The Association of Medicaid Estate Recovery with Homeownership, Home Equity, and Medicaid Enrollment

Policy Points This study examines the association between the implementation of Medicaid estate recovery and homeownership, home equity, and Medicaid enrollment among low-income adults. Estate recovery is associated with a decrease in Medicaid enrollment among unmarried, low-income older adults and a decrease in home equity overall and among Black respondents, White respondents, and adults over 74 years of age. These findings suggest that low-income adults may behave as intended, avoiding Medicaid and extracting housing wealth to cover care costs; still, it is worth reconsidering a policy that recoups less than 1% of the Medicaid budget to the detriment of low-income families with few assets. CONTEXT: In response to the high cost of state-run Medicaid programs, the 1993 Medicaid estate recovery policy was established to enable states to recover assets from the estates of beneficiaries after death. Estate recovery may trigger behavioral responses from older adults who may no longer view real estate as an attractive asset, may borrow money from home equity to cover the cost of increasing care needs, or may avoid enrolling in Medicaid altogether. METHODS: Using 1992-2008 data from the Health and Retirement Study, this study exploits the time variation in state adoption of estate recovery to determine the association of recovery policies with homeownership decisions, home equity, and Medicaid enrollment among low-income older adults using a difference-in-difference fixed-effects model. FINDINGS: The implementation of estate recovery significantly decreased home equity in the overall sample and among Black and White subgroups as well as those over age 74 years. Additionally, estate recovery implementation was associated with a significant decrease in Medicaid enrollment among unmarried, low-income individuals aged 65 years and older. No significant association was found between homeownership and estate recovery overall or among subgroups. CONCLUSIONS: These findings suggest that those most at risk for Medicaid estate recovery, namely, low-income older adults, may behave exactly the way policymakers intended, avoiding enrollment in Medicaid and extracting housing wealth to cover the cost of their care. Still, it is worth reconsidering a policy that recoups less than 1% of the long-term services and supports budget from Medicaid estate recovery to the detriment of low-income families who already had few assets. These findings reflect the limited choices that older adults and their families have in making long-term care decisions, filling a gap in the extant literature, which has not adequately explored the impacts of estate recovery.