Alabama's Medicaid Estate Recovery Program

Medicaid is a joint federal and state program that helps pay medical costs for people who can't afford them. It's fairly common for people to apply for Medicaid benefits when they need long-term care services (like nursing home care), whether because of age or disability.

Medicaid is a costly program, and federal law requires every state to have what's called a "Medicaid Estate Recovery Program." So, if you receive Medicaid benefits in Alabama, your family might need to repay the state after your death for certain services Medicaid paid for during your lifetime.

When you become eligible for Medicaid, the state of Alabama must send you information about the estate recovery program. Understanding the basics of the program and letting family members know what to expect can help avoid unpleasant surprises after your death.

Will Alabama Seek Reimbursement From My Estate?

The assets you own at your death make up your "estate." The state will seek reimbursement from your estate for the benefits you received through Medicaid:

• after the age of 55 (except for some Medicare cost-sharing), or
• at any age during the time you lived in a nursing home, an intermediate care facility for the intellectually disabled, or other long-term care institution. (Ala. Admin. Code Rule 560-X-33-.05(1).)

Alabama will try to recover these Medicaid benefits even if you had a special needs trust. (A special needs trust holds assets for someone to preserve their financial eligibility for Supplemental Security Income (SSI) or other government assistance.)

Which Medicaid Expenses Must My Estate Repay?

Federal law requires Alabama to seek repayment for the cost of all long-term care services paid for by Medicaid, including related drug and hospital benefits. The state must also seek recovery for Medicare cost-sharing payments that are related to long-term care services. (42 U.S.C. § 1396p(b)(1).)

The law allows each state to choose whether to seek reimbursement for other types of Medicaid payments. Alabama tries to recover payment for all Medicaid services allowed under federal law, not just long-term care benefits.

What Assets Will Alabama Go After for Medicaid Recovery?

Under the Alabama Estate Recovery Program, assets subject to recovery can include any of the following:

• homes
• land
• bank accounts
• vehicles
• cash
• household goods, and
• other assets.

Repayment is made from the assets you owned at your death. If there isn't enough money in your estate to cover repayment, the state can claim the available assets, but nothing more. Your family members won't have to repay Medicaid from their own pockets.

Can the State Take My House for Medicaid During My Lifetime?

No. But if you become permanently institutionalized, the state can place a lien on your house at the time your Medicaid benefits begin. (A lien is a legal claim against a piece of property that ensures a creditor—in this case, Medicaid—eventually gets paid.) When your house is sold, whether before or after your death, Medicaid will collect what you owe from the sale proceeds. (42 CFR § 433.36(g).)

But federal law bars the state from placing a lien on your house if certain close relatives live there, including:

• your spouse
• your minor child(ren)
• your permanently disabled or blind adult child, or
• a sibling with an ownership interest in the home who lived there with you for at least a year before you entered the care facility.

For more information about Medicaid liens, see the Alabama Medicaid Agency's Property Liens information page or contact the agency using the information at the end of this article.

Could My Estate Be Exempt From Alabama's Medicaid Estate Recovery Program?

In Alabama, there's no permanent exemption from Medicaid estate recovery. But the Alabama Medicaid Agency will delay seeking repayment if you're survived by:

• your spouse, until your spouse dies
• a dependent child under the age of 21, until that child turns 21, or
• a blind or disabled child of any age, until that child dies.

Once your spouse dies and you have no children under 21 or who are blind or disabled, the state will try to recover funds from your estate. (Ala. Admin. Code r. 560-X-33-.05(2)(a)-(b).)

Medicaid reimbursement can become complicated when delayed recovery is involved, especially if the Medicaid recipient's children are very young or a disabled child is likely to live for a long time. If one of these situations applies to you and you have questions, contact the Alabama Medicaid Agency.

Will Alabama Excuse My Estate From Recovery If It Would Cause Hardship for My Family?

Alabama won't recover anything from your estate for Medicaid if repayment would create "undue hardship" for your family. The Alabama Medicaid Recovery Agency will sometimes allow a hardship exemption (called a "waiver") if the estate property is an income-producing asset, like a family farm or other family business, and both of the following are true:

• the property is the sole income-producing asset of one or more of your heirs, and
• the income produced is equal to or less than 141% of the federal poverty level (FPL). (In 2025, the FPL is $15,650 per year for a single person or $32,150 for a family of four, and 141% of the FPL is $22,066 per year for a single person and $45,331 per year for a family of four).

But Alabama won't grant an undue hardship waiver in the following circumstances:

• you became eligible for Medicaid by disregarding assets because of payments or benefits from a long-term care insurance policy, or
• Medicaid finds you created the hardship through estate planning.

If the state approves the waiver application, only that inheritor's portion of the repayment will be forgiven. (Ala. Admin. Code r. 560-X-33-.05(2)(c).)

Medicaid must inform the person in charge of your estate that someone who inherits from you can apply for a hardship waiver under the conditions above. The inheritor then has 30 days to apply for a waiver.

Who's Responsible for Notifying the State and Repaying the Medicaid I Received?

The person in charge of wrapping up your estate (your spouse or the executor of your estate) should contact the Alabama Medicaid Agency within 30 days of your death. To make the process easier, you can give the person you expect to handle your final affairs a copy of the notice you receive from Medicaid when your benefits begin. (Remember, federal law requires Alabama to provide you with a notice explaining the estate recovery program.)

After the Medicaid office receives notice of your death, it will contact your estate representative and explain how to proceed with the repayment process. Your representative can contact the Medicaid office with any questions using the information below.

The person in charge of your estate shouldn't distribute money or other assets from your estate to your heirs until after making any required repayments to Medicaid. A representative who pays heirs first and later finds that there aren't enough assets left to pay back Medicaid could be personally responsible for the bill.

Where Can I Learn More About Medicaid Estate Recovery in Alabama?

Get more information about Alabama's Medicaid estate recovery program by contacting the state Medicaid recovery office by:

• calling (334) 242-5727, or
• sending email to [email protected].

You can find links to Alabama's Medicaid estate recovery rules online at the agency's estate recovery page.