Add this to the litany of scary but improbable things people are hearing could happen because of the new federal health-care law: After you die, the state could come after your house.
The concern arises from a long-standing but little-known aspect of Medicaid, the state-federal program that provides health coverage to millions of low-income Americans. In certain cases, a state can recoup its medical costs by putting a claim on a deceased person’s assets.
This is not an issue for people buying private coverage on online marketplaces. And experts say it is unlikely that the millions of people in more than two dozen states becoming eligible for Medicaid under the program’s expansion will be affected by this rule. But the fear that the government could one day seize their homes is deterring some people from signing up.
"I was leaning toward not getting Medicaid, because there is somewhat of a stigma," said Steve Olin, 60, a former copy editor from Eureka, Ill. "Then, when I heard about the estate recovery, I was really sure."
It is the latest anxiety to spring from the health-care law. After years of speculation about the sprawling legislation, which affects everything from the way people see their doctors to their finances, is now a reality - and in some cases is causing fear.
Some worries stem from the law’s unintended consequences, such as last year’s cancellations of health plans by insurers whose old policies did not meet the new standards. The flare-up shook public confidence in the administration’s forthrightness about the impact of the measure.
Opponents of the law have held up its flaws, and have embraced the Medicaid issue as well. "State can seize your assets to pay for care after you’re forced into Medicaid by Obamacare," warned a writer on the conservative site HotAir.com. Another conservative blog, RedState.com, warned of a "Medicaid asset-seizure bonanza."
Asset recovery predates the health-care law, but the legislation makes it apply to a larger pool of people.
About half of the states took an option to expand Medicaid to anyone who makes up to 138 percent of the poverty level, or $15,900 for an individual. That includes childless adults and people with significant assets besides a home, who previously had been excluded in most states.
In 1993, concerned about rising Medicaid costs, Congress made it mandatory for states to try to recover money from the estates of people who used Medicaid for long-term care, which can cost taxpayers hundreds of thousands of dollars per person. They included exceptions in cases in which there is a surviving spouse, a minor child and other situations.
Congress also gave states the option to go further - to target the estates of all Medicaid recipients for any benefits they received after age 55, including routine medical care. Many states took that route, including Oregon, which from July 2011 to June 2013 recovered $41 million from about 8,900 people.
The argument had been, "If you’re receiving a public benefit and the state is trying to support you, you should give back if you are able," said Judy Mohr Peterson, Oregon’s Medicaid director.
But after the Affordable Care Act made it mandatory for most people to carry health insurance, Oregon’s Medicaid office decided the approach needed to be changed because asset recovery was scaring people into not signing up for coverage. So new rules took effect last year to make sure that those signing up for the Medicaid expansion would not be subject to asset recovery.
"We needed to take another look at heath insurance coverage from the point of view of it not being a public benefit that’s voluntary," Mohr Peterson said.
Other states have taken a much more lax approach to asset recovery in the past, hesitant to target poor people whose only valuable asset might be the farm that has been in their family for generations. Experts say there are no good, recent national data on how asset recovery is applied, with states differing drastically and working on a case-by-case basis.
It wouldn’t make sense for a state to pursue a claim on the property of a new Medicaid recipient under the health-care law, said Matt Salo, executive director of the National Association of Medicaid Directors.
"There’s no way any state is going to see it as cost-effective or politically sensible to do that," he said. "It’s a scare tactic."
Still, when it comes to something as central to middle-class identity as a home and what people can pass on to their heirs, it is perhaps not surprising that some people are not taking any chances.
A 54-year-old former lawyer from New York City, who spoke on the condition of anonymity because she will be looking for a job soon, said that despite the prospect of free insurance, she did not enroll in Medicaid because she owns an $850,000 apartment she hopes to bequeath to a family member.
"I don’t want my assets to be raided after my death," she said. "The idea that someone can come after my house after I die - I just can’t do it."
Advocates are pressing the Obama administration to specify that new Medicaid recipients nationally should not be subject to asset recovery.
Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services, said, "We recognize 1/8the 3/8 importance of this issue and will provide states with additional guidance in this area soon."
Many of the new Medicaid recipients are in a similar situation as Olin and the former lawyer - people in their 50s and 60s who have homes but do not have jobs, and are living off meager withdrawals from their savings. Medicaid was supposed to serve as a health insurance bridge for these people until they turned 65 and could receive Medicare.
Part of the issue is that people who qualify for expanded Medicaid do not have the option of choosing instead to get a tax subsidy to buy private coverage on the marketplaces. In the states expanding Medicaid, the subsidies are available only to those who make more than the Medicaid income cutoff.
That means that someone just under that threshold could be subject to asset recovery, while someone who earns slightly more - up to 400 percent of the poverty level, or $45,960 for an individual - could get a federal subsidy to buy private coverage on the marketplaces, with no strings attached.
Other options are to buy insurance without a subsidy outside the marketplaces, or to be uninsured. But Elaine Ryan, a vice president at AARP, a senior citizen advocacy group, said it may be premature to do something so drastic. She said her group, which supports the Affordable Care Act, is watching the issue and is waiting for federal clarification before offering advice on how to proceed.
"I would inquire about the application of 1/8Medicaid asset recovery 3/8, but I wouldn’t succumb to the fear of rules you don’t understand as a reason you wouldn’t become covered under Medicaid," she said.