What does the Medicaid lien mean?

Written by Jennifer McInerney, Attorney on 1/10/2023

You have probably read in literature with the ABLE account that the ABLE account is what is called a “payback” account. What that means is, when the beneficiary (the disabled person) passes away, Alabama Medicaid can “lien” or become a creditor for the total amount of medical assistance paid. This lien is much like the lien you read about in a First Party Special Needs Trust.

For example, assume my daughter Erin (21) opened her ABLE account at age 18 with $5,000. Let’s assume she is approved for SSI and Medicaid at age 19. Let’s assume that sometime after receiving SSI and Medicaid, she added $10,000 to her account. She dies unexpectedly. On the date of her death her account has a $10,000 balance.

(1)    After being notified of her death, Medicaid must initiate a reimbursement lien on the account.

a.     Pursuant to the Treasuring and IRS’s Notice of Proposed Rulemaking 1917(b) requires that in certain cases states are required to seek recovery against the estates of deceased Medicaid beneficiaries. These specific individuals are those individuals who at the age of 55 or older or received coverage for certain long term support services and were subject to post eligibility treatment of income rules.

b.     If the estate of an ABLE account beneficiary is not subject to Medicaid estate recovery, states have discretion whether to file a section 529A claim against the ABLE account of a deceased individual who had been enrolled in a Medicaid Buy In program.

Because she is under the age of 55 at the time of her death, it is unlikely that her Medicaid must initiate recovery, but is can still elect to do so.

(2)    The amount of any Medicaid payback is calculated based on the amounts paid by Medicaid after the creation of the ABLE account and excludes amounts paid by the beneficiary as premiums to a Medicaid buy-in program.

Assuming Medicaid paid $20,000 in benefits since she opened her account, the full $10,000 balance at the time of her death could be clawed back by Medicaid.

That is a simple analysis of a very complicated process that is ever changing.

For questions about the Medicaid payback program, please contact Alabama ABLE or the author of this Blog, Jenny McInerney at JMcInerney@ParmerLaw.com or (205) 871-1440.