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WHEN THE STATE COMES FOR YOUR ESTATE  
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Safiya Charles
April 8, 2024
Type Investigations
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_ Medicaid was designed to provide healthcare for the poorest
Americans. But after death, their relatives can be socked with massive
bills, as one Charlotte family learned. _

Tammy Crowder and her daughter Kendra Pate outside the family home,
credit: Travis Dove for The Assembly

 

_This story was published in partnership
[[link removed]] with The
Assembly, a digital-first magazine about power and place in North
Carolina. _

When Tammy Crowder’s phone rang late one evening in February 2018,
her eldest sister, Joy, sounded panicked. Their mother, Cleveland
Hager, had slipped and fallen on her side, injuring her leg. Unable to
stand, Hager crawled from the hallway to her bedroom in search of a
phone to call for help. The effort took hours. 

When Crowder and her husband arrived at Hager’s Charlotte home, they
found her on the floor, helpless and in pain. Crowder’s husband
lifted his mother-in-law in his arms and carried her to their car. She
would stay with them for the time being. Suddenly,
what-to-do-about-mom became the family’s most pressing concern.

At the urging of Crowder and her siblings, Hager agreed to move into a
nursing facility, even though it would mean leaving the place she had
called home for the majority of her life. Hager had lived in the
three-bedroom, ranch-style home on LaSalle Street for six decades. She
and her late husband built it in 1958 and raised their six children
there.

The Hagers’ home had always been whatever the family needed it to
be. When their children were busy raising their own kids, it became a
daycare, filled over the years with their 30-some-odd grandchildren
and great-grands. It was a place to celebrate wedding anniversaries
and college graduations under the shade of the pecan tree in the
backyard. And during hard times, it was a place to get back on one’s
feet.

It had never occurred to anyone that they could lose it.

When the Covid-19 pandemic hit and restrictions limiting
person-to-person contact went into effect in March 2020, Hager’s
health declined swiftly. She died seven months later, in October, at
93 years old.

By that time, North Carolina Medicaid had covered her long-term care
costs for about two years while she lived in the nursing home. Barely
30 days after her passing and still reeling from her death, however,
the family received a letter that left them in shock. The state was
demanding the beneficiaries of Hager’s estate pay back the full cost
of her care—a total of $167,000—in six months. If they could not
produce the cash, the state would seize the estate’s most sizable
asset: the home that had been so central to their lives.

Like many Americans, Crowder and her family were unaware of the
Medicaid Estate Recovery Program, which allows states to seize
property from the heirs of Medicaid recipients, often robbing people
of homes that have been in their family for generations. 

“We were still grieving for my mom,” said Crowder. “She had just
passed away. Then you say you want to take the home we grew up in?”

‘There’s An Equity Issue’

For disabled people or people over 65 who meet income and other
eligibility requirements, Medicaid will cover the costs of long-term
care, whether that means living in a nursing facility with
around-the-clock care, or staying at home with the help of a
caretaker. But unlike other federal assistance programs, Medicaid can
also operate essentially as a government loan.

The Medicaid Estate Recovery Program allows states to claw back money
spent on long-term care by making a claim against a recipient’s
estate after their death. The consequences of this program can be
devastating: Families who have often spent decades working to realize
their dream of homeownership can lose it all.

It’s a program that has serious implications for generations of
Americans. Nearly 80 million people were enrolled
[[link removed].] in
Medicaid as of November 2023, according to U.S. government data, and
an estimated 70 percent of adults who reach age 65 will require some
form of long-term care. Each year, however, states work to recover
millions of dollars from thousands of people. In fiscal year 2019,
states collected more than $733 million from beneficiary estates,
according to a 2021 report by the Medicaid and CHIP Payment and
Access Commission [[link removed]], a nonpartisan agency that
analyzes healthcare data and makes policy recommendations to
Congress. 

After receiving the letter in November 2020, Crowder and her siblings
frantically convened a family discussion. Her eldest sister worked in
retail, another was a school registrar, while a brother was a
minister. No one had $167,000 on hand, and loans weren’t a viable
option. They would have no choice, they feared, but to forfeit the
family home.

“You can’t tell me that’s not predatory,” said Crowder’s
daughter, Kendra Pate, who moved into the house when Hager moved into
the nursing facility. “You’re coming to people during a vulnerable
time. I’m sitting up here like, ‘This feels impossible.’”

Twenty-five states responded to public records requests from Type
Investigations and The Assembly seeking Medicaid estate recovery data
from fiscal year 2011 through 2022. The data reveals that North
Carolina can be unforgiving when it comes to recovering money from
heirs.

Federal law requires that states create a process through which heirs
can apply to waive the costs owed due to undue hardship—if there is
a disabled child living in the home, for example, or if a home’s
value is “modest.” But such hardship waivers can be difficult to
obtain, experts say, either because of restrictive requirements, poor
administration, or simply because people don’t know how to apply.
Each state can create its own definition of undue hardship. 

From fiscal year 2011 to 2022, North Carolina closed 9,351 estate
recovery cases, collecting $161 million. Over that time period, the
state received 2,103 hardship waiver applications and granted 1,388.

One reason Congress created the Medicaid Estate Recovery Program in
1993 was to enable states to replenish their Medicaid coffers, to
ensure that the program can continue to provide needed services to
society’s most vulnerable. But money collected from estates may go
into states’ general funds, and doesn’t necessarily make it back
to Medicaid departments. 

“It can go to schools, highways, prisons, tax cuts. It may or may
not end up back in Medicaid,” said Chuck Milligan, a healthcare
consultant, former state Medicaid director, and the former vice chair
of the Medicaid and CHIP Payment and Access Commission. 

“We were still grieving for my mom. She had just passed away. Then
you say you want to take the home we grew up in?”

Tammy Crowder

The commission’s 2021 analysis showed that Medicaid estate recovery
recouped less than one percent of annual fee-for-service spending on
long-term care between 2015 and 2019. The findings were consistent
with analyses published in the mid-2000s, demonstrating that the
program has little effect on Medicaid overall, but can be devastating
to families.

According to the Centers for Medicare and Medicaid Services, more than
half the recipients of Medicaid and the Children’s Health Insurance
Program are people of color. In North Carolina, people of color
account for 59 percent of the state’s more than 2.3 million Medicaid
recipients, but represent less than 40 percent of its population. The
estate recovery program places an undue burden on families that are
often already financially strapped, critics say, leaving relatives
vulnerable to homelessness and eliminating the potential transfer of
generational wealth. 

“You look at other government programs where people use services,
and there isn’t a recovery policy. There’s an equity issue when
Medicaid is singled out,” said Milligan. “It perpetuates a cycle
of poverty when someone on Medicaid can’t leave their estate to
their heirs, yet wealthy people can.”

When the State Comes For Your Inheritance 

Amid the fiercely enforced segregation of the 1950s, the Hagers built
their home in University Park, one of Charlotte’s most historic
African American neighborhoods. 

Crowder’s father made it clear to his children, long before he
passed, that his wish was for their home to stay in the family, for
his children and grandchildren to enjoy. That was the plan. That was
their American Dream. 

“For their generation, to them success was to own your own home, and
the fact that they had worked and paid it off,” said Crowder’s
sister, Trena Hager Means. “For their five remaining, living
children, that was their legacy. So just to let the state take it?
No.”

Racial and ethnic disparities in wealth and homeownership have
impacted Black families for generations. Purposeful and targeted
institutional racism once blocked Black families from owning homes or
living in so-called desirable neighborhoods.

“Now that we’re seeing that ease off, African American families
who have a family home have the ability to pass on generational wealth
in ways they were not able to,” said Matt Salo, a healthcare
strategist and former executive director of the National Association
of Medicaid Directors [[link removed]], an
organization of state healthcare leaders from across the United
States. 

Now, however, the estate recovery program represents another barrier
preventing these families from transferring wealth to their children
and grandchildren. “They’re seeing Medicaid come along and take
those houses and take those estates away,” Salo said, “and that
seems particularly cruel.”

Desperate for any help they could get to save their home, Crowder and
her family began reaching out to neighbors, cousins, folks at church.
Soon they learned of others who had met the same fate. Yet they had
never heard of the estate recovery program. “How?” they
wondered. 

State Medicaid offices are required by federal law to disclose the
fact that money spent on care and support services will be recouped
from estates upon a recipient’s death. Attorneys, advocates, and
people directly affected by estate recovery noted again and again,
however, that one of the biggest problems with the program is that
many don’t know it exists—whether that’s because of the mountain
of paperwork Medicaid recipients or their caregivers must complete, or
a lack of detailed information provided by local Medicaid
departments. 

Homes are particularly vulnerable. Medicaid has strict income and
asset limits
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applicants must meet in order to qualify. In North Carolina, an
individual under the age of 65 may have a monthly income of no more
than $1,676 before taxes, while a person over 65 may have an income of
$1,215 or less, and assets totaling no more than $2,000. However, an
individual’s home is not counted as an asset to qualify for
Medicaid. This means it’s often the only asset of value left behind
after a Medicaid recipient dies, making it a prime target for state
efforts to recoup Medicaid costs.

“Are you kidding? How can you take something that someone owns? How
is this legal? It was infuriating,” Pate said. “This isn’t just
a home. This is where I grew up. Where all of us grew up,” she waved
her hand toward her cousin, aunt, and mother who sat before her.
“You can’t just—” her words broke off.

Varying Standards and Data

When Congress created
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Medicaid Estate Recovery Program in 1993 in response to the rising
costs of administering Medicaid nationwide, it required states to
pursue debt collection and expanded the types of assets that states
are allowed to seize.

Previously, only 22 states had estate recovery programs, and seizable
assets were limited to money, homes, and investments that were willed
to heirs. Congress gave states the authority to seek additional assets
as well, including life insurance benefits, interests in trusts, and
property passed on to heirs not only through wills, but simply through
survivorship.

Some states have not rushed to comply with Congress’s mandate.
Texas 
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instituting its recovery program until 2005, and Michigan held off
until 2011 when it faced a potential loss of Medicaid funding. In
1995, West Virginia sued the U.S. Department of Health and Human
Services, arguing that the program was bad public policy that yielded
little money and would cause “widespread clinical depression in aged
and disabled nursing home residents.”

The state claimed the program was a “betrayal of the New Deal,”
and would perpetuate poverty by confiscating homes from the elderly
and poor. Ultimately, however, a circuit court ruled against West
Virginia and forced the state to acquiesce to Congress’s demand.

Still, states can use their discretion to lessen the impact of estate
recovery by limiting its scope or broadening the undue hardship
criteria. For example, Georgia and Massachusetts waive recovery if an
estate is valued at less than $25,000, while Texas may waive up to
$100,000 of a property’s value if one of the heirs has a family
income below a certain limit adjusted each year.

North Carolina’s estate recovery program is limited to the money,
homes, or investments included in a decedent’s probate estate—a
smaller scope than is allowable under federal law. The state will also
not pursue recovery if an estate is valued at $50,000 or less, or if
the amount subject to recovery is under $10,000.

But advocates say this offers little consolation.

“The problem is that if you inherited a house, they’re counting
that house—even though you’re living in it—as one of your
assets,” said Douglas Sea, senior attorney at the Charlotte Center
for Legal Advocacy, a legal aid organization. “Generally, any asset
test will exclude a person’s home, because they’ve got to live
there … and certainly Medicaid eligibility does that. But on the
estate recovery side, that house alone is generally going to put you
over the limit for [exemption from] estate recovery.”

Indeed, one reason homes are so important as a vehicle for
transferring generational wealth is because they tend to increase in
value significantly over time. “Especially in this day and age, in a
place like Charlotte,” Sea said, “certainly a house is going to be
worth more than $50,000, just for the land alone.”

“It perpetuates a cycle of poverty when someone on Medicaid can’t
leave their estate to their heirs, yet wealthy people can.”

Chuck Milligan, healthcare consultant

The data on North Carolina’s estate recovery program shows that
obtaining a hardship waiver can be challenging, even as the number of
people requesting relief has increased. Between fiscal year 2011 and
2022, the state approved just 66 percent of hardship waiver
applications. Whereas 34 people requested hardship waivers in fiscal
year 2011, that number rose to a high of 304 in fiscal year 2021.

In a statement, the North Carolina Department of Health and Human
Services acknowledged that research suggests “the estate recovery
program has had a negative impact on historically marginalized
communities in North Carolina, exacerbating issues of inequality and
hindering the transfer of intergenerational wealth. It has
inadvertently contributed to the widening wealth gap and perpetuated
cycles of poverty, particularly impacting those already facing
systemic barriers to wealth accumulation.” 

Reforms to the program which went into effect in the last year,
including the exemption of homes valued at $50,000 or less, were
designed to make it easier for more people to obtain hardship waivers
and “directly address and rectify the disproportionate impact on
historically marginalized communities,” the department said.

The state’s rate of hardship approvals declined between fiscal years
2015 and 2022, reaching a low of 60 percent at the end of that period.
At its highest approval rating, North Carolina granted nearly 72
percent of waivers in 2015.

A Glimmer of Hope

Crowder and her siblings cycled through moments of hopelessness and
depression as they tried to figure out a way to hold on to the home
their parents built. 

“When I got the letter, the first thing I did was try to Google and
ask around to people, ‘Have you ever heard of this?’ It was just
crazy,” said Crowder. “Some people said, ‘That happened to my
cousin, they ended up losing their house.’ A bunch of sad
stories.”

A representative of Health Management Systems (now part of Gainwell),
a third-party administrator for a number of estate recovery programs
across the country including North Carolina’s, suggested that
Crowder apply for a hardship waiver, despite the complicated
application process.

“I explained to her, ‘I just lost my mom, my daughter lives in the
house, she doesn’t make much money—like, what can we do?’”
said Crowder. “Just fill it out, you never know,” Crowder said the
representative told her.

Yeama Arrington, an attorney at the Charlotte Center for Legal
Advocacy, told the family they had a good chance of making a claim.
Because Pate had been living in the house for more than a year prior
to Hager’s death—one of North Carolina’s conditions for claiming
undue hardship—they could apply for a waiver as long as Pate met the
state’s income conditions.

Suddenly, it was all hands on deck. In North Carolina, heirs must
submit their request for a hardship waiver within 60 days of receiving
an estate recovery notice. Crowder and Pate communicated with
Arrington by phone and email. The two gathered tax documents, bank
statements, and other information the state required as proof. Hager
Means faxed everything to the attorney. 

Without the legal aid organization’s help, Crowder and Pate said the
challenge of meeting the state’s hardship waiver requirements likely
would have been insurmountable.

“The stipulations that they had. The amount of things that they
asked for to qualify for that—that combination—I felt like the
average person would feel like it was impossible,” Pate said. 

In its 2021 report to Congress, the Medicaid and CHIP Payment and
Access Commission highlighted how the program could be improved to
promote equity. Among the group’s recommendations was that Congress
make estate recovery optional, and direct the Department of Health and
Human Services to establish minimum standards for hardship waivers,
while allowing states to continue to use their own additional
criteria. 

Some argue that the program should be eliminated altogether. In 2022,
U.S. Rep. Jan Schakowsky (D-IL) proposed a bill that would give states
that option. The Stop Unfair Medicaid Recoveries Act
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to repeal the federal requirement that states create an estate
recovery program and limit the circumstances in which states are able
to place liens on beneficiaries’ homes and property.

“We were hearing from people about the damage that this legislation
has caused. It’s ridiculous, and it’s not effective,” Schakowsky
told Type Investigations and The Assembly. “In 2019, the state of
Illinois spent $3.9 million to help people through Medicaid, and they
were able to collect $26,000. How much money did they spend trying to
recover such a pittance?”

The bill didn’t gain traction in the Republican-controlled Congress.
Schakowsky said more lawmakers need to be educated about the program,
so they can recognize that the issue is not one of individual
responsibility, but rather of “bad policy.” 

“The fact that there’s so little data is also a mark against this
program,” said Schakowsky. “It doesn’t seem as if there’s
really clear monitoring of what’s going on. … They ought to at
least know at CMS [the Centers for Medicare and Medicaid Services]
what the consequences are and who’s being affected. But there’s no
central place for information.”

Schakowsky reintroduced the bill in March. It currently has 13
cosponsors, all Democrats. 

In September 2021, almost a year after Hager’s death, Pate received
a letter from North Carolina’s Department of Health and Human
Services: Her request for undue hardship had been granted. 

“We appreciate your cooperation in this matter,” read the letter,
“and are sorry for your family’s loss.”

“I felt very happy. Relieved. Like the system didn’t get me,”
said Pate. “I fought back. I can’t express to you how upset it
made me, recognizing this was a systemic thing.”

Yet this wasn’t a complete reprieve. North Carolina had revised its
policy in 2018 to allow the state to defer estate recovery instead of
issuing a permanent waiver. The state can still resume its recovery
efforts if an applicant no longer meets the undue hardship criteria.
The family worried: Could the state still try to collect on the debt?

In January, it did. Pate received a new notice from the state’s
Medicaid estate recovery agent, stating that she no longer meets the
conditions of undue hardship. Still, the family has vowed not to give
up. 

“They’re not going to have my grandmommy’s house,” said Pate.
“I’m not discouraged.”

_Safiya Charles
[[link removed]] is a
Montgomery, Alabama-based writer and a former Type Investigations Ida
B. Wells fellow. Charles covered the movement around justice for Black
farmers at The Counter, and wrote about race and politics for The
Montgomery Advertiser, the Alabama capital’s daily newspaper._

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