All About Medicaid Liens
The Medicaid program provides a safety net when you need housing and medical care. It is a federal program administered by the state.
If you don’t have the resources to pay for your own care, the program is a godsend. It assures that, if you don’t have such resources, you will have a roof over your head and meals on the table.
This is what we call a “means-tested” program. In other words, if you have the means to pay for your own care, you will be expected to do so. But once you’ve spent your own assets down to a minimal level, then the program steps up to take care of you.
The only significant assets that Medicaid does not require you to liquidate and spend are your house and one car. This is based on the hope that your need for assistance may turn out to be temporary. The program hopes you will be able to return to your own home at some point.
As a tradeoff for this exception, Medicaid automatically will hold a lien against your home for the amount of the assistance that they pay. No payment on the lien is required until after you pass away. Or, in the case of a married couple, until both spouses have died.
At that point, your heirs will be expected to reimburse the state for any amounts paid under the program for the care during the last five years of the person’s life.
If your house is worth less than the amount paid for that care, the house will be sold by your Executor and the entire proceeds will be turned over to the state. But if the house is worth more than the cost of your care, then after the house is sold by your Executor, the state will be reimbursed the costs it paid. The rest of the sales proceeds will then be disbursed to your heirs.
So, the Medicaid lien is the vehicle that enables the state to recover as much of the care costs as possible.