By Tony Leys
In Iowa, collection agents have recently targeted the estates of at least two individuals with disabilities who lived the majority of their lives in a state institution before passing away. These letters demand substantial sums of money—amounts that reflect the Medicaid expenditures covering their care at the Glenwood Resource Center, which was closed last summer.
Such attempts exemplify a practice known as Medicaid estate recovery. Under federal law, states are mandated to pursue repayment after certain Medicaid recipients pass away, promoting the idea that individuals should utilize personal funds before turning to public assistance. However, reports indicate that some states, including Iowa, adopt particularly aggressive strategies in these collections.
Joy Higgins was taken aback when she received a letter not long after the death of her 41-year-old daughter, Kristin, who passed away in May. The correspondence, on official Iowa Department of Health and Human Services letterhead, began with a message of condolence but then detailed the state’s demand for $4,263,148.67 to recover costs for Kristin’s Medicaid coverage. Her family was given only 30 days to respond.
Living in a state institution largely throughout her life due to severe developmental disabilities, Kristin’s income stemmed solely from a Social Security disability benefit of $1,105 per month, most of which was allocated to her care. Only a mere $50 a month was designated for any personal expenses—something Joy Higgins emphasized: “They knew exactly how much she had.” After Kristin’s passing, her personal account had $2,239.84, which the family used for her funeral costs, leaving nothing for the state to claim. Joy expressed her distress over receiving such a letter, questioning the motive behind sending a significant bill to a grieving family.
The Higgins family isn’t alone in their painful experience. Eric Tomlyn’s family received a similar Medicaid bill exceeding $4.2 million shortly after his death at age 29 in 2020. His mother, Susan Tomlyn, recalled her shock upon reading the letter, which she also associated with a state agency’s correspondence. Following a detailed response about her son’s funeral expenses, she reported no further communication regarding the estate recovery.
Advocates for estate recovery measures argue that the regulations incentivize individuals to utilize their resources prior to enrolling in Medicaid, which exclusively assists those in financial need. In contrast, critics claim that these collections frequently target families with minimal means, while wealthier ones often employ legal measures to evade such claims.
Both families mistakenly believed these letters originated from state officials when, in truth, the letters were generated by private contractors engaged for debt collection aimed at Medicaid expenditures. According to Iowa Department of Health and Human Services spokesperson Alex Murphy, letters are disseminated for every deceased Iowa Medicaid recipient aged 55 and older or who lived in a long-term care facility, specifically requesting details about the deceased’s assets and expenses.
In Iowa, Medicaid collections are managed by the Sumo Group, which is compensated based on the amount collected from estates. Critics are questioning why such significant amounts are pursued from families of those with disabilities, particularly as many cases end without successful collections. In the last fiscal year, nearly two-thirds of estate recovery cases in Iowa were closed without any financial recovery, yet the program generated over $40 million, reflecting a 14% increase from two years prior.
Families can apply for hardship waivers to exempt them from payment if it would endanger their basic needs, and in the previous year, 35 waivers were granted, compared to 20 rejections. Notably, while one report indicated that more than $700 million is collected nationally through estate recoveries, states vary dramatically in their collection rates; Iowa collected over $26 million in the analysis year compared to Hawaii’s mere $31,000.
Organizations such as Justice in Aging have been vocal against Medicaid estate recovery, highlighting instances where families are compelled to liquidate homes—their primary financial asset—to cover these debts. Attorney Eric Carlson noted the distress caused when families encounter estate recovery letters demanding immense sums.
Some states, including Massachusetts, have started to restrict their estate recovery practices, with lawmakers there taking steps to limit their aggressive collection policies. Meanwhile, Rep. Jan Schakowsky from Illinois has attempted to introduce legislation to abolish the federal estate recovery requirement, garnering some support yet facing opposition, particularly from Republican lawmakers.
Schakowsky noted that even though her bill did not reach a vote previously, she remains hopeful about gaining bipartisan support due to the emotional turmoil such debts cause. However, the added complexity of possible Medicaid budget cuts by the current administration may complicate efforts to reform estate recovery practices further.
