Medicaid Giveth Then Taketh Away

The Las Vegas home of Agnes and Harold Ullmer was a house of happiness and song.

Then, as CBS News Correspondent Vince Gonzales reports, Harold's battle with Alzheimer's took the couple's entire life savings. Agnes, 88, turned to Medicaid, which picked up the bill until he died.

Harold was "a handsome man that I just miss terribly," says his wife. "We had such a good life, and God took him, and here I am."

Then she received a letter that said Nevada's attorney general was going to court to put a lien on their house for more than 90 percent of its value. To daughter Sherry, the message was clear.

"It said, 'our condolences on the loss of your husband. Your house is now ours,'" says Sherry Baer.

The American Association of Retired Persons worries seniors in other cash-strapped states could soon receive similar letters.

"It is a concern that this may spread to other states and cause the same chilling effect on surviving spouses that we saw in Nevada," says Rochelle Bobroff, senior attorney for AARP.

Medicaid is different from Medicare; It's like a loan. When you sign up, you agree to pay it back and Congress has ordered the states to recover that money. In Harold's case, the only asset he had was the house he owned with Agnes.

To Agnes, it sounded like an eviction notice.

"I'm going to be out on the street with nothing after all those years," she says.

She also believed everything in the house belonged to the state. So, when the furnace failed, she lived in the cold, afraid to fix it. She was out of money and thought no bank would give her a home loan because of the lien.

Nevada's attorney general's office says the liens are merely notices that at some future date the state wants its Medicaid money back.

"We do not come to take their home," says Nevada Deputy Attorney General Charles Hilsabeck.

So what exactly does a lien do?

"It secures the state's right to recover at the time the property is sold … after the death of any surviving spouse," says Hilsabeck.

"People are crying in my office because of these types of lawsuits," says attorney James O'Reilly.

O'Reilly sued the state of Nevada for Agnes, arguing that the lien itself amounted to seizing her house.

"Is that what this country is all about - suing old people to put liens on their homes in order to protect an economic interest in that property?" asks O'Reilly.

Last month, Nevada's Supreme Court ruled the liens were legal.

But the court did say surviving spouses must be told they can fight the liens and use the equity in their homes to pay for their final years. That's some relief to Agnes who feels she has her home back, even if there's still a lingering feeling of emptiness.