When The State Comes For Your Estate

This story is co-published with The Assembly as part of a new content partnership and was also produced in partnership with the nonprofit newsroom Type Investigations, where Safiya Charles was an Ida B. Wells fellow.

Tammy Crowder’s phone rang late one evening in February 2018, and 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 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, 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.

The commission’s 2021 analysis showed that Medicaid estate recovery recouped less than 1 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, 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 that 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 the 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 delayed 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.”

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 aims 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 co-sponsors, 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 is a Montgomery, Alabama-based writer and a former Type Investigations 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. Her work has also appeared in USA Today, The Nation and The New Republic.