Can Medicaid come after heirs/successors? If she has assets (for
instance she owns her house and her care completely) can they come
after those?
Medicaid is frequently described as a grant program, but in essence it is more of a guaranteed loan.
Also, Medicaid is actually a collection of programs. There is a program for health care for adult low income non-elderly people that doesn't have an asset test or a prohibition on giving gifts or an estate recovery program that provides more ore less what people age 65+ get from Medicare. There is a Medicaid program call CHIP that is basically the same but with more lenient income cutoffs for children. There is a Medicare program for adults with serious disabilities that has both an income and an asset test. And, finally (at least for these purposes, I'm sure I've left out a few less common Medicaid programs), there is the Medicaid nursing home program which also covers some kinds of long term care (many states have catchy state specific names for each of these programs, so don't get confused by that), which is what a 75 year old parent would be applying for in a case like this one.
Medicaid keeps track of every dime spent on a beneficiary.
Medicaid has a lien against proceeds of personal injury settlements and judgments for expenses it incurs as a result of third-party tortious conduct.
In the nursing home and disability programs, Medicaid lien against real estate owned by a beneficiary (typically only a personal residence, as other real estate is disqualifying).
Also, in the disability and nursing home programs Medicaid, under what is called the Medicaid estate recovery system, has a claim against the estate of a Medicaid beneficiary at death for the amount expended for that beneficiary (after certain probate exemptions for minor children, surviving spouses and sometimes a homestead of a survivor who lives in the beneficiary's residence at the time the beneficiary dies and inherits the residence, although New York State is quite skimpy on exemptions compared to many Southern and Western states).
The heirs and descendants of a Medicaid beneficiary are not personally responsible for any of the amounts incurred by Medicaid for their parent. But, the Medicaid claim in the estate has priority over inheritances to the extent of the assets of the deceased Medicaid beneficiary, subject only to some narrow exceptions for minor children and surviving spouses.
This regime is onerous. I call it "the poor man's estate tax."
This regime is one of the reason that many middle class and upper middle class people in their 40s and 50s take out long term care insurance (Medicaid is the only real option for the poor and working class who have few assets to "spend down" in order to qualify, and the rich can just write a check to pay for their care from their investments), so that they can get the care that would otherwise be provided by Medicaid while leaving something to their heirs. There are also Medicaid partnership long term care insurance policies that preserve a fixed dollar amount of assets for the next generation while requiring the rest to be "spent down" which have somewhat lower premiums.
At age 75, however, the premiums for long term care insurance would be prohibitively expensive. It is too late to do that kind of planing at that age in most cases (in rare cases it makes sense to do so anyway for tax purposes).
if anything I have said about the above scenario is grossly misled or
misinformed, please begin by correcting me!
This is a rather complex and technical subject. While you have a lot of the general gist of the concepts more or less right, you are inaccurate in almost all of the specifics.
Your understanding of how a special needs trust works has many specific technical errors (e.g. a true special needs trust, if indeed it is one, can only make distributions for things that are not in the nature of health care and support expenses like rent).
Also, you are confounding and mish-mashing the rules for a special needs trust for excess assets and a Medicaid eligibility trust for excess income, which don't really work quite the same way.
There is also an important distinction between self-settled Medicaid eligibility trusts created from the Medicaid beneficiary's assets (in which Medicaid is the residuary beneficiary) and special needs trusts created from a third-party's assets in a way that doesn't prevent the beneficiary of the special needs trust from qualifying for Medicaid (which doesn't have Medicaid as a residuary beneficiary).
I'm not going to try to restate all of the technical details in a short answer format like this one. I have a printed out copy of the relevant state and federal regulations and statues in my office and I can barely close the one inch ring binder that I keep them in. There is also a trust approval process in connection with the application for Medicaid coverage.
Setting up a Medicaid trust is not something that anyone who is not a lawyer with experience working in elder law or trust and estate should even consider attempting to do. There are at least four different kinds of basic trust forms that apply in different circumstances before customizing them to a particular client. I recently did one in connection with a personal injury case involving an already disabled Medicaid beneficiary. It took some significant research to make sure it was up to date and a fair amount of time to draft, even though this is an area where I practice regularly.
Assets in a first-party Medicaid eligibility trust (i.e. a trust funded with the Medicaid beneficiary's own assets) of any kind are, at the death of the beneficiary, used to repay amounts spend by Medicaid before any amounts in it can be distributed for any other purpose. But Medicaid does not have access to the trust's assets before then.
Also, in addition to the income requirement for Medicaid eligibility (which is much higher than $800 a month), there is an asset test which is $2,000 of what amounts to cash on hand at one time, although there is a long list of specific exempt assets. New York State is more strict than average in this regard. Most notably, being a beneficiary of a third-party created trust that has a right, but not an obligation to make distributions to a Medicaid beneficiary for something other than the beneficiary's "special needs" that also has other beneficiaries is Medicaid disqualifying in New York State, but not in many other states.
Furthermore, there is a prohibition on making gifts to anyone in the five year period before applying to eligibility (or anytime after one is on the program) which if violated, disqualifies the beneficiary from receiving benefits for a time period based basically on the amount of the gift and the average cost of care in the one's state. You can't just give away your assets during life to qualify for Medicaid.
This option to enroll her in a trust is very appealing because it
would get her Medicaid eligible, and she really needs to be on
Medicaid. But its a non-starter if Medicaid can come after
heirs/successors to recuperate the remainder of the bill.
As a practical matter, for someone in the "income trap" where you can't afford the care you need, but have too much income to qualify for Medicaid, there really isn't any choice.
If you don't get Medicaid coverage, you die quickly and in an ugly manner without qualified home health care or nursing home care.
The only other option if for the kids to personally pay for the care that their parent can't afford, so that Medicaid doesn't do so and get a claim against the estate. They can try to provide home health care themselves, but most families don't have children who are willing and able to do so in a minimally competent manner.
This may be offensive, but calling it a "non-starter" is basically consigning your mother to a quick and ugly death, mitigated only by the help that children can provide personally.
