Medicaid, Estate Recovery and Your Parent's House in Oklahoma

Your mother is in a nursing home and the bills are being paid by Medicaid. Somebody at a family gathering says the state will take the house. Somebody else says sell it now before they can. Both pieces of advice are wrong, and the second one can cost your mother her care.

This article sets out what Oklahoma actually recovers and when, which houses are protected, what an undue hardship waiver is, and why the timing of any sale matters more than almost anything else in this situation.

What Oklahoma actually recovers

The Omnibus Budget Reconciliation Act of 1993 requires every state to seek recovery from the estates of people who received certain Medicaid-funded care. Oklahoma's rules sit in the administrative code at 317:35-19-4 and 317:35-9-15, and the recovering agency is the Oklahoma Health Care Authority.

Two conditions define who is in scope. The care must have been received on or after 1 July 1994, and the person must have been 55 or older when they received it. Care given before 55 is not recovered.

The rule lists what can be recovered: nursing facility services, home and community based services, related hospital services, prescription drug services, physician services and transportation services. It is not everything Medicaid ever paid for.

Recovery happens against the estate after death. It is not the state taking the house while somebody is living in it.

The lien, and when it cannot attach

There is a second mechanism, and it is the one that frightens families. The Authority may file a lien against the real property of a member who is an inpatient in a nursing facility or similar institution, and only after notice and an opportunity for a hearing. It is available where the person cannot reasonably be expected to return home.

A lien does not attach where any of these people lives in the home:

• A surviving spouse residing in the home
• A child who is under 21, or who is blind or permanently and totally disabled
• A sibling with an equity interest in the home who lived there for at least a year before the admission

And one fact that families are rarely told: if the person is discharged and returns home, the lien ceases to exist. Somebody going into rehabilitation with a realistic prospect of coming home is in a different position from somebody who will not.

Undue hardship, defined narrowly

A waiver exists, and it is worth applying for where it fits, but read what the rule actually says before pinning hopes on it.

Undue hardship exists where recovery would deprive the person, or family members who are financially dependent on them, of food, clothing, shelter or other necessities of life. The rule then says plainly that hardship does not exist merely because the family is inconvenienced, or because their lifestyle is restricted by the lien or the recovery.

That is a narrow test. It is aimed at a dependent who would lose their home, not at heirs who would rather inherit more. Decisions are made at state level, the applicant receives written notice either way, and there is an appeal route if it is refused.

Why the timing of a sale decides everything

This is the part that goes wrong in real families, so it is worth being blunt.

While they are alive and receiving Medicaid, the home may be an exempt asset. Selling it turns an exempt house into countable money sitting in a bank account, which can end eligibility until that money is spent. Families do this believing they are protecting the house and instead they stop the care being paid for.

After death, the position is entirely different. The estate is settled, the Authority makes its claim like other creditors, and a sale at that point is an ordinary estate sale. Our page on the Oklahoma probate timeline covers how long that takes, and our article on summary administration covers the faster route for smaller estates.

Transfers made to move the house out of reach have their own consequences, because there is a look-back period on transfers when eligibility is assessed. Giving the house to a child at the wrong moment can create a penalty period during which Medicaid pays nothing at all. This is precisely the territory where an attorney earns their fee and where advice from a relative costs money.

What to do, in order

1. Speak to an Oklahoma elder law or Medicaid planning attorney before selling, transferring or signing anything. If cost is the barrier, Legal Aid Services of Oklahoma helps people who qualify, free
2. Find out whether anyone protected lives in the house. A spouse, a child under 21 or a disabled child, a sibling with an equity interest. It changes the answer
3. Ask whether returning home is realistic. If it is, the lien position is different and so is the whole plan
4. Keep the house insured and maintained. An empty house deteriorates and insurers restrict cover on unoccupied property, which our article on vacant property insurance covers
5. Keep the property taxes current, because a tax problem stacked on top of this one is much harder to unwind. Our page on Tulsa County property tax dates has the deadlines
6. Ask about an undue hardship waiver if a financially dependent family member would genuinely lose their home

The Long-Term Care Ombudsman programme and the Area Agency on Aging both provide free advice to families in this position, and neither is selling you anything. Use them before you use us.

Where we come in

Not while your parent is alive and on Medicaid. There is no version of that where selling to us is the right first move, and if you ring us in that situation we will tell you to speak to an attorney and put the phone down. We would rather lose the deal than be the reason somebody's care stopped being funded.

Where we are useful is afterwards, and only in a narrow case. The estate has a house that has stood empty through a long illness, it needs work nobody in the family can fund or manage, the heirs are scattered, and the Authority's claim plus the costs of holding it are eating whatever is left every month.

Even then, run both routes. If the house is sound and the family has time, an ordinary sale will net the estate more, and our page comparing a cash offer against listing shows the arithmetic including commission. Our page on selling a parent's house covers the practical side, and our article on the inherited house nobody wants deals with the family part of it.

The short version

• Oklahoma recovers against the estate for care received at 55 or older, on or after 1 July 1994, for the service types listed in the rule
• A lien on the property requires notice and an opportunity for a hearing, and it cannot attach where a spouse, a child under 21 or a disabled child, or a qualifying sibling lives in the home
• If the person returns home, the lien ceases
• Undue hardship is a narrow test about necessities of life, not about inheriting less
• Do not sell while they are alive and on Medicaid without advice. An exempt house becomes countable cash and eligibility can end
• Transfers have a look-back period and can create a penalty during which nothing is paid
• Free help exists through Legal Aid, the Long-Term Care Ombudsman and the Area Agency on Aging. Use it first