ObamaCare death debt? States can seize assets to recoup Medicaid costs

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Seniors fleeing Medicaid to escape potential 'death debt'

Dan Springer reports from Seattle, Washington

Tom Gialanella, 56, was shocked to find out he qualified for Medicaid under ObamaCare. The Bothell, Wash., resident had been able to retire early years ago, owns his home outright in a pricey Seattle suburb and is living off his investments.

He wanted no part of the government's so-called free health care. "It's supposed to be a safety net program. It's not supposed to be for someone who has assets who can pay the bill," he said.

And after reading the fine print, Gialanella had another reason to flee Medicaid -- the potential death debt.

Though many may not realize it, states are allowed to recover the cost of health care after someone's death by seizing their assets. It applies to Medicaid recipients who are between the ages of 55 and 64. The law has been in place since 1993, when Congress realized states were going broke over rising Medicaid expenses.

But under ObamaCare, Medicaid eligibility has expanded dramatically along with the promise that the federal government will pick up the cost of the higher tab -- at least for the first few years, after which states will be on the hook for a portion of the increase.

Millions more are entering the system, perhaps without knowing that their assets could be at risk.

However, just like Gialanella, others are opting out.

A Washington state couple in their early 60's actually got married recently so their combined income would keep them out of Medicaid and allow them to purchase a plan on the health exchange. Filing as individuals, their incomes had been low enough that they qualified for Medicaid.

They married primarily because Sophia Prins owns a home and wants to will it to her children without any worry that the government will attach a lien for the cost of her medical care. Prins doesn't think it's fair to go after the assets of people who get government assistance through Medicaid, but not those getting taxpayer subsidies through the exchange plans.

The story prompted Washington's Democratic governor, Jay Inslee, to issue an emergency rule change. It says the state may only recover the cost of nursing home care provided to Medicaid recipients in that 55-64 age group. That's the minimum allowable under the 1993 law.

"We have this population that we want to make sure they have access to health care," said state Medicaid Director MaryAnne Lindeblad. "We want them to get in so they can get the kinds of services that keep them healthy."

Oregon followed suit. But the 23 other states that expanded Medicaid under ObamaCare have not changed their estate recovery policies. A lot of money is at stake.

In 2004, California collected $44.6 million through estate recovery. It's a number that is certain to rise dramatically. MediCal officials tell Fox News they expect 1 million-2 million additional enrollees by 2015.

Minnesota, a much smaller state than California, managed to collect $25 million in 2004. It, too, is keeping its estate recovery policy in place.

Critics see a money grab.

"I think that people are maybe in for a shock when they find out their heirs are going to be paying for their care, because they got into a system under false pretenses," said Dr. Jane Orient of the Association of American Physicians and Surgeons, a group opposed to the Affordable Care Act.

The estate recovery law is so under the radar right now that interest groups like the AARP are still studying how it will play out under ObamaCare for seniors.