Medicaid estate recovery can charge Ohioans more than medical care provided

Credit: Nick Graham

Credit: Nick Graham

Ohio charges the estates of deceased Medicaid recipients sometimes more than the cost of services they received, a practice not recommended by a national advisory group, a Dayton Daily News investigation found.

For months, the Dayton Daily News has reported how Ohio Medicaid is more aggressive than other states in recouping Medicaid costs from deceased residents and is in the minority of states that puts liens on Medicaid recipients’ properties.

This story looks at how the way Ohio pays for Medicaid can result in people being charged more or less in estate recovery than the cost of the services they received through Medicaid.

There are about 3.3 million people enrolled under Medicaid as of September, and of those enrollees, approximately 2.9 million are under a managed care program, which are funded through “capitation payments.”

Capitation payments are a flat amount, usually per person per month, and in exchange, the managed care entity provides the covered health care services, said Alice Burns, associate director of KFF’s Program on Medicaid and the Uninsured.

“Capitation rates are set usually within a geographic based group and an eligibility group,” Burns said. The capitation rates are set to equal the average of all of those people’s health care spending, Burns said.

There are multiple arguments for doing this. It makes state budgeting easier because it simply pays a flat amount per recipient rather than paying for the specific care each recipient received. Advocates also argue it incentivizes managed care providers to promote preventative care since they keep the difference if they can cut down on expensive emergency treatment. Critics say it incentives managed care providers to cut costs and make care less accessible.

“There have been a ton of studies on what are the effects of managed care, and some of them find good effects, some of them find negative effects,” Burns said. “So the good effects may be it could lower costs. It could encourage preventive care use. It could encourage the coordination of services. On the flip side, the managed care entities have an incentive to save money, and so there have been other studies saying it makes it harder for people to access care, people have worse inferior outcomes and so forth.”

Capitation and estate recovery

The value of capitation aside, the outcome is the amount the state pays per Medicaid recipient is based on the capitation rate, not what that person received in services.

Federally, the state is only required to seek estate recovery for those on Medicaid who are 55 or older and who are permanently institutionalized. Ohio goes further, and under the state’s administrative code, requires the Ohio attorney general to seek recovery from the estates of:

(1) A permanently institutionalized individual of any age, in the amount of all Medicaid benefits correctly paid including managed care capitation payments; or,

(2) An individual 55 years of age or older who is not permanently institutionalized, in the amount of all Medicaid benefits correctly paid including managed care capitation payments (with some exceptions for benefits under the Medicare premium assistance programs) after the individual turned 55.

Of the 3.3 million on Medicaid, about 560,000 of them are 55 and older. The state also pays Medicare premiums on behalf of some people who are also enrolled in Medicare, and those premiums would not be subject to estate recovery.

MACPAC recommendations

In its 2021 report on estate recovery, Medicaid and CHIP Payment and Access Commission (MACPAC), a group that advises Congress, recommends that when the estates of applicable Medicaid enrollees get charged for capitation rates, instead they should get charged for what services were actually utilized.

“The current situation is, if someone is enrolled in managed care, estate recovery would be based on what the state paid for the capitation payments and not for the actual services they used,” Burns said. “One thing about Ohio is that they recover some optional services. States are all required to apply estate recovery to nursing facility care. Ohio chooses to apply it to other services as well.”

For those on a Medicaid managed care plan, if they are 55 or older, their estates will get charged back the managed care capitation payments the state funded after they die. It is only for the capitation payments made for them after they turned 55 years old, but even if the capitation payments are more than the actual services the individuals utilized, their estates will still be billed for the capitation payments and not the specific services.

On the reverse, if someone is using more services that go beyond what that capitation payment is, their estate would not be getting charged for that extra amount.

MACPAC’s recommendation is “to pursue estate recovery based on the cost of care when the cost of services used by a beneficiary was less than the capitation payment made to a managed care plan.” The rationale is that this method would “avoid circumstances in which individuals’ estates are pursued for more than the cost of care that was provided to them,” the group says.

Recovery debate

The Medicaid enrollees this would apply to are also likely unaware of what the capitation payments are that are being made on their behalf.

“Even if a Medicaid beneficiary over age 55 receives no care from their managed care plan, under current law, the state still retains the right to pursue the beneficiary’s estate for the entire cost of all capitation payments paid to the plan by the state,” the group says.

This differs from other federal programs for which no funds are recovered from the enrollees’ estates after they die.

State officials counter that they are being responsible stewards of taxpayer money by aggressively recouping Medicaid costs. The total recouped through estate recovery is less than 1% of the total spent in the program.

Ohio Medicaid’s estate recovery program also already has authorization from the Centers for Medicare and Medicaid Services (CMS) to purse repayment for capitation, the state says, and changing it would require “significant procedural shifts for the state” in order to pursue the cost of care instead.

“For the department to establish estate recovery reimbursements on the cost of care vs. capitation payments would involve revisions to Ohio’s Medicaid state plan that is subject to CMS approval, as well as significant procedural shifts for the state, changes to information systems, and actuarial involvement for each settlement. The state of Ohio is not considering these options at this time,” said Lisa Lawless, communications director for the Ohio Department of Medicaid.

Advocates for the elderly and poor say recovery is not evenly distributed.

“The burden of estate claims falls disproportionately on economically oppressed families and communities of color, preventing families from building wealth through home ownership, which has been historically denied to communities of color through discriminatory public policy,” says a 2021 issue brief from the national nonprofit Justice in Aging.

About the Author