An unexpected after-death side effect of Obamacare

An old law may create a headache for some of the 11 million Americans who gained health coverage through the Affordable Care Act's (ACA) Medicaid expansion.

The estate recovery law allows states to recover Medicaid costs for patients who are older than 55 when they die, although some limits apply, such as exceptions for the disabled and hardship exemptions for survivors. The law is taking some newly enrolled Medicaid patients by surprise, but it's also prompting a few states to push back on the practice, according to The Wall Street Journal.

While the law has been around since 1993, it may be little known to many Medicaid recipients, who are nonelderly adults with incomes at or below 138 percent of the federal poverty level. That works out to about $16,245 for an individual in 2015. Even though Medicaid is thought of as a program to provide free health insurance to poor Americans, the estate recovery law was designed to shore up the program's finances by getting back some of what Medicaid spends on long-term care.

Some enrollees weren't aware of the program when they signed up, while others were given wrong information, PBS' NewsHour reported last month.

One couple, Ruth and Rod Morgan, told the news magazine they had heard about the estate recovery act and asked about it when they signed up in California's Medicaid program, but they were told that it wasn't the case.

"And then weeks later, we got a letter in the mail saying, congratulations, congratulations! You qualified for Medi-Cal. And then on the back page, this little paragraph says that you are subject to estate recovery, and do not contact your social worker about this," Ruth Morgan told NewsHour.

Critics say the law hits low-income families and families of color, the very people who can't afford to give up assets to the state. In fiscal 2011, the 40 states that had the law to recover the costs of all Medicaid services after recipients' deaths collected $498 million, The Journal noted, citing data from the Health & Human Services Department.

In one case the newspaper profiled, Stephanie Graham said her mother joined the Medicaid rolls in 2014 because the ACA required coverage or else they would pay a fine. Her mother died soon afterwards, and Graham learned that the state can collect on the costs of her treatment by coming after her assets, including her mother's house, where Graham now lives.

Because of concerns about the law, the Centers for Medicare and Medicaid services said last year that it would "thoroughly explore options" to limit the practice.

In the meantime, some states are having second thoughts. California's legislature is considering a bill to limit how much the state could recoup from Medicaid recipients' estates. For now, however, California has a piece of advice for Medicaid enrollees who want to avoid having their estates tapped after their deaths: "The best way to avoid an estate claim is to leave nothing in the estate."