Understanding Medicaid: Protect Your Family Home from Recovery

by The Sarcastic Guru

I never wanted to become an expert in Medicaid policy, but here I am. I had to get somewhat knowledgeable when I was trying to get my mom qualified for Medicaid, and there is nothing worse than finding out the rules in the middle of the process. Families think they’re applying for help, but the fine print means the state can swoop in and take the family home once the parent dies.

Grandma’s Story: A Different Era

When my grandma died in 1997, she had Federal Blue Cross Blue Shield — a gold-standard veteran plan. She was the type of woman who treated herself like a Porsche: she’d drive to San Diego in the 1980s, check herself into Scripps, and demand every test imaginable. She loved hospitals. We knew something was wrong near the end when she didn’t want to go.

She lived to 93, sharp as ever until her last few months. And she had something we don’t have anymore: community support. The Jewish Community Center sent someone to help her shower twice a week. Catholic Social Services sent a cleaner. Her only big out-of-pocket cost was a live-in caretaker for six months at $600 a week — about $1,200 in today’s money. Affordable, manageable, and no vultures circling her estate.

How the Rules Changed

• 1965: Medicaid was created under President Lyndon B. Johnson (Democrat). From the beginning, states could try to recover costs from estates, but most didn’t.
• 1982: President Ronald Reagan (Republican) signed a law that allowed states to impose liens and recover costs more aggressively, but still optional.
• 1993: President Bill Clinton (Democrat) signed the Omnibus Budget Reconciliation Act (OBRA ‘93), which made estate recovery mandatory for long-term care services for anyone over 55. This was the game-changer. Every state now had to run an estate recovery program.
• 2005: Under President George W. Bush (Republican), the Deficit Reduction Act tightened rules on asset transfers, making it harder for families to “gift” property or move money around to protect it from Medicaid recovery.
• Since then, both parties have kept the rules in place. States differ on how far they go, but the federal baseline — recovery after death — has never been repealed.

The 2025 Reality Check

Fast forward to today, and the landscape is brutal:

• Medicare? Covers hospital stays, doctors, short-term rehab, hospice. But not long-term care (LTC).
• Supplemental/Medigap plans? They help with co-pays and deductibles. But not LTC.
• Long-term care costs? Assisted living averages about $4,500/month. A nursing home runs closer to $8,000-$10,000/month.
• Social Security? The average benefit in 2025 is about $1,916/month. Even the max benefit at age 70 — around $4,800/month — doesn’t come close to covering most facilities.

So what happens?

• Families spend down assets until there’s practically nothing left.
• If the Social Security check is modest, Medicaid steps in — but then takes the entire check every month as a “share of cost.” That means your parent technically has “income,” but they don’t get to keep it.
• If the Social Security check is too high — often anything over $2,742/month in most states (the 2025 Medicaid income cap) — the person can’t even qualify for Medicaid unless they set up a Miller Trust or other legal workaround to funnel the excess back to the state.
• Once they die, the state comes after the house through Medicaid Estate Recovery.

And it’s not optional. By federal law, every state must recover at least the cost of long-term care services from estates of people over 55.

State-by-State: How Hungry Are They?

The rules vary:

• Aggressive states (Ohio, Iowa, New York, Massachusetts, Pennsylvania, Wisconsin) come after everything they legally can — not just nursing homes, but hospital visits and prescriptions tied to Medicaid. Some even place liens while the person is alive.
• Moderate states (Missouri, Illinois, Texas, Arizona) target long-term care but sometimes exempt small estates or waive recovery if collection costs exceed the value.
• Mild states (Hawaii, California after 2017 reforms) recover very little — Hawaii collected only $31,000 in a whole year.

Nationally, states claw back around $733 million a year — which sounds big, but is less than 0.6% of Medicaid long-term care spending. It’s a tiny drop in the bucket, but for the families who lose homes, it’s everything.

Your Options (Spoiler: They’re Bad)

If you want to keep the family house, your choices are:

1. Pay out of pocket — $50,000+ a year until your parent dies.
2. Quit your job — become the caregiver yourself. (Good news! Medicare lets you take 5 days off a month as respite care so you don’t collapse.)
3. Do nothing — Medicaid steps in, then estate recovery takes the house.

That’s it.

Why It Feels Like a Scam

We’re sold the story that Medicare is the great safety net, but when it comes to the most predictable, expensive part of aging — long-term care — it’s more like “Medican’t.” Medicaid picks up the tab, but only after you’ve gone broke, and then it comes back for the family home.

This isn’t a “Trump thing” or a “Biden thing.” It’s been baked into the system since the 1990s, signed into law by Clinton, reinforced by Bush, and maintained by every president since. The vultures don’t change party — they just keep circling.

My grandma’s generation had stability, insurance that worked, and community organizations that actually showed up. Families today have GoFundMes, a pile of fine print, and the state waiting at probate like a repo man.

I know this all sounds like a massive downer, and I hate to be the messenger of bad news. But forewarned is forearmed. What bothers me most is scrolling Reddit or Facebook and seeing family after family blindsided, shocked when the state comes for the house, or when mom’s Social Security check gets swallowed whole by Medicaid. This isn’t new, and it isn’t going away on its own — but at least if you know the rules before you’re in the middle of the crisis, you have a fighting chance to plan, protect what you can, and not get steamrolled by a system designed to take more than it gives.

If you want to get ahead of this, there are a few places to start. Look for an elder law attorney in your state — they know the Medicaid rules and loopholes where you live, and many offer low-cost consultations. Check your state’s Medicaid office website for eligibility numbers, “spend-down” rules, and waiver programs. Nonprofits like the National Council on Aging and Justice in Aging also publish plain-English guides on long-term care planning. None of this makes the system less unfair, but it does give you a fighting chance to protect your family before the vultures circle.

Originally published at https://thesarcasticguru.com on September 28, 2025.