San Antonio Express-News
March 1, 2005

MERP Final Rules Effective

copyright 2005, Paul Premack

Texas is putting a Medicaid estate recovery program (called MERP) into effect. The final rules were announced in the Texas Register on February 18, 2005 and will go into effect today, March 1, 2005.

The final rules slightly modify the earlier proposals. One change makes it clear estate-planning techniques which are legal for other purposes (like trusts and rights of survivorship to avoid probate) are also legal when used to avoid MERP.

Another change makes it crystal clear that any person whose application is filed today or earlier (even if approval has not yet been issued) is exempt from MERP. Anyone already receiving Medicaid’s nursing home or community-based assistance is exempt from MERP. Further, anyone on Medicaid who dies before reaching age 55 is exempt from MERP.

The state will absolutely make no MERP claim if there is a surviving spouse, a surviving child under age 21, a surviving child of any age who is blind or disabled as defined by the Social Security Act, or an unmarried adult child who has resided continuously in the beneficiary’s homestead for at least one year prior to the time of the beneficiary’s death. The law also exempts a lengthy list of items it calls "American Indian or Alaska Native" income, resources and property.

If it appears that MERP may make a claim when the Medicaid beneficiary dies, the heirs have several grounds for stopping the claim due to hardship. It is a hardship, for instance, if the property has been the site of a family business, farm, or ranch for at least 12 months prior to the beneficiary’s death, that business produces at least half of the heirs’ livelihood. The state will not recover that income producing property.

It is a hardship if losing the property would leave the heirs so destitute they might start receiving public and/or medical assistance. The reverse is also true: if receiving the property would allow an heir now getting public and/or medical assistance to drop that assistance, the heir is allowed to keep the property and to drop the assistance.

When a hardship waiver is approved, the first $100,000 of a homestead’s value will be left alone. Any value above that can be claimed by the state in reimbursement of its Medicaid outlays. However, this exemption can only be claimed by heirs whose family income is below 300% of the federal poverty level. A hardship waiver is only needed if a claim can be filed in probate court, so pre-planning to avoid probate using legal methods will also legally avoid a MERP claim, thus avoiding the need to file a hardship waiver.

Can the state go after other items? A person who qualifies for Medicaid can only have $2000 or less, personal items, an auto and a homestead. A MERP claim includes any asset passing through probate, but the state will only bring a "cost effective" claim – which the rules define as exceeding $10,000 in value. If all a person owns at death are personal items and a small bank balance, the survivors will not be receiving a MERP claim.