The surprising truth about a Texas program that ‘claws back’ wealth from the families of those on Medicaid

For two years, I’ve studied Medicaid precisely because it is challenging to understand. Each state operates its programs differently and most states do not use Medicaid in the title. Washington state has Apple Care, California has Medi-Cal, Kansas has KanCare. These names make it possible for someone to be enrolled in a Medicaid program and not even know it. Depending on the source, I make sure that the individual I’m speaking with knows the difference between Medicaid and Medicare — which is also confusing because the programs do share some overlapping features. 

In Texas, roughly 4.5 million adults and children were in enrolled in Medicaid in 2020. Of all states, Texas has disenrolled the highest number of people, leaving 2.5 million Texans without insurance as of August 2024. Texas not only continues to have the highest number of uninsured people but the state refuses to expand Medicaid, leaving roughly $10 billion dollars of federal money on the table each year.

When I started speaking to sources, I heard that people were frustrated and overwhelmed by the process of applying for Medicaid, but I also heard that some were afraid to sign up at all, because they didn’t want the state to take their home. I was shocked that this outcome was even possible. 

I pivoted from my initial project when I learned about the Medicaid Estate Recovery Program (MERP), which is a state and federal program that can “claw back” funds from Medicaid recipients who received long-term care after they’ve died. To receive Medicaid an individual cannot have more than $2,000 in the bank. They can own one car and their home. Because homes are the most valuable asset that can be passed down to the next generation, it was immediately apparent that this federal claw-back law was not only disrupting generational wealth but perpetuating poverty.  

In 2024, Rep. Janice Schakowsky (D-IL) introduced a bill, the Stop Unfair Medicaid Recoveries Act, which would repeal a law that, in many states, puts liens on homes to recoup the cost of long-term care. This care includes nursing home care, in-home care, hospitalizations and prescription drug costs. 

As Jennifer Lav, a senior attorney at the nonprofit National Law Health Program, put it, “MERP is the only example of a public benefit that needs to be paid back.”

The Medicaid Estate Recovery Program was mandated by the federal government in 1993, and the law was deeply unpopular in Texas, which didn’t implement a recovery program until 2005. Texas is a non-lien state, which means that the state cannot put liens on peoples’ homes. What the state can do is stake a claim to the funds from the sale of a home after it goes through the probate process, when assets are distributed to family members. Texas also has legal protections in place that allow a surviving spouse, an unmarried adult child, or a child is blind or disabled to remain in the home, thus nullifying the claim. 

Other states have far more aggressive MERP policies. In Georgia, for instance, the state can wait for the surviving spouse to die and then put a lien on the home. In Missouri, the state can place pre-death liens on homes for individuals who are receiving long-term nursing home care. 

The worse the law, the harder it is to understand. For me, that meant my project for the 2023 National Fellowship would take time — more time than I initially anticipated. I knew that if I didn’t pull the curtain back as far as possible, I wouldn’t succeed on expanding on the great reporting other journalists had done. 

While understanding MERP was my first step, understanding how it operates in Texas is where my deeper research began. After hearing from a couple experts (not directly impacted by MERP) that it wasn’t that bad in Texas compared to other states, I knew that I had to start making a lot of records requests. 

Open records requests revealed something that I didn’t expect to find. I assumed that state health agencies handled state health programs. I was wrong. 

In Texas, MERP is overseen by Texas Health and Human Services, but it is not run by HHS. Texas contracts with a third-party vendor, Health Management Systems (HMS), to handle MERP claims from start to finish. This means that HMS, a private company that is a subsidiary of Gainwell Technologies, oversees the fate of families. In the eyes of HMS, Texas is the customer. In exchange for processing as many MERP claims as possible, HMS earns 11.5% to 12.5% in contingency fees, according to their contract with the state.  

This came as a surprise because Texas Health and Human Services told me that funds collected from MERP went back into Medicaid programs in Texas — specifically home health services. Ironically home health is a category that MERP can reclaim funds for. The situation is worsened by the fact that private companies such as Gainwell Technologies make money from Medicaid recoveries; they are under no obligation to provide families with information over the phone about how they can keep their homes because that is considered “legal advice” and their main goal is simply to collect payments. While Gainwell Technologies (still using the name HMS) sends out information about possible ways heirs can stop a MERP claim through exemptions or hardship waivers, the paperwork is not written in a way that’s easy to understand.

One of my core reporting motivations was to include information about how families could protect themselves from MERP claims. In the state of Texas, there are two deeds — either a Lady Bird Deed or a Transfer on Death Deed — that allow a home to be transferred to family members directly without going through probate, which is how MERP is able to make a claim on a home in Texas. Since many people don’t have these deeds in place, because education about long-term care planning isn’t available or accessible to all, I needed to make clear that heirs knew they could still qualify through an exemption or a hardship waiver. And perhaps most important, if there was no money left in the estate, family members do not have to pay the claim out of their own pockets. 

No one should be afraid to apply for public health insurance because they’ve heard that the government will take their home. While I was able to go pretty deep with my investigation, there’s still more work to be done. When there are a lot of layers, you’ve got to be prepared to dig.