What Is Medicaid Payback?
- Purple
- Aug 21
- 2 min read
If you’re managing an ABLE account—or planning to open one—you’ve probably heard about something called Medicaid payback. But what is it, and when does it apply?
In this article, we’ll explain:
What Medicaid payback means
When states can claim ABLE account funds
Who is affected
What expenses are covered
How to protect your savings
How Purple supports long-term planning
1. Medicaid Payback, Explained
Medicaid payback refers to the government’s ability to recover the cost of Medicaid services from a person’s estate after they pass away.
If someone received Medicaid benefits during their lifetime, the state may try to recover those costs by claiming assets from their estate—including funds remaining in an ABLE account.
This is also known as estate recovery.
2. Does Medicaid Payback Apply to ABLE Accounts?
Yes—but with some conditions.
If the beneficiary of an ABLE account received Medicaid after the ABLE account was opened, the state may file a claim against the remaining funds in that account when the person dies.
Funds may only be claimed after:
Funeral and burial expenses are paid
Any outstanding bills are resolved
Other qualifying final expenses are covered
So not all funds go directly to the state—but anything left may be at risk.
3. Who Is Affected by Medicaid Payback?
Medicaid payback only applies after the death of the ABLE account holder.
It typically affects:
Adults with disabilities who received Medicaid services
ABLE account holders who did not spend down their balance
Families or caregivers hoping to pass unused ABLE funds to heirs
Importantly, not all states enforce Medicaid payback. Some have chosen to waive or limit recovery for ABLE accounts. Policies vary by state, so it’s worth checking with your state Medicaid office.
4. What Services Are States Reimbursed For?
If the state does pursue estate recovery, it’s usually limited to:
Medicaid services received after the ABLE account was created
Services like doctor visits, home care, or long-term care
Costs paid by the state that weren’t covered by Medicare or private insurance
The state cannot claim more than what was actually spent on care. And they can’t claim funds for services received before the ABLE account was opened.
5. How to Protect ABLE Account Funds
Here are a few steps you can take:
Use ABLE funds regularly for qualified disability expenses, instead of letting the balance grow unused
Pay final expenses quickly after the beneficiary’s death (before the state files a claim)
Know your state’s policy on Medicaid payback for ABLE accounts
Pair your ABLE account with a Special Needs Trust, especially if you’re receiving large gifts or inheritances
Talk with an estate planning expert familiar with disability law
Even if payback applies, you can often minimize the amount that’s claimed through smart planning and spending.
6. How Purple Helps with Long-Term Planning
At Purple, we believe financial tools should work for people with disabilities—not against them.
We’re building technology that helps:
Track your ABLE account contributions and spending
Separate funds for daily use, savings, or backpay
Store estate documents securely
Educate families on Medicaid payback and state-by-state rules
Plan for both short-term needs and long-term legacy
Because protecting your benefits shouldn’t come with fear or confusion.