by Kyland Jackson Next Avenue

When Kevin White talks about his family’s home, a smile crosses his face.

The Minnesota native created memories at home. His father built it in the 1960s, tucked in the quiet woods and hills of Mazepa, Minnesota. An unused oven reminds White of his mother. The smell of her freshly baked bread tempted him and her children into the kitchen. A dusting chair in the corner evokes memories of his father who sat there for hours carving wood.

The house has been a fixture of the White family and community for decades, and he plans to pass it on to his son. But a controversial federal law known as estate restitution could cancel his plans.

White’s mother was diagnosed with type 1 diabetes in 2017, and it was expensive to treat. He spent more than $15,000 to help her, but she also received health care services through Medicaid.

After two years of treatment, the state informed White that Medicaid, Minnesota’s version of Medicaid, had spent $187,000 on his mother โ€” and that, under a federal process called estate restitution, she had put a mortgage on the family home to get some of that money back.

Because his mother gave Kevin the home before her death, he is now responsible for the state lien on the property. Even worse, when the home’s value rose along with the rest of the housing market, the county revalued the property and the mortgage amount doubled.

lack of confidence

“I did exactly what they told me to do, and then when I went and evaluated it, they backed out of the deal,” White said. “I changed my view of the country to where I think they are perverts. I don’t trust them at all anymore.”

It may not be the only one.

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Medicaid programs across the country should attempt to recover some of the benefits paid on behalf of those who enroll in them. That’s according to the Centers for Medicare and Medicaid Services (CMS), the federal agency that administers Medicare, the health insurance program for people 65 and older, and works with states to administer Medicaid for low-income people.

CMS requires states to attempt to recover the cost of nursing facility accommodations, home and community services, hospital-related benefits and prescription medications. Some states also seek reimbursement for other Medicaid services.

Experts say Medicaid recipients are often not told before they accept treatment that they can be required to pay for their care, even if it means losing property rights to their property and deepening wealth inequality. And while recovery programs are meant to help future Medicaid recipients, loopholes allow some wealthy families to get taxpayer-funded medical care while circumventing property recovery rules.

"Low-income communities are hardest hit because it's their families who received Medicaid benefits, and it's the families who now have to pay the price," said Representative Jan Chakowsky, a Democrat from Illinois. "That's really, really unfair. If it generates lots and lots of money for the economy, that would be one thing. But it's not. It's a tiny amount that's actually being recovered and taken back from the poor mostly."

Argument for restitution of the estate

When Congress created Medicaid in 1965, the programโ€”which operates under different names in some states, such as Medical Assistance in Minnesota and Medi-Cal in Californiaโ€”allowed but did not require states to recoup their spending on the program. Congress made restitution of the estate mandatory in 1993; Supporters of poor families and seniors are pressing Congress to repeal the mandate, saying it perpetuates poverty and inequality for minimal returns to the states.

Regardless of the fairness or economic return from the recovery of the estate, state courts have consistently ruled that this practice is legal. In its decision upholding the legality of the program, the Minnesota Supreme Court said: โ€œThe estate law in question here serves a very important purpose. [Estate collection] It is a system whereby money paid to eligible individuals for healthcare purposes can be recovered and reused to help other people in a similar situation.โ€

The savings are relatively small

In fiscal 2019, states reported collecting nearly $733.4 million using real estate restitution, according to a report quoting the Commission on Payments and Medicaid Access and the nonpartisan CHIP. That's about one-tenth of a percent of the $671.2 billion that federal and state governments combined spent on Medicaid in 2020, according to CMS.

The federal courts also upheld the restitution of the estate. After Congress made property restitution mandatory in 1993, West Virginia sued the federal government, saying, among other things, that the requirement was a "betrayal of the New Deal." The state lost. Michigan delayed real estate redemption until 2007, when the federal government threatened to withdraw Medicaid funding. The US Supreme Court recently heard oral arguments in a case that challenges part of Florida's real estate restitution law.

States must continue the program if they want the flow of Federal Medicaid dollars. But the lawyers say the estate restitution hurts some of their most vulnerable clients the most. Laurie Hanson and Laura Zedicnik are two of these lawyers.

ignorant and unprepared

Hanson and Zdychnec met many people like Kevin White through the Minneapolis law firm they set up for older clients. As taxpayers, they said they had no problem with the concept of estate recovery. But the way it is implemented raises legal and ethical concerns for them and their team.

"Federal law is pretty clear that people need to be aware of and notify the state repossession program when they apply for Medicaid. In some cases this notice is completely lacking, and in some cases it is greatly deficient," Zdychnec said.

โ€œI am not suggesting that people will never realize what will happen to them, but I do think, in my opinion, that the state needs to do more to inform people in advance of how [this program] It really works and what would the expectation be on the other end.โ€

In some cases, Hanson said, entire generations have been displaced because the home they live in is the only asset they own โ€” and they don't learn about property restitution until it is too late.

In its 2021 report to Congress, the Medical Chip Payment and Access Committee found that few people know about property repossession and many high net worth individuals avoid repossession programs altogether. This comes at the expense of families with modest incomes, said John Kentke, an attorney in St. Paul, Minnesota, who has practiced elder law and represented Minnesota seniors for more than a decade.

Some loopholes are there

To qualify for the Minnesota Medicaid program, people must dispose of most of their assets and spend up to the last $3,000, depending on their circumstances, five years prior to enrollment. Those who break the rules can face penalties, including the state's refusal to pay some Medicaid expenses.

The restrictions were intended to punish people who would take advantage of the system, but Kantke found that those who could afford a good attorney could find ways to qualify for Medicaid without losing their fortune to reclaim their property.

Whether it's through trusts, nonprofits, or other financial loopholes, it's an option that Minnesota's most vulnerable Medicaid recipients can't access. The loopholes in estate restoration, and the burden it places on low-income families, are part of the reason Kantke says the program is "retrograde."

"The most difficult thing is hitting those who have the least amount of money," he said. "When the system takes one hundred percent of some and ten percent of others, it seems unfair."

State officials are well aware of these vulnerabilities. They say they worked hard to close it and make the program fairer, but that's easier said than done.

Geneve Fein is the director of the Minnesota Department of Human Services' Special Recovery Unit. She and six employees run the Minnesota Repossession Program. Finn said she is concerned about the loopholes, but her office is understaffed and under-resourced.

Inconsistent decision making

With so much to manage and so few resources to manage, the state leaves much of the data collection to counties. As a result, county officials decide ways to escape estate recovery, such as hardship waivers and appeals, with little oversight from the state.

โ€œCounties track their recovery program internally,โ€ Finn said. "Some counties are in paper files. Some counties have different databases." โ€œYou can get your hardship exemption โ€” it wonโ€™t go to our appeals office; it will just go to the county office. Itโ€™s only going to happen at the county level, and I wouldnโ€™t necessarily have a reason to know, unless there were some questions about it.โ€

In some ways, the difference between Minnesota's county recovery programs is a microcosm of real estate recovery in different states.

โ€œThis is a very common crisis for families across Minnesota and the country,โ€ said Representative Ilhan Omar, a Minnesota Democrat who co-sponsored the federal legislation, Stopping the Unfair Recovery of Medicaid Act. Medicaid recipients must reimburse the state for medical care provided to relatives.

โ€œAfter losing a loved one, families are forced to pay thousands โ€” sometimes hundreds of thousands โ€” of dollars in long-term care that their loved ones have received. It is traumatic and drives many families into medical debt. In some cases, families lose their homes because of this debt,โ€ Omar added. unexpected.โ€ โ€œThis is outrageous and must end.โ€