Do You Have to Pay Back Medicaid in Illinois?

In Illinois, you don’t pay back Medicaid while you’re alive, but after a recipient dies the state can seek repayment from their estate for certain benefits. The Medicaid Estate Recovery Program targets costs paid for anyone who was 55 or older when they received benefits, plus all medical costs for anyone permanently living in a nursing facility, regardless of age.¹ Several protections can shrink or eliminate what the estate actually owes: a $25,000 small-estate floor, hard bars while a spouse or certain children survive, and a hardship waiver for heirs who would be seriously harmed by collection.²

Whose Medicaid Costs the State Tries to Recover

Illinois pursues recovery in two main situations. If a recipient was 55 or older when they got benefits, the state can seek repayment for the medical assistance paid on their behalf. If a recipient of any age was permanently institutionalized in a nursing facility and had a lien placed on their real property, the state can recover all medical assistance paid during their lifetime, not just what was spent after age 55.³

A detail that catches many families off guard: Illinois can also file a claim against the estate of the recipient’s spouse, regardless of which spouse died first.¹ If a Medicaid recipient dies and the surviving spouse inherits everything, the state doesn’t walk away. It waits. When the surviving spouse eventually dies, the state files against that estate for the original recipient’s Medicaid costs.

Which Costs Are In and Which Are Out

Federal law requires every state to seek repayment for nursing facility care, home and community-based services, and related hospital and prescription drug costs for recipients 55 or older.⁴ Illinois follows that mandate. The state also recovers cash assistance paid under the Aid to the Aged, Blind, and Disabled program at any age, not just after 55.⁵

One important carve-out: Medicare cost-sharing expenses the state paid on behalf of Medicare Savings Program enrollees, including premiums, deductibles, and copays, are exempt from estate recovery for any payments made after January 1, 2010.⁵ If your loved one was in a program like Qualified Medicare Beneficiary or Specified Low-Income Medicare Beneficiary, the state won’t seek repayment for those costs.⁶

What Counts as the Estate

For most recipients, “estate” means real and personal property that passes through probate. That typically covers a home owned solely in the deceased person’s name, bank accounts without a payable-on-death designation, vehicles, and other individually titled property. Assets that skip probate usually stay outside the state’s reach: life insurance proceeds with a named beneficiary, retirement accounts like IRAs, joint accounts with rights of survivorship, and accounts with transfer-on-death designations.⁷

There is one significant exception. If the recipient received benefits under a long-term care insurance policy and had assets disregarded because of that policy during their Medicaid eligibility determination, the definition of “estate” expands. In that situation, it reaches property held in joint tenancy, tenancy in common, life estates, living trusts, and other arrangements that would normally bypass probate.⁵ This situation is narrow, but when it applies, the usual probate-avoidance tools won’t shield those assets.

When the State Can’t Collect

The $25,000 Small-Estate Floor

For Medicaid recipients who died on or after July 1, 2022, Illinois will not pursue recovery against the first $25,000 of estate value. If the entire estate is worth $25,000 or less, the state leaves it alone.² For larger estates, the claim applies only to value above the floor. A home that pushes the estate past $25,000 still puts the excess at risk.

Surviving Relatives Who Block Recovery

No matter how large the estate, Illinois cannot enforce a recovery claim while any of the following relatives are alive:

A surviving spouse. No recovery until after that spouse dies.
A child under 21.
A child of any age who is blind or permanently and totally disabled under Social Security’s definition.²

These are statutory bars, not discretionary waivers. The state cannot pursue the claim at all while a qualifying relative is living, though families may still need to inform the state of that relative’s existence during probate.¹

Caregiver Child and Resident Sibling

An adult child who lived in the parent’s home for at least two years immediately before the parent entered a nursing facility can qualify to keep the home out of the claim. The child must show that their caregiving directly delayed the parent’s need for institutional care. Families typically prove this with medical records, physician statements, tax returns showing the same address, and utility bills establishing residency during the qualifying period.⁸ The documentation burden is high; vague claims of helping out won’t satisfy the requirement.

A sibling of the deceased who holds an equity interest in the home and lived there for at least one year before the recipient entered a nursing facility may also qualify for an exemption, preventing a forced sale that would displace them.

Hardship Waiver for Heirs

When no automatic exemption applies, an heir can ask the state to reduce or eliminate the claim through a hardship waiver. The Department of Healthcare and Family Services will waive its claim, in whole or in part, when recovery would cause undue hardship for a beneficiary or heir.⁹

The timeline is strict. The completed application and supporting documents must be submitted within 60 calendar days of the date on the state’s Notice of Intent to File a Claim. Each heir seeking relief files a separate application. The form asks for the estate’s total value and the heir’s income, and supporting evidence can include documentation of the heir’s finances, medical expenses, or other circumstances showing genuine hardship. Applications can be submitted electronically through the HFS Information Portal or mailed to the Bureau of Collections in Springfield.⁹ The application is available in English, Spanish, Polish, Chinese, Tagalog, and Arabic.¹⁰

Liens on the Home During a Recipient’s Lifetime

Illinois can place a lien on a Medicaid recipient’s real property while they are still alive if the state determines they are permanently institutionalized and not reasonably expected to return home.⁴ The lien prevents the property from being sold or transferred until the Medicaid debt is addressed. The recipient must be given notice and a chance to challenge the finding at a hearing, and the state must remove the lien if the person is discharged and actually returns home.¹¹

The state cannot place a lifetime lien while certain relatives live in the home: a spouse, a child under 21, a blind or disabled child of any age, or a sibling with an equity interest in the property.⁴ If none of them live there, the home can be liened before the recipient dies.

Why You Can’t Just Give Assets Away First

Families sometimes try to protect assets by transferring them before a loved one applies for Medicaid long-term care coverage. Illinois reviews all asset transfers made within five years before the application to see whether anything was given away or sold for less than fair market value.¹² If the state finds such a transfer, it imposes a penalty period during which the applicant cannot get Medicaid-covered long-term care.

The penalty begins on the date of the transfer or the date the person enters a nursing facility and is otherwise eligible for Medicaid, whichever is later.¹² Its length is calculated by dividing the total value transferred by the private-pay rate at the applicant’s nursing facility.¹³ Rates vary by facility, so there is no single statewide figure. During the penalty period, the applicant pays for care out of pocket.

The only way to eliminate a penalty is to get all of the transferred assets returned.¹² Returning only part reduces the penalty but doesn’t eliminate it. A well-intentioned gifting plan made without legal advice can leave a family paying full freight for nursing home care for years.

If You Disagree With a Lien or Claim

If you want to challenge a decision to file a lien or an estate claim, you can request a hearing. Write a letter requesting one, or fill out an Appeal Request form available at local Department of Human Services offices. Appeals can be submitted by mail to the Bureau of Administrative Hearings at 69 W. Washington, 4th Floor, Chicago, IL 60602, by email to DHS.BAH@illinois.gov, by fax at 312-793-3387, or by calling 1-800-435-0774 on weekdays between 8:30 a.m. and 4:45 p.m. For lien and estate questions specifically, Cook County cases should contact HFS.BOC.TRS.CHI.LE@illinois.gov, and all other jurisdictions should contact HFS.BOC.TRS.SPR.LE@illinois.gov.³

1
Illinois General Assembly. 305 ILCS 5/5-13
2
Illinois Department of Healthcare and Family Services. Guide to the Medicaid Estate Recovery Program
3
Illinois Department of Healthcare and Family Services. Estate Recovery
4
Medicaid.gov. Estate Recovery
5
Illinois General Assembly. Illinois Administrative Code Title 89 Part 102 – Section 102.210
6
Illinois Department of Healthcare and Family Services. Medicare Savings for Qualified Beneficiaries
7
Illinois Department of Healthcare and Family Services. FAQs
8
Illinois State Bar Association. Summary of DRA Changes That Will Affect Your Clients and How You Process Their Medicaid Applications
9
Illinois Department of Healthcare and Family Services. Hardship Waiver
10
Illinois Department of Healthcare and Family Services. Online Forms
11
U.S. Department of Health and Human Services, ASPE. Medicaid Liens
12
Illinois Department of Healthcare and Family Services. Highlights of New Eligibility Requirements for Long Term Care
13
Illinois Department of Human Services. Penalty Period Due to Non-Allowable Transfers