New Jersey Appeals Court Upholds Medicaid Estate Recovery

In March 2024, a New Jersey appeals court upheld the state's claim to recover Medicaid costs from the family home of Philomene Benoit, who had received Medicaid-funded care for nearly nine years before her death in 2012. The state's claim for $415,501.30 in benefits was filed after her surviving spouse, Clerveaux, died in 2019, and a lien was placed on the property. When the home sold for approximately $302,000 two years later, the Medicaid claim exceeded the sale price by over $113,000. The net proceeds were held in escrow while Clerveaux's beneficiaries contested the state's recovery rights. This case highlights a critical contradiction in Medicaid rules: a home can be protected for eligibility while receiving benefits but not necessarily protected from estate recovery after death. Tim Sechler, an elder-law attorney, noted that a common misconception is that a house is safe from Medicaid claims simply because it is not assessed during the initial eligibility determination. The mechanism at play is known as estate recovery, a federal requirement for states to seek repayment for certain Medicaid costs incurred by beneficiaries aged 55 and older, particularly long-term care expenses. These costs can rapidly deplete personal savings. Long-term care, which includes custodial care, is not covered by Medicare, leading many individuals to rely on Medicaid for extended support. The cost of such care can be substantial, often necessitating the use of home equity or the sale of assets to cover expenses. Federal law mandates that states implement estate recovery programs to recoup these costs from the deceased beneficiary's estate. While states have some flexibility in determining the scope and timing of recovery, the core principle remains the recovery of funds spent on long-term care. This can include nursing facility services, home and community-based services, and related hospital and prescription drug services. The intent of estate recovery is to ensure the financial sustainability of the Medicaid program, which provides essential healthcare services to millions of Americans. However, it can create significant financial hardship for surviving family members who may have relied on the family home as a source of security or inheritance. The Benoit case exemplifies the complex interplay between Medicaid eligibility rules, estate planning, and the financial realities of long-term care. The appeals court's decision reinforces the state's authority to pursue recovery, even when it impacts heirs. This ruling underscores the importance for individuals and families to understand the implications of Medicaid-funded long-term care on their assets and to seek legal counsel to navigate these complex regulations and protect their estates.