Collecting Medicaid Costs from Heirs: How Missouri Compares to Other States

Under federal law, if a state Medicaid program pays long-term care expenses for someone 55 years or older, the state must attempt to collect those expenses from the person’s property after their death, before the property passes to the person’s family or other heirs. This process is called “estate recovery.” The state often collects against the person’s house because their savings are usually minimal: most of their life savings have been spent on nursing home care or other long-term care in order to become Medicaid-eligible.

The amount the state pursues can be very large, since long-term care can cost well over $100,000 per year. The state may take all of the person’s property if needed to cover the long-term care expenses. If long-term care expenses exceed the property’s value, however, the family is not responsible for the difference.

In recent years, Missouri has collected less than one-half percent of its Medicaid long-term care expenses.

Missouri Collects Relatively Little of Its Long-Term Care Expenses

In recent years, Missouri has collected less than one-half percent of its Medicaid long-term care expenses. In one year, for example, the state spent approximately $3.7 billion on long-term care and collected only $13.7 million, for a recovery rate of 0.37%. This level is relatively typical among states: the Medicaid and CHIP Payment and Access Commission (MACPAC) reports an annual national recovery rate varying between 0.52% and 0.62% over a five-year period.

The small amount of collected funds becomes even smaller when considering the administrative costs of collection, along with Missouri’s obligation to return a percentage of funds to the federal government. While the amount recouped by the state is minimal, the impact of this policy on families is devastating.

Why Collecting Medicaid Costs from Heirs is Harmful to Low-Income Families

Medicaid collection unfairly penalizes low-income older adults and people with disabilities because they need long-term care.

The fear of losing their home or burdening their family causes many people to delay or avoid applying for Medicaid altogether. As a result, some families go into debt to pay for care themselves, while others forgo care entirely, leading to preventable health crises and costly hospital stays.

When Medicaid collection is pursued, surviving family members may be forced to sell the decedent's home to come up with the funds the state is seeking. This deepens housing and financial instability and prevents the ability to pass down even modest assets, keeping families in poverty and widening racial and economic gaps.

Contrary to Federal Law, Missouri Does Not Offer Waivers for “Undue Hardship”

Federal law prohibits collection when it would cause “undue hardship” to heirs, and federal guidance instructs states as to which situations should be considered “undue hardship.” The guidance suggests, for instance, that states waive collection against homes with a “modest value,” against income-producing property such as family farms or businesses, or when there are other “compelling circumstances.” States can go beyond these suggested situations; various states waive collection if the heir (family member) has a very low income, has been living in the home, or served as a caregiver for the person.

Missouri does not provide any procedure to waive collection in cases of undue hardship and is therefore out of compliance with federal Medicaid law.

Missouri Pursues Collection Even When It’s Not Worth the Cost

Recognizing the significant administrative costs associated with Medicaid recovery, states can also adopt policies to forego collection if the estate or the claim is relatively small. Missouri has broad collection policies that it pursues as long as the state retains at least $1 more than it spends. Other states, however, follow more balanced policies that both reduce administrative costs and avoid punishing surviving family members with limited assets. For example, South Carolina and Georgia only pursue collection for estates valued above $25,000, while North Carolina sets this limit at $50,000. Also, a state can balance cost effectiveness by looking at the size of the claim (as opposed to the estate). Illinois and Georgia, for example, only seek collection if the claim exceeds $25,000.

Missouri Exceeds Federal Requirements for Minimum Collection

Federal law requires states to recover for Medicaid expenses related to long-term care for individuals ages 55 and older. Fourteen states, including Arkansas, Louisiana, Mississippi, Montana, South Dakota, and Texas, limit collection to only the federal minimums, thereby reducing the scope and the impact on low-income families. Missouri, however, collects for the cost of all Medicaid-covered services for persons ages 55 and older.

Similarly, federal law requires states to pursue collection for assets passing through probate, a legal process used to settle an estate’s affairs after an individual's death. Missouri, however, permits collection of non-probate transfers, expanding the pool of assets subject to recovery beyond the federal minimums.

Impact on Missouri Families

For more information about Missouri's Medicaid recovery policy, its impact on low-income families, and state-specific practices, please contact Neighborhood Advocacy program.

For a national analysis of state mitigation strategies regarding Medicaid estate recovery, see Justice in Aging’s Advocate Guide: Mitigating the Harmful Effects of Medicaid Estate Recovery: Strategies for States.