Medicaid Estate Recovery: What Families Need to Know (Before It's Too Late)

When families first hear that Medicaid can help pay for long-term care, whether in a nursing home or through in-home services, one fear almost always comes up: “Is the state going to take my house?” It’s a real concern, and one we hear every day at our firm. The fear is tied to a policy called Medicaid Estate Recovery. While estate recovery does exist, it’s often misunderstood, and that misunderstanding can lead to unnecessary panic, poor planning, and real financial harm.

What Is Medicaid Estate Recovery?

Medicaid Estate Recovery is a program required by federal law. If a state wants to receive federal Medicaid funding (which all states do), it must attempt to recover some of the money spent on certain individuals after they pass away. Specifically, estate recovery applies to people who received long-term services and support through Medicaid—called TennCare CHOICES in Tennessee. In simple terms: The state may try to get reimbursed from a person’s estate for the

cost of long-term care services they received during their lifetime.

Does Estate Recovery Apply to Everyone Who Receives Government Benefits?

No—and this is one of the biggest misconceptions. Estate recovery does not apply to:

·         Medicare

·         Social Security Disability

·         SSI

·         Regular Medicaid (for doctor visits, hospital care, etc.)

·         VA benefits or

·         Medicare cost savings programs

It only applies to long-term care benefits, such as:

·         Nursing home care

·         Certain in-home care services

·         Other institutional care under TennCare CHOICES

This makes it the only public benefit programs that requires repayment after death.

Why Does This Policy Exist?

The mandate for estate recovery came out of federal legislation in the early 1990s. The idea was to help “refill the coffers” of Medicaid by recouping funds. But here’s the reality, nationwide, estate recovery only brings back about 1% of total Medicaid spending. So while it causes significant hardship for some families, it does very little to sustain the system financially.

What Assets Are Typically Targeted?

For most families, it comes down to one thing: the home. Why?

·         Bank accounts must already be “spent down” to about $2,000 to qualify for Medicaid.

·         Most people don’t have other significant assets by the time they need long-term care.

·         The home is usually the only remaining asset of value.

So, while estate recovery can technically apply to other property, in practice it’s almost always about real estate.

Are There Protections for Spouses and Children?

Yes—though they are often poorly understood. In Tennessee, there are protections for the surviving spouse and/or a disabled or minor child. If someone dies while their spouse is still living in the home, TennCare will not pursue recovery until after the surviving spouse passes away. This is called a deferment, not forgiveness. Recovery may also be deferred or waived if there is a disabled child of any age, or a minor child under 21.

It is important to know that TennCare does not place a formal lien on the home in Tennessee. That means a surviving spouse can often sell the home, though title companies may still require additional documentation.

What About Family Farms or Hardship Cases?

There are hardship exceptions, such as when a family farm is the primary source of income and/or multiple generations rely on the property for livelihood. But these exceptions are not always clearly explained—and families must often know how to ask for them.

This is one of the biggest problems. The rules exist, but they are not consistently communicated or applied.

Why You Shouldn’t Rely on the Nursing Home for Guidance

Many families assume the nursing home business office or a case worker will guide them through Medicaid. But caseworkers may not know all the rules. Additionally, facilities are focused on getting paid for services provided, not protecting your estate. Government workers are doing their jobs, not advocating for your family. That’s why relying solely on the system is risky.

Is There Any Push for Reform?

Yes, but progress is slow. A federal bill has been introduced (again) to eliminate the mandatory nature of estate recovery and make it optional for states. Elder law organizations, including the National Academy of Elder Law Attorneys (NAELA), continue to push for reform. However, currently, estate recovery remains the law.

The Most Important Takeaway

If there’s one thing families should remember, it’s this, go into Medicaid with your eyes wide open.

You are not:

·         Signing your house over to the nursing home

·         Automatically losing everything

But you do need accurate information, not fear-based assumptions. And if you have anything meaningful to protect—a home, a family business, generational property—then hiring an elder law attorney is not a luxury. It’s an investment in your family’s future.

Medicaid Estate Recovery is one of those policies most people don’t learn about until they’re already in crisis. Understanding what it applies to, what protections exist, and what planning options are available can make the difference between preserving a legacy and losing it unnecessarily. Awareness is the first step toward better planning—and maybe, eventually, better policy.