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PERRY, Iowa 鈥� Fran Ruhl鈥檚 family received a startling letter from the Iowa Department of Human Services four weeks after she died in January 2022.

鈥淒ear FAMILY OF FRANCES RUHL,鈥� the letter began. 鈥淲e have been informed of the death of the above person, and we wish to express our sincere condolences.鈥�

The letter got right to the point: Iowa鈥檚 Medicaid program had spent $226,611.35 for Ruhl鈥檚 health care, and the government was entitled to recoup that money from her estate, including nearly any assets she owned or had a share in. If a spouse or disabled child survived Ruhl, the collection could be delayed until after their death, but the money would still be owed.

The notice said the family had 30 days to respond.

鈥淚 said, 鈥榃hat is this letter for? What is this?鈥欌�� said Ruhl鈥檚 daughter, Jen Coghlan.

It seemed bogus, but it was real. Federal law requires all states to have 鈥渆state recovery programs,鈥� which seek reimbursements for spending under Medicaid, the joint federal and state health insurance program for people with low incomes or disabilities. The recovery efforts collect more than $700 million a year, according to a from the Medicaid and CHIP Payment and Access Commission, or MACPAC, an agency that advises Congress.

States have leeway to decide whom to bill and what type of assets to target. Some states collect very little. For example, Hawaii鈥檚 Medicaid estate recovery program collected just $31,000 in 2019, according to the federal report.

Iowa, whose population is about twice Hawaii鈥檚, recovered more than $26 million that year, the report said.

Iowa uses a private contractor to recoup money spent on Medicaid coverage for any participant who was 55 or older or was a resident of a long-term care facility when they died. Even if an Iowan used few health services, the government can bill their estate for what Medicaid spent on premiums for coverage from private insurers known as managed-care organizations.

Supporters say the clawback efforts help ensure people with significant wealth don鈥檛 take advantage of Medicaid, a program that spends more than $700 billion a year nationally.

Critics say families with resources, including lawyers, often find ways to shield their assets years ahead of time 鈥� leaving other families to bear the brunt of estate recoveries. For many, the family home is the most valuable asset, and heirs wind up selling it to settle the Medicaid bill.

For the Ruhl family, that would be an 832-square-foot, steel-sided house that Fran Ruhl and her husband, Henry, bought in 1964. It鈥檚 in a modest neighborhood in Perry, a central Iowa town of 8,000 people. The county tax assessor estimates it鈥檚 worth $81,470.

Henry Ruhl, 83, wanted to leave the house to Coghlan, but since his wife was a joint owner, the Medicaid recovery program could claim half the value after his death.

Fran Ruhl, a retired child care worker, was diagnosed with Lewy body dementia, a debilitating brain disorder. Instead of placing her in a nursing home, the family cared for her at home. A case manager from the Area Agency on Aging suggested in 2014 they look into the state鈥檚 鈥淓lderly Waiver鈥� program to help pay expenses that weren鈥檛 covered by Medicare and Tricare, the military insurance Henry Ruhl earned during his Iowa National Guard career.

Coghlan still has paperwork the family filled out. The form said the application was for people who wanted to get 鈥淭itle 19 or Medicaid,鈥� but then listed 鈥渙ther programs within the Medical Assistance Program,鈥� including Elderly Waiver, which the form explained 鈥渉elps keep people at home and not in a nursing home.鈥�

Coghlan said the family didn鈥檛 realize the program was an offshoot of Medicaid, and the paperwork in her file did not clearly explain the government might seek reimbursement for properly paid benefits.

Some of the Medicaid money went to Coghlan for helping care for her mother. She paid income taxes on those wages, and she said she likely would have declined to accept the money if she鈥檇 known the government would try to scoop it back after her mother died.

Iowa Medicaid Director Elizabeth Matney said that in recent years the state added on forms people fill out when they apply for coverage.

鈥淲e do not like families or members being caught off guard,鈥� she said in an interview. 鈥淚 have a lot of sympathy for those people.鈥�

Matney said her agency has considered changes to the estate recovery program, and she would not object if the federal government limited the practice. Iowa鈥檚 Medicaid estate collections topped $30 million in fiscal year 2022, but that represented a sliver of Medicaid spending in Iowa, . And more than half the money recouped goes back to the federal government, she said.

Matney noted families can apply for 鈥渉ardship exemptions鈥� to reduce or delay recovery of money from estates. For example, she said, 鈥渋f doing any type of estate recovery would deny a family of basic necessities, like food, clothing, shelter, or medical care, we think about that.鈥�

Sumo Group, a private company that runs Iowa鈥檚 estate recovery program, reported that 40 hardship requests were granted in fiscal 2022, and 15 were denied. The Des Moines company reported collecting money from 3,893 estates that year. Its director, Ben Chatman, declined to comment to KHN. Sumo Group is a subcontractor of a national company, Health Management Systems, which oversees Medicaid estate recoveries in several states. The national company declined to identify which states it serves or discuss its methods. Iowa pays the companies 11% of the proceeds from their estate recovery collections.

The 2021 federal advisory report urged Congress to bar states from collecting from families with meager assets, and to let states opt out of the effort altogether. 鈥淭he program mainly recovers from estates of modest size, suggesting that individuals with greater means find ways to circumvent estate recovery and raising concerns about equity,鈥� the report said.

U.S. Rep. Jan Schakowsky in 2022 that would end the programs.

The Illinois Democrat said many families are caught unawares by Medicaid estate recovery notices. Their loved ones qualified for Medicaid participation, not realizing it would wind up costing their families later. 鈥淚t鈥檚 really a devastating outcome in many cases,鈥� she said.

Schakowsky noted some states have tried to avoid the practice. West Virginia in an attempt to overturn the requirement that it collect against Medicaid recipients鈥� estates. That challenge failed.

Schakowsky鈥檚 bill had no Republican co-sponsors and did not make it out of committee. But she hopes the proposal can move ahead, since every member of Congress has constituents who could be affected: 鈥淚 think this is the beginning of a very worthy and doable fight.鈥�

States can limit their collection practices. For example, Massachusetts to exempt estates of $25,000 or less. That alone was expected to slash by half the number of targeted estates.

Massachusetts also made other changes, including allowing heirs to keep at least $50,000 of their inheritance if their incomes are less than 400% of the 2022 federal poverty level, or about $54,000 for a single person.

Prior to the changes, Massachusetts reported more than $83 million in Medicaid estate recoveries in 2019, more than any other state, according to the MACPAC report.

Supporters of estate recovery programs say they provide an important safeguard against misuse of Medicaid.

Mark Warshawsky, an economist for the conservative American Enterprise Institute, should follow Iowa鈥檚 lead in aggressively recouping money from estates.

Warshawsky said many other states exclude assets that should be fair game for recovery, including tax-exempt retirement accounts, such as 401(k)s. Those accounts make up the bulk of many seniors鈥� assets, he said, and people should tap the balances to pay for health care before leaning on Medicaid.

Warshawsky said Medicaid is intended as a safety net for Americans who have little money. 鈥淚t鈥檚 the absolute essence of the program,鈥� he said. 鈥淢edicaid is welfare.鈥�

People should not be able to shelter their wealth to qualify, he said. Instead, they should be encouraged to save for the possibility they鈥檒l need long-term care, or to buy insurance to help cover the costs. Such insurance can be expensive and contain caveats that leave consumers unprotected, so . Warshawsky said that鈥檚 probably because people figure Medicaid will bail them out if need be.

Eric Einhart, a New York lawyer and board member of the National Academy of Elder Law Attorneys, said Medicaid is the only major government program that seeks reimbursement from estates for properly paid benefits.

Medicare, the giant federal health program for seniors, covers virtually everyone 65 or older, no matter how much money they have. It does not seek repayments from estates.

鈥淭here鈥檚 a discrimination against what I call 鈥榯he wrong type of disease,鈥欌�� Einhart said. Medicare could spend hundreds of thousands of dollars on hospital treatment for a person with serious heart problems or cancer, and no government representatives would try to recoup the money from the person鈥檚 estate. But people with other conditions, such as dementia, often need extended nursing home care, which Medicare won鈥檛 cover. Many such patients wind up on Medicaid, and their estates are billed.

On a recent afternoon, Henry Ruhl and his daughter sat at his kitchen table in Iowa, going over the paperwork and wondering how it would all turn out.

The family found some comfort in learning that the bill for Fran Ruhl鈥檚 Medicaid expenses will be deferred as long as her husband is alive. He won鈥檛 be kicked out of his house. And he knows his wife鈥檚 half of their assets won鈥檛 add up to anything near the $226,611.35 the government says it spent on her care.

鈥淵ou can鈥檛 get 鈥� how do you say it?鈥� he asked.

鈥淏lood from a turnip,鈥� his daughter replied.

鈥淭hat鈥檚 right,鈥� he said with a chuckle. 鈥淏lood from a turnip.鈥�