeavors as Oregon. Pennsylvania 
actually told us that the responsibility of a guardian 

qhqitee thie roppsosi:te ,  e.,  to preserve the property for the

"There is a general feeling that if someone has to be
hurt 
, let it be the State, especially when there are prospec
tive heirs involved. There is no law in the state which

makes repayment of assets to the state a high priority.

Sta 
e Recommendations 
Of the 11 maj or recommendations made by states in response

none was more frequently and strongly made

to our  inquiry, 
than the one on liens. Nine states recommended loosening

Federal restrictions on the placement of liens for the
 purpose of securing property to be recovered from estates to

repay Medicaid benefits correctly paid. Specifically, they

said 1 iens should bind a State' 
s claim on a recipient' 
temporarily exempt property (1) if there is a spouse or

dependent child, so that the asset can be recovered when

they no longer need it, (2) during the lifetime of a

surviving spouse or dependent child if the recipient

predeceases them, (3) if a recipient returns home and goes

off Medicaid if benefits were paid, (4) if the property is

excluded because it produces income or for any other reason

and (5) if the property is jointly owned to prevent its

inuring without an estate to a joint tenant. 
Tyical are

the recommendations of New Jersey and North Dakota:

"Federal law should allow the filing of an

unconditional lien at the time of application

for all Medicaid recipients.  (NJ) 
"Make the lien a condition of eligibility and

have it attach to the property, not the

individual or estate. 
(ND) 
a Medicaid long-term care

rIfe ancy pirpopeirety nremtai nIs  s legal possessin ion after death, States have the
option, subject to specified restrictions 
, to recover from 
the estate. Only having examined the difficulties with

transfer of assets and liens, however, can we appraise the

effectiveness and potential of Medicaid estate recoveries.

States cannot recover what is not there.

ESTATE RECOVERIES

section 1917 (b) of the Social Security Act codifies TEFRA'

estate recovery provisions. The HCFA has published regula
36. 
tions on liens and recoveries at 42 CFR 433.  Like the 
provision on liens, the statutory provision on recoveries

begins with a prohibition which is then qualified by

exceptions: 
No adjustment or recovery of any medical assistance

correctly paid on behalf of an individual under the

State plan may be made, except--

The first exception allows recovery from the same nursing

the sections on 
home population we encountered before  in 
transfer of assets and liens. They are the people who are

required to contribute most of their income toward their

cost of care. 
Recoveries may be made from their estates or
upon sale of a property subj ect to a lien.  The second exception permits recovery from the estate of

any other individual who was 65 years of age or older when

he received such assistance. 
The recovery authority granted in these two exceptions is

circumscribed by the following provisos. Any recovery based

on either exception may be made only after the death of any

surviving spouse and when there is no surviving minor or

disabled child. A recovery based on a lien may be made only

when (1) no sibling with residency of at least a year nor

(2) any son or daughter with residency of at least two years
who provided care which postponed institutionalization is

lawfully residing in the home and has been since the date of

insti tutional ization. 
As we know, this convoluted statutory provision delimiting

recovery from liens is very nearly moot, because all but two

states eschew liens for this, as well as the aforementioned,

reasons. The provisions permitting recovery from the

estates of individuals who are over the age of 65 or

institutionalized, however, are fairly widely used. 
We turn 
now to the application by states of this authority.

state Performance

As noted earlier, all States and the District of Columia 
responded to our questionnaire. Dropping Arizona, which has

no Medicaid long-term care program, leaves 50 respondents

which might have estate recovery programs. Of these, 

recover benefits correctly paid and were able to give us

data on both the amount of recoveries and the cost of

recovery. 12 
Seven other States recover benefits correctly 
paid but could not provide data on the amount of recoveries

(two States) or the cost of recovery (five States). Twelve 
states recover incorrect benefit payments only. Few of these

were able to provide data on either the amount or the cost of

recoveries. Seven states have no estate recovery program

but have at least considered starting one. Seven other

States have no program and no plans for one. (See the chart

on the following page.

12 
Alabama does not do estate recoveries for correct 
benefi ts routinely. Because the State I s lien program 
achieves basically the same purpose, however, Alabama is

included.  MEDICAID ESTATE RECOVERY PROGRAMS

BY TYPE OF PROGRAM 
AK . N 
HI. G 
MA. G 
. . RI . 
cr. G 
NJ . G 
DE . 
MD. G 
DC. G 
N/A 
G = General Recovery States = 24 
! ., Recover Only Incorrect Benefits = 
N = No Estate 
Recoveries = 14  The 16 states and the District of Columbia which recover

benefits correctly paid and reported dollar figures for the

amount and costs of recoveries:

employ 62. 95 full time equivalent (FTE) staff in the
function, 
at a cost of $2, 005, 396 (or $31, 857 per FTE), 
to recover $28, 919, 560 or 
$14. 42 for every $1 spent on recovery. (See tables 1
and 2) 
These same States reported only $8, 065, 878 in "probate
recoveries  in. 1986. California, 
" to HCFA  which reported $12 
486 to 
million to us for estate recoveries and only $71, 
HCFA, accounts for most of the discrepancy. Massachusetts

reported $4. 8 million to us and none to HCFA. The same is

true for several other States. Various factors account for

these discrepancies. There are "nonprobate" estate 
recoveries 
, recoveries reported unspecifical1y to HCFA as
"third party liability, 
" and some state-only recoveries mixed 
in with the figures reported to us. These items should not

account for more than a fraction of the differential how

ever. The States are required by law to return the Federal

share of Medicaid estate recoveries to the united States

Government. Sometimes, however, the amount of the Federal

share may not be clear. For example, some state programs

are funded with only State money. states 
may reimburse 
these programs first before returning any money to the

Federal Government for combined Federal/state programs.

After the State-only costs of a deceased recipient are paid,

there may be little or nothing left in the estate to reim

burse for Medicaid (i. 
Federal/State costs). States are 
e., "
reputed to be adept at minimizing the Federal share of

recoveries with this and many other tactics. A thorough 
audit of the function is needed to determine whether the

Federal Government is getting its full share of the proceeds.
 p-
;!.

=-.
. ----- 
TIB 1

II  IB
IIIQI E5 
MUIBIES 
,. ISIQI FI MTA 
Po 
TDUl.
Stte  ReEcxsJtayeted es  RCCet oaf   PCeC Ft T  1RUei.p ;on  E(1$ UMI.i  lltic1n)  R0eWdpi.e n  0(WRs  Meiiplliiecnn)  RTeDipUilon 
(S Mil icn) 
$ 55,  20,741  14.  316 159  37. 
12,  17.  131  1B.  90.  OI. 
1oo  11.  22,  31,  274.  35,491  25.  217  59. 
129  145  61.  92.  29. 
. 4,  59.  11 ,  60.  14.
62,  367  45.3  75,  367  65. 
450  017  42.  104 746  62.  43. 
071  104  195.  42,  22.  56. 
453  21 ,  29, 169  20.  763  22.  974  S2. 
150  012  41.  412  38.  95. 
316  34,  123  49.  55.3  674  116. 
22,  58.  418  63.  118. 
150  118  493  413.  58,  1J. 
12,216  76.  018  8:.  152,  23. 
26,  619  91.  117.  100  25.
23,  645  30.  27.  210  109. 
69  667  22.  30.  213  33.  89. 
Totl  919  62.  531  $ 3,40.  S 3 744.  454 847  $11 810. 
941  710  35.  112  413.  561  9i. 
CB,  21.  91,  75. 
561  328.  27.  746. 
44.  35,  00. 
110.  0%.  7!.  S!. 
Total  189  453  $ 3,43.  S 5, 148.  186  S1'  CI. 
715 749  716  $ 6 84.  67,  $ 8 89.  11,3,  12,849. 
Ot' 
1,3,3 
St.  -0- N/A  N/A  N/A  547  $ 4 75.3  $ 5,20.  $14 515. 
Gr. 7

Tot. 1  715 749  1,3,  $11,59.  'l4  $14 09.  219  S5 ,3. 
1 Meicaid  aota ca fra oficial ICA-2D aota fo Fel FY 198. Sa: Ofice of th Ac,
Divisim of Mecaid COt Estimes. 
2 .EJIll Z ICfIl; irellZ  Ot.
SNF In ICf 
"";es or  "";es"  Fel 
lists: as estate  th "Ps: to ICA as  in  FY 19. 
re;es.  bs 
4 lrdier ro La- tnd estae  This filJ is 8 j:jeciO"  en pB 
re  I" h..IIC_

5 AR: Ac;"" Rea $tte. 
in:lv 
re I th ar 
6 A few 
ot Stes  Ipte reiesll to tCA bJ  O1ly fo bEits  reiwd 
7 EJllZ th teritories In 
AriZO. 
-oJ'  !,.

To estimate the total current value of Medicaid estate

recoveries nationally, we started with the figures reported

to us. These figures should be the most accurate, because

they come directly from program staff. For states which did

not report a recovery figure to us, either because they are

county administered or because their recoveries are handled

by a contractor, we used the figure they reported to HCFA

for "
probate recoveries" or, as in one case , a best estimate 
based on past recoveries. Two states which claimed to do

general estate recoveries were unable to report a dollar

figure to us, reported none to HCFA, and were not very

active programmatically. Dropping them from the analysis

gives us a conservative estimate of $41, 716, 000 for Medicaid 
estate recoyeries nationally based on benefits correctly

paid. 
Some small portion of this may include recoveries of 
benefits incorrectly paid, but we found such recoveries to be

nominal at best in most States.

Although our questionnaire did not ask why 26 States fail to

recover from estates for benefits correctly received, two

States volunteered these comments: 
"We have not pursued estate recoveries because we .
people in 
do not think it is worth it. Very few 
nursing homes have estates.  (SC) 
"We just do not see estate recoveries as worthwhile

to pursue. Too costly administratively. 
(WV) 
Telephone follow-up elicited similar comments from other

States. Based on the experience of active estate recovery

programs recounted below, however, we conclude that Medicaid

recipients in nursing homes frequently do have estates,

sometimes large ones. We may also say with confidence that

effective. It is 
recovery from these estates is very cost-
true, however, that actual effectiveness levels vary widely

among States.

Estate Recoverv Effectiveness Ratios

To compare the effectiveness of the 22 active recovery

states 
, we computed 7 achievement ratios. State scores on 
each of these ratios are shown in table 2. We assigned a

rank to each state based on its average rank on the seven

ratios. This allowed us to array all 22 active recovery

States based on their overall success with the program.

Some interesting comparisons emerge.

On the "recovery ratio  . i. e. , dollars recovered per dollar 
spent, the rta5ng.e  was from $1. 73 in Rhode Island to $51. 36 in 
3.sSClch'.J'Spt. Oregon I s recovery ratio was only $13. 07 to 
rank, and below the mean. But Oregon ranked 
$1, sixth  in  first on all six of the other ratios. This is not difficult

to understand if we look at the marginal utility of a State'

dollar investment in recoveries. For example, Massachusetts

wi th a recovery ratio four times Oregon 's, recovers less than

one-fourth as much as Oregon overall per elderly Medicaid

recipient. 
Presumably, Massachusetts could add staff, 
recover mu h more, and still maintain a satisfactory

recovery ratio. The bottom line, therefore, is not the

recovery ratio, but the total amount cost-effectively

returned to Medicaid to meet the needs of other recipients.

Several different ratios are necessary to rank States fairly,

because of wide variations among States in the percentage of

recipients who are over age 65 and in the percentage of
vendor payments for people over 65. Recipient  over age 65 
t. 
range from 7 percent in Illinois to 28 percent in Texas, with

a mean of 15 perce  Vendor payments for recipients over 
age 65 vary from 20 percent in Illinois to 54 percent in New

Hampshire , with a mean of 38 percent. These variations skew 
the individual effectiveness ratios. For example, New

Hampshire, with nearly double the percentage of recipients

over age 65 (25 percent) of Oregon (13 percent), has very low

ratios based on recipient age even though its r9tio based on

total recipients is quite close to Oregon ' s. A composite of 
different effectiveness measures tends to average out these

13 To 
discrepancies in caseload characteristics. obtain an

overall ranking of effectiveness in estate recovery, we

assigned a score in each ratio equal to each State s rank.

Then we sumed the scores and ranked the averages. That gave

a list of active recovery States by level of effectivene

13 We 
did not weight the effectiveness ratios because

we had no basis or rationale to do so.
 " . 
TAB 
RE 
1E1!:ID ESATE 
EFFECTIVESS 
Recovery  NRuresc.ip iHeonmt   NPuarsy. mHot m  ROeVeef rp i 6e5n t  OPaVyrm 65t   ReTcoiptaiel nt  PTaotyalt  STcootarLe  
Ovrall 
(S"" 01 
State  Retio  Rank  Ratio  Rank  Ratio  Rank  Ratio  Rank  Ratio  Rank  Ratio  Rank  Ratio  Rank  Ranks)  Rank 
121 
19.  91.  26. 
67.  59. 
95.  30. 
16. 
126 
23.  22.  21. 
51.  109.  45. 
11.  45.  28. 
21.  15.  1.27  104 
10.  29.  23. 
51.  35. 
13.  160.  95.  23. 
2:90  13.  134 
13.  327.  199.  26. 
149 
40.  29. 
12.  20.  1.38  108 
Mean  14.  65.  28. 
FL 8  14.  16.  1. 14  102  15
14.  30.  11. 
INg  14.  1'1 
14.  100.  1. 1  84.  13. 
14.  53.  T7. 
Mean  14.  47.  19. 
ARs 
Mean  14.  58.  24. 
Recovery  at1 0 = Recoverl es/Cost 0 Recovery 
States by 
Nursing Han Recipient Ratio = Recoveries/Nursing Han
Overa II 
Recipients (i . 
, SNF + ICF Other)  Rank 
3 Nursing Kan 
Paymt Ratio = Recoveries/Nursing Han 
Paymts C1.  , SNF + ICF Other PaytS) 
4 OVer 65 
Recipient Ratio = Recoveries/Recipients Ovr 
Age 65 
5 ORvr e65c Piapymi ents 
Ratio = Recover;es/Peymts for ovr Age 65
Total Recipient Ratio = Recoveries/Total Recipients 
7 Total Pa)m,
c /lat fa' = Recoveriesltotat Pa)mts 
8 '  reery 
Cost of  data, unvailable for these States. IlTte 
of the other States S14.42/S1 an a rank of 5. 
9 ARS: 
Acti  e Recovery States  -. 
National Pro; ections 
Because states vary widely in estate recovery effectiveness,

from nonparticipation to recovery of 1. 
7 percent of total
vendor payments, it is reasonable to ask what the national

recovery potential would be based on various levels of

effectiveness. To compute such estimates, we multiplied the

various effectiveness ratios by national totals and then

averaged across all of the ratios. We did this for the

ratios of the most effective State (Oregon), for a success

ful large State (California), 14 and for the mean of all the

ratios. The result was that if every state in the country

recovered from estates with the same level of effectiveness

as Oregon, then the national potential would be $589

million; if at the level of California, then $123 million;

and if at the level of the mean of current active recovery

states 
, then $74 million. 
TAB 
1E1ES 
IEICAID ESTATE 
(Nationl Prjectian in S ..i II 101) 
Nursing Han  Nursing Hom  Over 65  Ovr 65  Total  Total 
Reef pi ent  Paymt  Recipient  Paymt  Recipient  Payt  Average in
State  Ratio  Proj.  Ratio  Proj.  Ratio  Proj.  Ratio  Proj.  Ratio  Proj.  Ratio  Proj.  S Miltion 
Oregon  327.  5450.  5603.  199.  561'.  S705.  26.  S53O.  565.  S589. 
Mean  58.  80.  69.  24.  76.  70.  74.  75.  74. 
Cal Hernia  91.  S125.  S162.  26.  S 80.  S183.  S 71.  S112.  SI22. 
*The projections alreJ b ased on the ratios times nationl totals less the territories an Arizon. Factors for each

ratio are then  and averaged to give the nationl projectim in the sLuas t colUJ. For exmple: Oregon recovers
5X of its Medicaid paymnts to pepLe over Bge 65 fran estates. If 5): of  paymnts were recovered nationlly,
total recoveries would be 5705.0 million. Based on Oregon's recovery of S327.44 per nursing han reipient , nationl
nraetcioovnearli epsr owjoeuLcdt iboen  5o4f5 0S.5489 am 2il mLiiolnl.io And dbiansge dal oln t Oher eplr soj elcetvilo no ff oerf feeaccht iovfe stshae  ratios and averaging gives 
 us 8' 
14 
California shot up from $2 million in estate 
recoveries for 1983 to $12 million projected for 1987. 

ieve that estate recoveries may continue to rise in

bel 
California. Program staff were not so confident, however,

for reasons discussed in this paper.
 We believe these projections are very conservative

considering that the current recovery levels on which they

are based have been achieved without any technical assistance

and with very little emphasis on estate recoveries either

nationally or within the states. It is also important to

note that these projections are realistically achievable

under current law, which has been shown above to be very

disfavorable to estate recoveries. state staff who were

asked the question estimated that Medicaid estate recoveries

could be increased by a factor of from three to five times by

eliminating statutory "loopholes" in transfer of assets

liens, and recoveries. For reasons we will discuss in the

conclusion, these estimates could be far below the true

potential. 
(See the chart on the following page. 
Several States discerned an interesting relationship between

estate recovery potential and Medicaid eligibility policy.

For example, HCFA recently compelled Alabama to accept a

recipient' 
s stated "intent to return" to a home as sufficient 
cause to exempt the home instead of requiring a doctor'

certification. 
Consequently, many more homes will be 
exempted and the State s lien recoveries will go up.

Minnesota, on the other hand, used to have very liberal

Medicaid eligibility policies. As they have become increas

ingly restrictive, however, more and more people have had to

liquidate their property before becoming eligible. As a 
consequence, less property remains in recipients' possession

to be recovered from their estates. The question becomes

whether the public is better served by strict eligibility

policies which leave little property to recover from estates

or liberal eligibility followed by recovery of benefits after

death. An important consideration, according to Minnesota,

is that people rendered ineligible by strict eligibility

policies tend to consult attorneys, find "loopholes" and end

up on Medicaid anyway.

Of .the 12 States which reported they recover only incorrectly 
paid benefits, only 4 provided recovery amounts. The others 
said recoveries were nominal, minimal or they did not know.

Recoveries reported ranged from $3, 
600 in Louisiana to 
$400, 000 in Pennsylvania, with recovery ratios between $3. 
to $1 and $1.24 to $1 respectively. Based on this informa
decided to drop incorrect benefit recoveries from

tion,  we 
this analysis. Although fraud recoveries and policy

enforcement are important, they are not a large nontax

revenue source for Medicaid like general estate recoveries.

Oraanization and Procedures

he 24 States with any general estate recovery

Among 
involvement, we found a wide range of organizational
 MEDICAID ESTATE RECOVERIES

Actual and Potential for United States

ions) 
($ Mi 11 
EST A TE RECOVERY DOLLARS

1000

PROJECTE 
900

ACTlAL 
BOO 
700

600

500

400

300

200

123

100

ACTUAL  NEAN  CALIFORIA ORGON FE. LAN* 
I1/JNOII HOI( KUCH COFO EBEL R ECOVE TR 
RECIPrENT ESTA TC IF  LAItII  ON$ TR'TO F . 
AScT'/LIE/ErA TE REVEES  I s 
awareness and sophistication. One state  third party
liability 
(TPL) director did not even know his state
. At the other 
recovered from estates.  end of the spectru, 
States like Oregon, California and Connecticut have highly

organized programs with skilled personnel in central units.

General estate recovery programs break down into four

organizational categories. six states have central estate

recovery units--usually part of a broader recovery,

collection or TPL division--which employ experts dedicated

estate 
exclusively to estate recoveries. Five states have 
recovery specialists in their central offices who work

basically alone, but with clerical and legal assistance as

needed. Four States merely share the responsibility for 
estate recoveries among general TPL or collections staff.

Finally, nine states have no real centralized responsibility

for. estate recoveries. 
They depend on eligibility workers 
he field referring cases to legal services divisions

in 
often at the county level. Of the 10 most effective

recovery States 
, 9 have central units or specialists 
dedicated to estate recoveries.

We asked the general recovery states about a series of

procedures and techniques in an attempt to determine what

works best. For example, we asked what procedures, if any,

they had to trigger an estate recovery effort when a

recipient or spouse dies. Of the 24 States with general

, only 18 had such a procedure. 
estate recovery programs  The 
six which did not were, unsurprisingly, among the second half

tier of States by order of estate recovery effectiveness.

The most common procedures used were:

Eligibility workers report deaths of recipients over 65

including (sometimes) assets and other information

(seven States).

Estate recovery staff research legal notices, court

records, vital statistics or other public information

15 Centralized and specialized estate recovery units

are very important, several States pointed out, because of

the technical expertise needed to recover from estates.

Eligibility workers have neither the knowledge nor the time

to pursue recoveries. Estate specialists need to know the

law, real estate principles and skip tracing as well as

every nuance of Medicaid eligibility and resource policy

related to estates. wi 
th a central unit to which they can 
refer difficult property cases , eligibility workers are less

likely to ignore problems they do not understand.
 sources (six states 
, one of which had a computer match 
with vital statistics).

Computer generates a list of deaths of recipients
 over 
age 65 (four states; one other is planning such a

system) . 
Personal representative or family member is required to

notify the state when filing for probate (three
states) . 
Nursing homes report recipient deaths (two States). 
Probate court or registrar of wills reports probates

(two states).

The more sophisticated procedures may not be much more

effective than the simple process of having eligibility

workers report the deaths of recipients who possess assets.

To delay until someone else reports a death or until an

estate is filed, says Oregon, is like "waiting for the gu
to go bang before you duck.  You are too late to protect

the State' s claim. Also, the State may not need to know

everyone who died or generated a probate. The State may

only need to know who died with a recoverable estate. 
Some 
States recover, however, not only from recipients who die

while on assistance, but also from past recipients and/or

spouses predeceased by recipients. These States need to

match all probates against their lists of current and past

recipients and surviving spouses.

We asked how many of the 22 active estate recovery states

attempt to track people who go off assistance in order to

Fifteen do. 
recover from their estates when they die. 
the 10 most effective estate recovery programs, only

California and Washington, D.C. do not track ex-recipients
for estate recovery. 
Presumably, a long-term care recipient 
in these jurisdictions could drop from Medicaid just before

death and avoid estate recovery.

Many Medicaid recipients die without wills (intestate). Some

of these--only 1 or 2 percent in Oregon--die without heirs,

dev isees, or claimants. Unclaimed assets in such estates

revert 
(escheat) to the State. States which have efficient 
Medicaid estate recovery programs will lay claim to assets in

estates whether or not the recipient dies intestate. These 
States are required by law, as explained above, to return the

Federal share of the proceeds to the United States

Government. states 
which do not have efficient, general 
estate recovery programs (the majority) do not recover from

estates whether the recipient dies intestate or not. In such

States 
, any heirs, devisees or claimants may file for the  proceeds of an estate. If there are no claimants, then the

proceeds escheat to the State. In either case, if the State

does not have a fully effective estate recovery program, the

Federal Government gets nothing.

Spousal Recoveries

We asked what, if anything, a State does about recovery when

a Medicaid recipient dies in a nursing home, leaving an

exempt spouse in an excluded home. 
Forty-four states 
including 16 of the active recovery States, do nothing. Many

said that Federal law does not permit recovery from surviving

spouses or other exempt dependents, a dubious interpretation

of the law:

.. . there does not 
appear to be any time limit on
recovery. 
Thus, action could be suspended for a 
lengthy period after a recipient's death while a

surviving spouse or child remains alive. (Deford, 
p. 137)
Several States explained that because there is no estate of

the recipient (the property passed to the spouse with right

of survivorship) and no liability of the spouse (who was

never on assistance), there is no recourse of spousal

16 Of 
recovery--"Catch 22" .  the six States which do recover 
. from spouses, two recover only if the property was solely

owned by the recipient. This eliminates most spousal
recoveries, because most assets are jointly held. Of the 
remaining 4 States, all of which are among the top 10

recovery programs, North Dakota and New Hampshire do some

but not a lot of recoveries from spouses. Only Oregon

(No. 1) and Utah (No. 9) actively track and consistently 
recover from spouses whenever possible. Note again that

nothing stops a surviving resident spouse or other exempt

dependent from transferring the property, which once

belonged to a recipient, to a related or unrelated third

paalrtotyg eththereerb.y  removing it from a State's recovery authority

Spousal recoveries, like estate recoveries in 
general, are usually made from people who are unaware
, or

not philosophically disposed

, to take advantage 

16 
Connecticut used to put a "paper lien" on a spouse
property when the recipient dies just to hold the property

until it could be recovered from the spouse I s estate. The 
HCFA made them stop this practice. With no way to keep the

the spouse' s name or to know when the spouse dies

property  in 
or the property is transferred, Connecticut terminated

spous 
1 recoveries.  provisions in the law permitting them to shelter their

property. 
Other Practices 
Several other conditions are important to successful estate

recoveries. We asked how many States have a special standing

, i. 
in probate proceedings  e., the right to collect ahead of
certain other claimants. Twenty states do and 
30 do not. Of

the 22 active estate recovery States, 15 have special probate

standing and 7 do not. Of the 10 most effective estate

recovery states 
, only Massachusetts and Washington, D.
C. do
not have special standing. Al 
though there was some variation
among Statse:s,  the most common probate standing was similar to

Maryland ' 
h general
"The Medicaid agency is coequal wi 
creditors of the estate. Priority claims 
such as probate

costs and fees, funeral expenses, litigation costs, and the

costs relating to the last illness are eligible for payment

prior to the claim of the Medicaid agency. However
, claims

of beneficiaries named in a will or heirs in intestacy, are

I s claim. 
subordinate to the agency 
Based on an exemplary practice in Oregon which is authorized

in State statute, we asked how many States attach bank and

nursing home accounts automatically upon the death of a

recipient. Seven states said they have procedures to attach.

Of these, five attach only in the sense that assets in such

accounts become part of the formal or informal estate distri

bution process. Another State attaches only if benefits have

been incorrectly paid. Only Oregon routinely attaches bank

and nursing home accounts expeditiously following .all 
appropriate recipient deaths.

Accounts Receivable 
Sometimes , when an estate is probated, claimants have the 
choice whether to accept a contract
, note, or physical

property, or to permit the estate to be liquidated and accept

cash. 
Liquidation often means loss of value. 
as when con
tracts are sold at a "discount" or hard assets are auctioned.

We asked how many States accept installment payments and/or

hard assets in compensation of their claims so that they have

to deal with accounts receivable and property management. 

17 
Property management can be a nuisance. Oregon has
approximately $150, 000 worth of personal property which has

aCci.:m,ulat8d in a safe deposit box since the last auction 
seven years ago. The State has received mobile homes, auto

mobiles, farm equipment, furniture, rings, watches and even

a gold mine in compensation for its claims. 
Estate recovery

staff have not used a Government pen since receiving $5, 000  Most states said they require liquidation within the estate--

they are not in the loan or real estate business. 
Four 
States, however, reported accounts receivable. Only 1 of
these, Oregon, was among the top 10 recovery States. Oregon
has over $5 million in accounts receivable, which generate an

average of $85 0001 8pe r month in revenue for the State

Medicaid program.  Alabama, Missouri and Montana also have 
accounts receivable, but they average only $36, 000 per State.

Oregon' s accounts receivable program, although highly 
profitable for the State, is also intended to help families

keep homes they would otherwise have to lose in order to

I s 
satisfy claims on a loved one  estate. Often a family mem
ber moves in or the home becomes a rental and the proceeds

go to pay the State' 
s claim until the family owns the house
free and clear again. 
Thus, the elder is able to use home 
equity for cost of care while the family retains the home in

the end. This is 
an example of the elusive "home equity 
conversion" applauded in the long-term care funding litera

ture, but with a public sector assist. If the same program

were available during recipients I lifetimes, it would be even

more beneficial. In essence, home equity conversion is what

would happen if Medicaid were available to anyone with a

catastrophic long-term care need, conditional upon a lien on

their property recoverable after their deaths and after the

deaths or seniorities of their dependents.

Exemplarv Practices

We asked States to tell us what they consider their most

exemplary estate recovery practices. Thirteen states

responded with 22 practices. The most common exemplary

practices related to reporting deaths or estate filings and

then matching this information to Medicaid eligibility

records. These included manual and automated systems to

obtain information on deaths and estates from local welfare

offices, probate courts, vital statistics agencies, nursing

homis , and newspaper clipping services. One such practice
stands out. Connecticut requires that anyone filing an

I s estate 
application for administration of a decedent 
wQrt  of advertising/promotional pens from one recipient I s 
estate. 
1S For purposes of analysis and comparison with the

I s 
other States, Oregon  total Medicaid vendor payments for 
Federal Fiscal Year 1985 were $238 650, 352; payments for
recipients over age 65 were $80, 665  357. The State had
152, 502 reci  ients in 1985, of whom 20 018 were over 65.  probate court must declare if the deceased or any .
of his or

her family ever received public assistance. 
If so, the

probate court notifies the State and the State files a claim.

Six States mentioned practices related to legal enforcement

I s claim. 
of a State  These included the general need for
strong legal support, lien filing, getting the State 
appointed administrator of small estates in the absence of

anyone else, using conservatorships to get assets returned to

recipients, attaching financial accounts, attacking shelters,

and using open-ended mortgages. Illinois and Oregon

mentioned the importance of a central estate recovery unit

which frees local offices to concentrate on eligibility and

less complicated legal issues. California cited its practice
of recovering Medicare Part B buy-in premiu1m9s  paid by the

State as well as Medicaid vendor payments .  (See table 4. 
State Statutes

To find out about the importance of State statutes for

Medicaid estate recovery programs, we asked three questions:

which statutes authorize estate recoveries; which restrict

them; and what legislative initiatives are planned or

pending. We found there is not always a strong relationship

between the laws and the practices of estate recoveries.

For example, the District of Columia, although planning

some, has no authorizing statutes, regulations or policies,

but collects from estates anyway. Virginia, on the other

19 
Oregon has an interesting arrangement with an heir 
finding service. Heir finders locate money, real property or

other assets for which the owner or heir has not been found.

They find the owner or heir and offer information on the

windfall in exchange for a percentage. Sometimes the heir is

a Medicaid recipient, in which case Medicaid. has a claim 
which is like "picking money up off the street.  This 
happens five or six times a year. Heir finders always check

with Oregon' s estate recovery program early in their search.

If Medicaid has a claim, they need look no further.

Connecticut has a program, as most States probably do

whereby money left inactive in an account is escheated to

(7 years in CT). 
the State after a certain period  The 
estate recovery program checks the State-published list of

such accounts and files a claim when it finds a recipient I s 
name. It recently found $35, 000 belonging to an incapaci

tated recipient. Given the prevalence of mentally debili

I s, 
tating diseases like Alzheimer  lost financial accounts 
like these may be more common than is generally realized.
 TABLE 4 
IEIXT 
_ICAID ESATE 
CHISTICS 
STATE 
ite) 
(se COirv 

ACDlTS 
PHOG VRFT  10EN  INTI  RECVBLE 
ST TYPE ASST  PHII OVRC  TRST  SUIT  RTRN  GUR PHOC  STND  ATCH  TRCK  LIEN  (S1000) 
000 
SO 
I CO

, IN

. NM

. K
WY NY K
;i  .- 
.. 
aDllI U'IB Fa STATE DlISTICS TAB 
Col..  Col.. 
EJII 
. Title 
ion 
State  Stardl" two-character State Ibeviat;on cod. 
Program  G I: GenraL estate reovry progrll for 
which we have dati en
Typ  recoveries , costs of recovery,  full-time eqivalents (FTEs). 
gerel 
GN Ii  estate recovery program for which we Leek on 
mreorceo vofrs t ihnec othrrreeec tdlya tpea eidle bmetsf iftosr  "G.  I = pror.. whicrhevery
progrem, no pleme.  NY Ii no esotneLtey.  reNoNv e=r yn op reosgtarltle,  bi
considering on. 
Veri fy  )( I: State verifies--uslly by checking bBks--whether or not 8n
Assets  applicant or reipient has assets eve if poseion of suh
assets is deied.  Blenk I: State acceps denial I.less stroLy
suspiciou. 
Idetify  rHies reaL proprty owrship anor 
Proprty  Xc o1n1l Sttianteg  vC Otty assessor an rerdr record on tarLanLs fcearsse .b y
Blank = State accepts applieant/recip;entls deiaL U"less

stronly suspiciou.

Divorce  dX ;v= eSstta atses edtoss  onfo ti  1p1e nsnpite d.i voBrlcaen ko r=  pdriovporrtcye  dailslopows.h ion  ;ch
Trusts  X = Stlle dos not permit irrevocable living trusts for PJses 
of obtaining Meicaid eligibility.  Blank;: truts permitted.

Suits  X = State dos not permit no-sl.rt lewits IS a mens to 
obtain Meicaid eligibility. This refers to suits filed by the

no-institutionlized spoe to 
91in access to incom otherwise 
l ied toward the cost of care of en institutionl fzed spoe
on Meicaid. 
Blank = Suits penmitted. 
Intent to  X = State reqires proof, uslly I meical dotor's certifica-

Return  tion, of abil ity to return hor before a hom is exeqted baed
on "intecnt too rneturtnr. IIa  Bdlanik c= Sttaote rfoyllow.  SSI/HCFA rules.'no 
proof of intent req;  unless recipient I S stltemt of intent 
is self-
Guardi en  X = State uses gurdianips or other legal action to contest 
resource avoidance tecni  Blank = Legal action . is not 
taken routinely. 
Procedure  X = Stete has a prOecre where it is notified of a recipi
spe' 
ent'  ard/or  s deth so that estate reovery action may 
be taken.  Blank 8: State has no such procedre. 
Standing  XB l= eStrat*e  ha=s  spNeioa l sstpanedidnga olr  meptoiosn iint Sitaoten p.ro b
te law.
Attach  X = State ettaches bank or I'rsing hor  the deth 
sccOUts 
of 8 Meicaid recipient.  Blank = State dos not attach accouts. 
Track  X = State tracks ex-recipients who leave the nursing flcility 
in order to recover from thei restates.  Blenk = Do not track.

Spe 
X = State recovers befits receive by a Mediscpaied .recipient

1srpOOo athle  estate of the recipient's surviving  Blank = No 
recoveries. 
Liens  Y = liens are used ciring recipientls lifetime to secure pro
perty for estete recovery based on befits corretly receive. 
YO = Liens are used only after the recipient's death.  YF;: Liens

of befits 
are used only for  recovery  incorrectly received.
:: Liens are not used an State legisl8t;on wold be reqired to 
ruse. 
permi t thei  NN = Liens are not used but State legislation 
is not necessary.  NU = Lien are not us  an the ne for 
unkn. 
State LegisLation is 
Accouts  AILnts shown represent dollar totals ow the 
State based on 
ReceivabLe the estate recovery of t;rn peymnt vehicles su 8S rotes 
contracts ara mortgages.
 hand, does few estate recoveries, but has some very strong

laws which abolish survivorship between joint tenants, allow

the agency to petition for reformation of trusts created

to attain eligibility, and make grantees liable for the

uncompensated value of certain disqualifying property

transfers. 
Although there is no one-to-one relationship between

effectiveness in estate recoveries and legal clout, it

should be noted that the most effective recovery state has

one of the strongest state statutory foundations. Oregon'

estate recovery statutes authorize legal action to

(1) appoint conservators, (2) set aside abusive property
transfers 
, (3) attach financial accounts, (4) recover from 
spouses' estates and (5) file a priority claim in probate

court. 
Two states have noteworthy statutes qn interspousal

responsibility and joint tenancy. North Dakota law says: 
The parties to a marriage are mutually liable

to any person who in good faith supplied either

party with articles necessary for their support.

Such persons may recover the reasonable value from

either party except in the cases where by law one

party is not liable for the support of the other.

A New Hampshire statute provides that:

The estate of every recipient, and the estate of a

recipient' 
s spouse residing with said recipient, if
any, owned severally or as j 
oint tenants, shall be 
liable for all assistance granted to the recipient.

A State' 
s authority, if any, to recover benefits from a
successor' 
s estate when the recipient dies first, is 
critical to maximizing potential recoveries.

Several States responded to our request for information on

laws which restrict estate recoveries. In Florida, home

steads are constitutionally exempt and they inure to any

heir before the State. By statute , New Jersey may not
recover from estates under $3, 000 nor for amounts under

$500. A class action suit in California seeks to prohibit

spousal recoveries. Likewise, New Mexico believes its

unity property statutes might preclude recoupment from a

nonrecipient spouse. The state of Michigan has an attorney

general' 
s decision limiting recoveries to incorrect benefits 
in the absence of a state statute expressly authorizing

recovery of benefits correctly received. Pennsylvania, on

the other hand, prohibits recovery of correct benefits in

its "welfare code, " although such recoveries are authorized
 in law. Alaska has no statute authorizing or forbidding

estate recoveries, but public hearings on the subject led to

the conclusion that "Alaskans think nursing home care is a

right and that they should be able to leave assets to heirs.

In one large State, where estate recovery legislation has

been blocked for 2 years, the opposition did not come from

the elderly, but rather from the Bar Association. 
The Bar in 
that state trains attorneys on Medicaid resource avoidance

for estate planning purposes. 
Even Oregon limits estate
recoveries in some ways. 
The state does not recover benefits 
paid for in-home care. This exception 
was permitted to

encourage people to opt out of nursing homes and into home

care. 
Unfortunately, the people in home care tend to be the 
ones who own homes and the people paid by the state to take

care of them are often the same people who will inherit the

homes. Thus, the state (and Federal Government) lose money

on two counts. 
Several State legislative initiatives are underway.

California has proposed to permit a claim upon the recipi

I s estate 
ent ' s share of a spouse  and to require attorneys of
record to notify the State when settling the estate of a

deceased past or present recipient. Massachusetts is seeking

legislation to make resources which are exempt for eligibi

lity purposes, nonexempt for purposes of estate recovery, and

to require petitioners for probate to notify the State if the

decedent was ever on assistance. New Jersey is trying to

revise a statute which has been interpreted to preclude

recovery if there is a surviving child of any age. 
The court

case which elicited that interpretation brought New Jersey'

previously aggressive estate recoveries program to its knees.

Minnesota I s proposed 
statutory changes would allow spousal 
recovery and permit a local agency direct access to estates

under $5000--what is c2a0ll ed an "affidavit of claiming

successor" in oregon.  North Dakota professes a commitment
to a "legislative initiative whenever necessary to overcome

adverse judicial decisions" on estate recoveries.

Several States which do not recover from estates or recover

only benefits incorrectly paid are planning some legislative

tiati ves. 
ini 
Kentucky might pursue estate recoveries
depending on " 
staffing availability and cost-effectiveness 
data from other States.  Ohio is also reviewing cost-

effectiveness. In 
Texas, a special State legislative 
20 If 
an estate in Oregon involves less than $35, 000 in 
real property, less than $15 000 in personal property, or

less than $50 000 combined, heirs must file an "affidavit of

claiming successor" with the probate court
, the revenue

department 
, and the publ ic assistance agency.  committee is reviewing a proposal to allow general Medicaid

estate recoveries. In 
general, however, momentum as well as 
understanding, are lacking. Michigan told us, "Every year

we submit our over-65 probate legislation. The legislature

refuses to pass it. They call it the ' vulture bill. ' Every
year I get up and testify along with 'eligibility staff and

every year they vote it down. 
We can never muster enough 
support to get the bill out of committee on either the House

or Senate side. 
state Recommendations on Estate Recoveries

Five of the changes which states recommended in Federal law

and policy to enhance estate recoveries had to do directly

with estate recoveries as opposed to transfer of assets and

liens. The most frequent recommendation was that estate

recoveries should be made mandatory. 
Seven States made this 
suggestion. An eighth State, Kentucky, recommended elimina

ting all Federal restrictions on estate recoveries. 
A ninth,
North Dakota, felt strongly that the Federal Government

should not force any particular recovery process on the

States and should encourage flexibility. Rhode Island made a

common observation that people "beat the system all the time

and clear legislation is needed to make sure .that those who

are able, pay back the Medicaid program for the benefits they

receive. 
Three States recommended that technical assistance be

provided on how to establish and operate Medicaid estate

recovery programs. Specific requests 
included guidance on 
record keeping, establishing and filing claims, automated

recove  techniques 
, recovery in large States with many
counties 
, and sample forms. 
Five states thought the Federal Government should provide

incentives to the States to establish Medicaid estate

recovery programs. All of these recommendations involved 
giving states a disproportionate share of estate recoveries

compared to their Federal Medical Assistance Percentage

(FMP) or matching rate. For example, States might be

allowed to retain half of . 
all recoveries even though the 
original benefits were funded with 70 percent Federal and

only 30 percent State funds. From the Federal perspective

one wQnders why this kind of encouragement would be needed

when states can recover easily at a rate of $10 or $15 to

$1. On the other hand, Minnesota used incentives very

suc  essfully to animate its county administered program.
Al though the counties 
contribute only 5 percent of the cost 
of Medicaid in Minnesota (45 percent comes from the State

and 50 percent from the Federal Government), they are

allowed to keep 25 percent of all recoveries (25 percent

goes to the State and 50 percent to the Federal Government).
 This incentive system may help to account for Minnesota I s 
third place rank among Medicaid estate recovery programs.

There has been some argument whether Federal statute permits

recovery of correct benefits received before age 65 by an

institutionalized recipient. The law clearly prohibits
recoveries of benefits received before age 65 by noninstitu

tionalized recipients. In general, most states have acted as

though no benefits received before age 65 may be recovered

from anyone. Thus, eight States recommended permitting

recovery of benefits received at any age.

The final State recommendation relates to both transfer of

assets and estate recoveries. Four States 
said we need to

find a way to handle "joint tenancy with right of survivor

ship. " The problem is that when property is held in joint

tenancy, the property goes to the other tenant when either

tenant dies without an estate being probated. Joint tenancy
ownership may occur between nonspouses as well as spouses.

There is strong indication that people are using joint

tenancy in both real and personal property to avoid public

assistance resource limitations as well as to prevent estate

recoveries. You cannot collect from an estate when property

passes automatically to a nonliable joint tenant with no

estate filed. Once the property is in the joint tenant'

possession with full ownership status, the State may no

longer have a claim. With regard to setting up joint

accounts to which a Medicaid applicant/recipient has no

access without the consent of the j oint 
owner, thereby
excluding the account from eligibility resource limitations

one state said, "This is the biggest loophole in the

reguiations. You could drive an 18-wheeler through it.

I s property,
States recommended making the applicant/recipient 
which is held in j 
oint tenancy, available for purposes of 
eligibility and/or recoverable after the recipient I s death, 
when the remainderman either dies or tries to transfer the

property. Medicaid eligibility conditional upon liens or

voluntary mortgages" might achieve this purpose.

Montana capsulized the 70 recommendations we received from

34 States: 
"Applying transfer of assets restrictions to exempt

property, applying liens in all cases, and

recovering benefits received at any age would

remove most of the limitations and allow Medicaid

estate recoveries to be multiplied by factors of

three, four or five.  CONCIDSION 
Despite the asset control authorities granted by Congress in

TEFRA, many elderly people with moderate to large assets

still receive Medicaid. Hith few exceptions, their property

remains unencumered during the period of eligibility which

may include years of nursing home institutionalization.

Most Medicaid recipients have no legal responsibility to pay

back the cost of their publicly-funded care when they and

their dependents no longer need the exempted property.

Based on evidence from state Medicaid staff and the legal

literature on estate planning (see the Bibliography), it

appears that well-to-do people with access to attorneys and

accountants are the most likely to be able to avoid public

assi,stance resource limitations. 
Although Medicaid' s expensive long-term care benefit is 
available to people with sizeable assets, the program

encompasses only a relatively small percentage of the

nation' 
s poor. 
8 percent of 
Nationally, Medicaid covers only 35. 
poor elderly persons, 34. 0 percent of poor adults

between the ages of eighteen and sixty-four, and

49. 5 percent of those under age eighteen. (Holahan 
and Cohen, p. 99)

A recent Urban Institute book concluded that "Medicaid was

originally conceived as a way of broadening the public

provision of medical services to the poor and of ensuring

but 
more uniformity in service provision among the states... 
over the years Medicaid has increasingly concentrated on

providing long-term institutional care to the elderly and the

disabled, many of whom are not officially poor.  (Holahan
and Cohen, p. 1) 
Our findings show that states currently recover less than

$42 million per year from the estates of deceased Medicaid

recipients. If all 
states recovered at the same rate as the 
most effective state (Oregon), national recoveries would be

$589 million annually. Current laws, regulations, and

policies 
, as we have observed however, make estate recoveries 
very difficult. If the recommendations in the following

section were implemented, some state Medicaid staff believe

that the current potential of Medicaid estate recoveries

could be augmented by a factor of three, four or five. When 
we consider that (1) the total home equity of the elderly in
 the United states is $750 billion, 21 (2) Medicaid exempts

homes , and (3) catastrophic long-term illness strikes all 
economic levels, it is plausible that Medicaid estate

recoveries could generate very large sums indeed. (See the
illustration which follows this section.

A large nontax revenue source generated by Medicaid estate

recoveries could be recycled to help the truly destitute.

It is possible, however, that enhanced estate recoveries

would have more far-reaching effects on long-term care

funding. Faced with the certainty--which is almost nonexis

tent today--that accepting care from Medicaid means paying

back the cost out of one s estate, people might seek other.

alternatives. Such alternatives include Social Health

Maintenance Organizations (SHMO' s), continuing care communi

ties 
, targeted savings accounts and private long-term care 
insurance. To pay for these nonpublic assistance options,
the elderl 
would have to turn more to private home equit
conversion 2 or to assistance from their adult children. 
It is their children, after all, who stand to inherit what

ever property remains after the costs of long-term care are

paid and who currently reap the windfall of Medicaid

21 "
Seventy-five percent of Americans 65 and older own 
their homes, with the vast majority owning outright, reports

, p. 8) 
The Commonwealth Fund. The average value of the 13 million

homes owned by senior ci tizensis $60, 000, for an estimated

total equity of more than $750 billion.  Lonq Term Care
Manaqement Newsletter
22 Reverse mortgages and sale/leasebacks
, the principle

vehicles of home equity conversion, have not been highly

popular in the marketplace. "CUrrent Medicaid eligibility

rules discourage the use of home equity to finance long-term

care by making the home a protected asset.  States
(Uni ted 
Congress , Office of Technology Assessment, p. 450) 
In the 
absence of such protection, people might be more inclined to

tap their home equity to pay for private long-term care

insurance premiums. The interested reader should consult the

National Center for Home Equity Conversion in Madison,

Wisconsin. 
23 Home 
 quity conversion and help from adult children

could readily be combined. More and more frequently, we see

adul t children buying their parents I homes in a familial 
sale/leaseback arrangement. The children do this for 
a tax

wri te-
off . Proceeds from the sale augment the parents' 
income and could be used to purchase long-term care

insurance.  subsidies. We must 
emphasize that the issue is enrichment of

nonneedy adult heirs, not denial of care to the elderly. 
For
those who opt to rely on Medicaid
, or have no other choice,

eligibility conditional upon a promise (secured by an auto

matic lien) to repay benefits from their estates would assure

all elderly people of 
(1) access to care, (2) retention of

home property as long as it is needed by spouse and

dependents, and (3) the dignity of paying their own way in

the end.
 .. --
MEDICAD ESTATE RECOVEES
AR ONLY TH TIP OF TH 
ICEBERG 
CU 
ESTATE RECOVEES
AR 
ONLY $42 KILLON 
PER 
Because 
of statutes

and policies

which exempt

home equity and

discourage estate
recoveries 
, the Medicaid 
program recovered only $42

million last year from estates.

It is reasonable to ask how much

might be recovered to help care for

the needy if the statutes and policies

encouraged estate recoveries.

TH 
HOME EQUITY OF TH ELDERY 
IS $750 BILLION

In the U.S. today, people over 65 own $750 billion

in home equity. During 1985
, this country spent

$35 billion on nursing home care. Thus
, the annual

cost of nursing home care is 4. 7 percent of the elderly I
home equity. At any given time
, however, only 5 percent

of the elderly reside in nursing homes. 
We know that 
Al zheimer I s Disease, Parkinson' s and stroke--the

debilitating illnesses which fill America I s nursing 
homes--
. afflict rich and poor alike. Therefore, 
it is not

unreasonable to believe that much of the long-term car

funding crisis could be resolved by harnessing the home

equi ty of the elderly. Using recommendations made in this

report, home equity conversion could be achieved with a

minimum of disruption to the families of the stricken.
 RECOMMNDATIONS 
Recommendations numer 1 through numer 4 are the 
responsibility of the Health Care Financing Administration.

Implementation of these recommendations will require some

policy, regulation and statutory changes. 
Statutory changes
will require the preparation of a legislative proposal by

the HCFA followed by departmental approval. Recommendation
numer 5 is the reponsibility of the 
Office of Inspector
General. 
The HCFA reviewed and commented on a draft of this report.

We met with representatives of the agency to discuss their

comments. We will continue to confer with HCFA on related

issues. 
This report has also received close scrutiny from an

intradepartmental work group on estate recoveries. The work

group raised many questions which point toward further

research and analysis. For example, we are exploring a

proposal to tighten the "intent to return" rules instead of

easing or eliminating them as proposed here. This would

increase the pressure on people to sell homes and spend down,

but would eliminate the need to recover home equity from

estates. Another idea under review is governmentally

sponsored home equity conversion. The proposal is to give

people a publicly insured line of credit on their homes which

they can use for home care, institutional care, or long-term

care insurance premiums. 
The family would pay back public 
costs, up to but not exceeding the value of the property

secured 
, after the deaths of the beneficiary and all 
dependent relatives. These ideas and many other related

issues will be explored further in forthcoming OIG studies.

TRTM 
RECOMMDATION #l--ELIGIBILITY AN  OF RESOURCES 
FINDING: Some HCFA, SSI, and state Medicaid policies 
promote retention of assets during Medicaid eligibility

while others encourage precipitous liquidation of property

with concomitant losses in value. Assets retained by

recipients 
, in the absence of estate recovery programs, pass 
at the expense of the taxpayers.

encumbered to  heirs 
Assets liquidated, sheltered or concealed to obtain eligi

bility are lost as a long-term care funding resource also.

apacitated elderly people are sometimes financially

abused by people who want to take their property, while at

the same time, qualifying them for Medicaid nursing home

benefits.  RECOMMDATION: Change Medicaid 
rules to permit families to
retain and manage property while their elders receive long-

term care. Specifically: eliminate 
SSI "intent to return"

rules as they apply to Medicaid long-term care recipients.

Reinstate and broaden the "bona fide effort to sell"

exemption. Allow 
Medicaid recipients to retain more income-
producing property such as " 
contracts of deeds" or rental
homes. 
Require agreement to liens and estate recoveries as 
a condition of Medicaid eligibility for people with

property. 
Encourage State Medicaid programs to protect 
recipients and their property from financial exploitation

through conservatorships 
, legal representation, and property
management when necessary.

IMACT: This policy 
would ease the financial impact of
catastrophic long-term care costs on the elderly and their

families , giving them time to cope with the problem. 
Total
Medicaid costs would decline as estate recoveries increase.

RECOMMDATION #2--TRSFE OF 
ASSETS 
FINDING: Despite almost universal State 
implementation of
the TEFRA authority to restrict transfers of assets for the

purpose of obtaining Medicaid eligibility, people are still

able to give away property to qualify for assistance. 
This
may be done by using the legal "loopholes" recommended in

law journal articles or by deceit and concealment.

REqOMMDATION: Strengthen 
the transfer of assets rules so
tha 
people cannot give away property to qualify for
Medicaid. Specifically: 
improve State verification of
property and transfers. Clarify 
that the "transfer of

assets" restrictions apply to all property including that

which is ,. or would .be, exempt from 
eligibility determination.
Expressly prohibit the transfer of property to 
. spouses and
other dependents which is permitted under current law.

Extend the current 2-year "look-back" period to 5 or more

years. Have HCFA publish regulations on transfer of assets.

IMACT: 
More property will be retained by recipients to 
reimburse Medicaid for their cost of care after they and

their dependents are no longer in need.

RECOMMDATION #3--LIENS 
FINDING: state 
Medicaid programs need a way to track 
property owned by recipients and ensure that it is not

transferred or otherwise disposed before recovery of

Medicaid benefits can be accomplished. Liens achieve these

objectives most efficiently. While permitting liens, ' 
TEFRA  placed so many qualifications on their use that only two

states have employed liens to secure property for recovery

of benefits correctly paid.

RECOMMDATION: Require a legal instruent as a condition of 
Medicaid eligibility to secure property owned by applicants

and recipients for later recovery. Specifically: 
Make 
a condition of 
liens, or some other form of encumrance, 
I s 
eligibility so that the recipient  interest in any property 
solely or jointly owned will inure, up to the cost of care

paid by Medicaid, to the Medicaid program when neither the

recipient nor dependents need the property further. Promote 
home equity conversion by using liens, "voluntary mortgages

open-ended mortgages " and accounts receivable to let people

extract their equities gradually while they receive

assistance. 
IMACT: 
Mandatory liens would secure the State and Federal
Government I s investment and permit Medicaid recipients to 
retain needed property while receiving highly expensive, but

essential care.

RECOMMNDATION t4--ESTATE RECOVEES 
FINDING: Less than half of the States pursue Medicaid estate 
recoveries for benefits correctly paid. Of those which do, a

few are very effective, but most are not. The HCFA and State

Medicaid managements place little emphasis on retention of

recipient property or estate recoveries. 
The TEFRA authority 
for estate recoveries, as for transfer of assets restrictions

and liens, is only voluntary. Many State staff believe that

TEFRA limitations hobble estate recoveries without safe

guarding legitimate recipient interests.

RECOMMDATION: Increase estate recoveries as a nontax 
revenue source for the Medicaid program while steadfastly

protecting the property rights of recipients and their

dependents. Specifically: Make estate recovery programs

mandatory like other forms of third party liablity. Provide 
technical assistance on estate recoveries, so that States can

implement quickly and easily to generate an immediate cash

flow for the Medicaid program. 
Promote awareness of the 
importance of real property ownership and estate recoveries

benefits 
for Medicaid funding. Allow estate recovery of 
received before age 65. Permit estate recovery in cases of

joint tenancy with right of survivorship. Require spousal

and dependent recoveries upon death or seniority (of a minor

child. ) 
IMACT: 
Based on Oregon' s experience--even under current 
). 'IPS , regulations and policies--estate 
rest:ri('i;  i'le  recoveries can recoup 5. 2 percent of Medicaid nursing home

costs 
, 5. 0 percent of Medicaid payments to people over age 
, and 1. 7 percent of total Medicaid vendor payments . With

enhanced legal authorities and greater programmatic emphasis,

the contribution of estate recoveries to Medicaid'

s program

resources could be truly staggering. 
#5--FU 
RECOMMDATION  STUDIES 
FINDING: We have a great deal of circumstantial evidence

about public assistance resource avoidance and estate plan

ning to qualify for Medicaid. 
No hard data are available,
however, on the extent of these practices. 
We also are

unaware of how much Federal money is spent by the Legal

Services Corporation and other national programs to promote

Medicaid eligibility for people with property . We cannot
account 
, without further review, for large discrepancies in
amounts of estate recoveries reported to us versup "probate
recoveries 
" reported to HCFA (for purposes of reimbursing the
Federal share of recoveries. 
Finally, a priori, it would
seem that the ability to receive Medicaid while preserving

assets is a strong disincentive to the purchase of private

long-term care insurance. Is this true
, and if so, would

programmatic changes such as those recommended here remove

the disincentive and promote nonpublic assistance options to

funding long-term care?

RECOMMDATION:  At a minimum, the following actions should
be taken: 
Conduct a comprehensive study of the transfer of assets

problem to estimate how much equity is being diverted

from long-term care costs at the expense of the Medicaid

program. To what extent is the Federal Government

funding this diversion by training attorneys and

counseling prospective Medicaid recipients? . 
Conduct a thorough audit of Medicaid estate recovery

programs to determine if the Federal Government is

receiving its full share of the proceeds.

Perform a review to determine whether the availability

of Medicaid without encumering assets has a chilling

effect on the marketability of private sector risk-

sharing products such as long-term care insurance.

IMPACT: Results of these studies could point the way to a

more equitable and efficient utilization of economic

resources for the satisfaction of catastrophic long-term

care needs.
 , "

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.r"  Lona-Term Care Manaaement Newsletter, Volume 16, Numer 7

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Maag, Stephen J. , "Consumer Confidence Increases
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Manton, Kenneth G. and Korbin Liu, "The 1982 and 1984

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The Case for Insurance,  America' s Health Care Challenae: 
New Directions for Business. Government and Individuals

Northwestern National Life Insurance Company, 1986

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Mpeineprs, Msark .R. , "3Long-6Term- Car4e In2suran.ce:  An Idea  Whose 
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 "'-- ".---.-.._ , "  , "

article 
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Meiners 
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Long-Term Care
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New COBRA
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Clearinahouse Review
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pps. 487-493. 
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Gerontological Society of America'
Illinois  s Annual Meeting, Chicago,

, November 21, 1986.  APPENDIX

Citations for the inset "WHY PEOPLE WITH SIZEABLE ESTATES

END UP ON MEDICAID. 
a"Medicaid is a program intended only for the indigent, and

eligibility is contingent on nearly complete depletion of

financial resources.  (U. S. Congress, Office of Technology
Assessment (OTA), p. 26. 
"With some exceptions, to be eligible for Medicaid, an

individual must receive or be eligible for federally

assisted cash welfare payments.  (Council of Economic

Advisers, p. 155) 
" . . . the bitter pill of Medicaid coverage for nursing home 
, that is,
care is that the recipient must be pauperized
stripped of almost all possessions and other assets, in

order to meet eligibility requirements.  (Oriol, p. 19)

council of Economic Advisers, pps. 159-160.

cAmerican Council of Life Insurance

, mortality tables,

p. 113.
d"The prevalence of severe dementia (Alzheimer 
I s Disease and 
related disorders) rises from approximately 1% (ages 65 to

74) to 7% (ages 75 to 84), to 25% (over age 85). " (OTA, p. 7)

percentages of older Americans living in homes for the

aged, by age:

65-69 
XX 
70-74 
75-79  XXXXX 
80-84  XXXXXXXXXX 10% 
85+  XXXXXXXXXXXXXXXXXXXXXX  22% 
Source: 
Special Committee on Aging, U.S. Senate.  Cited in 
Wall Street Journal, December 31, 1986.

the 
"The best estimates place the prevalence of dementia among

nursing home residents at more than 50%. By sheer numers
then, the problems of the long-term care system are the

problems of persons with dementia. " (OTA, p. 447)

"Five percent of Americans 65 and over are in nursing homes

at anyone time, but only 3. 5% are long-stay patients....

Individuals with dementia are likely to be in the long-stay

group, needing supervisory and personal care more than

medical attention. One analysis estimates that those with

A- 1
 dementia constitute 60 to 70% of the long-stay group, making

dementia one of the major determinants of those staying

longer than 90 days in nursing homes.  (OTA, p. 27)

The majority of nursing home admissions are short-stayers

(with an average length of stay of 1. 8 months), but on any

given day, long-stayers (with an average length of stay of

5 years) constitute over 90% of all nursing home

residents. These long-stayers, who are more likely to be

Medicaid recipients, thus consume the vast majority of

resident bed days.  Grant and Contracts Report

(HCFA,
p. 128)
fNursing home expenditures 
average $22, 500 per person

annUally 
(OTA, p. 450) and range from $750 per month to over
$3, 000 (OTA, p. 27). 
, often decades. 
g"Most dementing conditions last years 
One 
recent study found the average duration of illness
, from

first onset of symptoms to death, was 8. 1 years for
Alzheimer' 
s disease....  (OTA, p. 14) 
h" . . . those most 
in need of long-term care are most likely to 
have the bulk of their savings tied up in their homes.

Widows.. . have 83% of assets thus committed, as compared to a 
median of 70%.  (Oriol, p. 135)

"Based on surveys of elderly living in the community in

Massachusetts, 65% of elderly persons aged 66 and older

living alone will impoverish themselves after only 13 weeks

in a nursing home. 
For married couples 66 years and older,
one out of three (37%) will become impoverished within 13

weeks if one spouse requires nursing home care. 
(U. S.
Congress 
, House Select Committee on Aging, 1985, p. VII) 
i"Nursing home care is a small part of Medicare
, and the

services covered are restricted to short stays after

hospitalization.. . 
Nursing home payments under Medicare 
were only $600 million of $64. 6 billion total Medicare

outlays in 1984 and accounted for 1. 9% of the total spent

nationwide on nursing home care.  (OTA, p. 18) 

j" At present 
, most private insurance simply fills the gaps 
Medicare nursing home coverage.... Since insurers rely

in 
on the narrow Medicare definition of skilled care, it is not

surprising that our national health accounts reveal such a

sIDcll role 
for private insurance financing of nursing home 
care  numer of the elderly 
, in spite of the significant  who 
own an insurance policy that covers nursing home care.

(Meiners, "The State of the Art in Long-Term Care Insurance

p. 2)
A- 2
 _.. 
.._ 
.-=
. " -,.  ':" =:'-;,: ""': ..  ""'
Private insurance of all 
kinds paid only. 85 percent of

total nursing home costs in 1985. (HCFA, "Health Care

Financing Notes 
" p. 8)

k"The dearth of insurance and Medicare coverage of long-term

care (particularly for stays of more than 90 days) is not

widely recognized by mos';: older Americans. A survey of
elderly people performed by Gallup for the American

Association of Retired Persons showed that 79% believed that

Medicare would pay for all or part of their nursing home

care. 
Another survey found that only 25% to 47% of those 
asked knew that Medicare does not cover a 6-month nursing

home stay. Yet Medicare covers less than 2% of expenditures

for nursing homes, and private insurance pays for less than

1%. " (OTA, p. 28) 
private (i.e. 
, nongovernent) ' 
sources pay nearly the same
proportion of total national health expenditures (58.

percent) and total nursing home costs (53. 1 percent).
Overall 
, health insurance pays 53. 3 percent of the private
costs. For nursing home costs alone, however, insurance pays

only 1. 
6 percent of private costs. Thus, 
although the public
of-
comes out- pocket for only 46.7 percent of private health
care costs in general , the elderly direct pay 98. 4 percent
of private nursing home costs ($18. 7 billion). (HCFA

"Health Care Financing Notes 
" p. 8, based on 1985 data.

Although private long-term care financing vehicles, such as

long-term care insurance, life care communities
, and social

HMOs have become increasingly available
, the potential

market has barely been tapped. There are several factors
that inhibit full market development for long-term care

financing products.... The key 
barriers are:

The lack of consumer awareness about the risk of needing

and the cost for long-term care services and the absence

of private coverages for these services has suppressed

demand for private long-term care financing products....

The lack of data regarding the utilization and costs of

long-term care services, particularly in an insured

environment, makes the actuarially sound pricing of

products very difficult.

"The additional underwiting 
and policy design concerns
of adverse selection and moral hazard on a product where

medical necessity" may not be an applicable coverage

criterion complicates insurer efforts to limit exposure

to unpredictable liabilities.

A- 3

-:""r-
..;u 
;.i-.  . .
regatory environment at both state and federal
for, and in many cases 
"The  no. incentives 
levelS presents 

inhibits, long-term care product development.

"The efficient marketing of long-term care products will

require the time-consuming development of new marketing

methodologieS and systems. The marketbiencga uosfe  ltohneg -ttaerrgme
t

care products cannot be readilY integrated into existing

marketing systems of large compani

market and the product are so different from most other

(NAIC, p. 15)

existing insurance markets and products, and interest by

employer groupS is limited.

"GenerallY, the Medicaid program is perceived by the middl

class as free, acceptable, and an inalienable right....

until such time as the array of Federal and state programs

with significant
that currentlY finance long-term care are perceived as

unacceptable alternatives, the private market for long-term

" p. "J
care insurance will be limited to thoS 
assets to protect and with sufficient income to pay

relativelY high rates for prAon teIcnstiunrger t"h epesrem apescsteit sv.e,

authors 
(Lif,on, "LOng-Term care' 
 \I.
s shortcomings cited by vario

which 
mSome of Medicaid'  spend down assetso nas nd income to I.i-
(1.) the need to 
include:  (3) pressure to divorce
the deeming of income provisi 
qualifY, (2). 
frequently impoverish par owpeelrlt ys,p o(u's)e ,a lle(g5e)d  adcicsucsraitmiionnast ioofn
  in

Nevertheless, 
in order to partiti 
the availacbairlei,t ay nodf  (n6u)r swienglf ahroem es tbigedms,a
 .
inferi 
mAiddlc  ccloasrs disi ndegpen dtiong  HmoreC anFd Amor,e on

America I s 
Medicaid.  " program

become the major "insurance 
Medicaid has . 
for nursing home care, not onlY for elderlY persons

p. 122)
of low income, but for middle income persons who

cannot afford the hiGgrha nctoss ta nodf  cnounrtsriancgt sh oRmeenso rfto
 r

very long.
 . (HCFA,
 costs
nursing hompocket 
I s contribution to  I s out-of-
unfortunatelY, Medicaid 

has been declining rapidlY and the elderlY  6 percent
costs have increased proportionatelY, Between 1979 and

tWO major funding sourcesc ofnotrr inbuutresdi n4g8 .h
ome care

1.985, the  payment',
switched places. Med4i cbaiildl,i ownh)i cihn  1979, dropped to 41.

7 percent in
of all 
of total costs ($21 7b.i
 llion' in 19'5. Direct patient 
percent (of $,5. 
pocket costs, which were onlY 42.1 percent to
i. e., 
out -of-
4 percent in 1985. The contributi

8 percent to 1. 
1979, rose to 51.

insurance (. 
other funditn) g,  psoruirvcaetse,  hienaclltuhd ing Medi2c apree rc(2e.n
 t to 3.
1. 7 perce
percent), other Government funds (5.

A-