The Pennsylvania Estate Recovery Act
Many Boomers endure the unpleasant experience of caring for a parent in a nursing home. The emotional and financial burden placed upon the family is exhausting. The eventual death of the nursing home resident may come as a relief when his or her quality of life has declined. Imagine that after dealing with months or years of such torment, you finally breathe a sigh of relief that mom is in a better place now. That's right about the time when you decide to call me to answer your estate administration questions. At our initial consultation, you inform me that mom never did any nursing home planning, and thus spent all of her cash assets for her nursing home care prior to getting Medicaid benefits. However, you heard somewhere that she was allowed to keep her home. Unfortunately, mom kept the house in her name. At this point, I have to be the bearer of more bad news you may not be able to keep her house. In order to avoid this scenario, a brief review of Pennsylvania's Estate Recovery Act is necessary.Back in 1994, the Pennsylvania Department of Public Welfare (DPW) established an estate recovery program to recover certain medical assistance payments from a decedent's probate estate.
Pennsylvania, like many other states, enacted this law to comply with a federal mandate in order to participate in the Medicaid program. For those of you not familiar with Medicaid, it is simply a federal welfare program administered by the states for a wide variety of medical expenses. Over 40% of nursing home residents are now receiving Medicaid benefits, and thus, nursing home costs demand the lion's share of the available funds. The average monthly cost of nursing home care in Pennsylvania currently exceeds $5,000. At best, Medicare covers a portion of these expenses for the first 100 days. After that, a patient must either pay privately or resort to Medical Assistance (Pennsylvania'sversion of Medicaid).
Of course, a minority of patients have long term care insurance. However, many insurance policies are inadequate. Another troubling statistic is that half of us will need skilled nursing care at some point in our lives. With so many people on Medicaid and the skyrocketing costs of skilled nursing care, our government continues to allocate increased funding to keep up with demand. So, in an effort to recoup these funds, the Estate Recovery Program places a lien on the nursing home resident's estate after death for certain benefits that have been received. Unfortunately, nursing home residents and their families do not recognize this liability until it is too late.
On the surface, the estate recovery lien does not appear to be a threat. Putting it simply, a nursing home resident must have less than $2,400 in countable assets before they meet the financial qualification to receive Medicaid. If the nursing home resident somehow accumulates more assets while on Medicaid, he runs the risk of losing these benefits. So, for purposes of this discussion, let's assume that a nursing home resident receiving Medicaid probably owns less than $2,400 in assets at death.
This being the case, how has DPW been able to claim millions of dollars from nursing home residents' estates since the inception of the estate recovery program? The answer can be found in the Medicaid qualification rules. Under the Medicaid rules, the value of a nursing home resident's personal residence is not included in the asset calculation. Therefore, a nursing home resident can keep his home whether it is worth $50,000 or $500,000 and still be accepted into the Medicaid program. This is generally true regardless of whether the nursing home resident is single or married. However, this exemption diverts the nursing home resident's attention from planning for the disposition of the home after death. Without proper planning, the uninformed nursing home resident mistakenly leaves the title to the home in his name while racking up thousands of dollars in benefits which will ripen into a lien upon his estate in the future. Once the nursing home resident dies, his house then becomes the major, and usually the only asset, of the estate.
In order to transfer title to the home to the beneficiaries of the estate, the executor must first deal with the Medicaid estate recovery lien. During the course of the estate administration, the executor must send notice via certified mail to DPW requesting a statement of its claim for Medicaid benefits paid during the nursing home resident's lifetime (after age 55). DPW then has 45 days to present its claim to the executor. If DPW fails to present its claim in time, the lien is waived. (However, I can tell you from experience that DPW has become extremely efficient and prompt in providing its bill!) Furthermore, the executor has personal liability to ensure that available funds from the estate are used to pay the claim. Translation: Hand over the house keys to DPW. While there are ways to postpone the collection of the lien and some exemptions for hardship cases, such instances are few and far between. There are much more reliable options to save the family home which can be implemented at various stages while the nursing home resident is still alive.
While there are other exempt assets which somehow end up in the probate estate of a nursing home resident, such as lifeinsurance proceeds, the home has typically been the jackpot for DPW's estate recovery claim. Therefore, nursing home residents, or those contemplating future elder care needs should seek proper legal advice and plan accordingly. Without proper planning, you could be leaving the light on for someone else.
Julian E. Gray is an attorney with Springer Bush & Perry P.C. concentrating in Elder Law and a member of the National Academy of Elder Law Attorneys. He can be reached at (412) 269-4200 or via email at jgray@springerlaw.com.
Subscribe to the Knowledge Bank.
