What is my mother's liability to Medicare if she enters a nursing home?

Ann marie asked...

My parents' house was previously paid off. Since then my father died in 2004 and our mother took out an equity loan on her house to help pay her in-home care expenses and maintenance to her home. We foresee our mother entering a nursing home within the next year. I understand from reading questions and answers on this website that if our mother passes away while in a nursing home that the sale of her home would have to pay back Medicare. My question is if she has a $50,000 home equity loan and her house is worth about $130,000 (in today's market), how much obligation does her estate have to pay back to Medicare? Would it be determined at the $80,000 (if it sells for $130,000) or is it at the total sale price of $130,000?

Expert Answer

First, it seems that you're confusing Medicare with Medicaid in your question. It's Medicaid (not Medicare) that would cover her nursing home bills and could seek repayment out of the value of her house after she dies. But if the loan was already made and secured by the house's equity before your mother goes on Medicaid, then the loan must be repaid out of the value of the house before Medicaid is entitled to recoup the payments it made to the nursing home on behalf of your mother. So, the most the state could be entitled to receive is $80,000. The exact amount it would be entitled to would depend on how much Medicaid had paid the nursing home for your mother's care. If her Medicaid-paid nursing home bills exceed $80,000, Medicaid cannot go against assets of other family members. It is limited to the equity in her house, after her existing loan and final expenses are paid.