Pay Now or Pay Later- The Medicaid Lien

The eligibility rules for nursing home Medicaid are said to be, for the most part, uniform throughout the country. Medicaid is, afterall, a federal program with laws issued by Congress and the federal agency overseeing the program (CMS).
However, states may implement laws that are more generous than the federal system. The federal system allows a Medicaid applicant to keep only $2,000 in assets. One such generous benefit accorded South Carolina residents is the protection given to the family home- .i.e., the “homestead”. Under this rule, one need not sell the “homestead” to qualify for nursing home Medicaid as long as the value of the home is less than $500,000.

This is a very generous rule not allowed in many other states. In New Jersey, for example, as long as all other assets are reduced to $2,000, you will be granted temporary Medicaid and given 6 months to sell the homestead. Once sold, you lose Medicaid and must start paying the private rate for nursing home care. There is no homestead protection in NJ.

The South Carolina law, which allows you to keep the homestead, is a bit deceiving though. SC has a a system for recouping the money it pays for nursing home costs through use the Medicaid lien. So when the State of SC says you don’t have to liquidate the homestead, what the really mean is that you can get an interest free loan for the nursing home costs it pays for you, but, when you die, the State can collect on the loan by placing a lien on the homestead. This lien ensures that the State of SC will be repaid for its costs on your behalf, before the homestead and be sold or passed on to heirs of your estate.