ASBURY PARK, N.J. — After their 92-year-old mother died, Richard Pfieffer and his siblings were set to sell her New Jersey home when a bill for $25,347 brought them up short.

The amount was the total cost of the home-based medical care their mother received through Medicaid in the last years of her life. If the bill wasn’t paid in full, the family was informed, the state would place a lien on the property.

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“It was like, ‘What the hell are they talking about?’ ” said Pfieffer, 65.

Although it often comes as a shock to families, Medicaid has worked this way for more than 20 years.

By law, the state can force the families of deceased Medicaid recipients to sell off their loved one’s home, heirloom jewelry and other possessions to repay the cost of whatever benefits the person received from age 55 on.

With the cost of end-of-life nursing home care often exceeding $100,000 per year, the amounts can be staggering. What’s more, the state can tack on thousands of dollars in administrative fees to the bill, which have little to do with direct medical care for a patient.

It’s called Medicaid estate recovery, and New Jersey happens to be one of the more aggressive states when it comes to seeking reimbursement. In the last four years, the state has brought in nearly $40 million, state records show.

Now there’s a new twist. These same rules will apply to those 55 and older who receive health insurance through Medicaid under the Affordable Care Act, also known as Obamacare.

The federal health care law, which went into effect Jan. 1, is expected to add 7 million Americans to the Medicaid rolls this year alone, according to projections by the Congressional Budget Office.

Already, 3.1 million people have qualified for Medicaid through federal and state health insurance exchanges, according to the latest figures released by the Obama administration.

Not only are the Medicaid rolls increasing, but the new enrollees are more likely to have assets that the state can tap down the road.

Prior to the ACA, only low-income children, families and pregnant women and adults who were elderly, blind or disabled could qualify for New Jersey’s Medicaid program, called NJ FamilyCare. Some 1.3 million New Jerseyans were enrolled last year.

By adopting the ACA’s new eligibility rules, however, New Jersey now provides Medicaid to nondisabled adults without dependent children with incomes up to 133% of federal poverty guidelines. That works out to $15,282 for an individual, or $20,629 for a couple.

The change means more people with homes and retirement nest eggs can qualify for Medicaid, including jobless white-collar workers, early retirees, and possibly even the super-rich, since the ACA bases eligibility solely on income, not the individual’s assets. Under the new rules, even someone who owns a multimillion-dollar home and a Lear jet could qualify, provided their income is low enough.

In fact, Medicaid is the default option for anyone, rich or poor, whose income falls under the new threshold. By virtue of being eligible for Medicaid, those individuals can’t receive a government subsidy to purchase a private health plan. They can, however, choose to pay full price for a private plan, or forgo health insurance altogether and pay a fine — neither of which would pose much of an obstacle in the case of a wealthy individual.

Estate recovery doesn’t affect young enrollees

It’s not Obamacare itself that’s “picking the pockets” of poor Medicaid recipients after their death, as some critics of the health care law have characterized it.

Rather, the controversy stems from the confluence of the ACA and an existing federal estate recovery law, which a Democratic-controlled Congress passed in 1993 in the first year of Bill Clinton’s presidency, in an effort to curb skyrocketing Medicaid outlays.

Medicaid experts and elder law attorneys say it’s important to keep the estate recovery issue in perspective.

For one thing, younger Medicaid enrollees have little to worry about, since the federal and state estate recovery laws pertain only to benefits received from age 55 on.

Nor will the state go after assets owned by a surviving spouse, or those of a dependent or disabled child, and its policy is not to force the sale of a home while the surviving spouse or another resident family member is living there.

“They don’t usually grab (the recipient’s home) until the other spouse dies or tries to sell it,” said the Pfieffers’ attorney, Donald D. Vanarelli.

Also, asset recovery doesn’t affect those who receive Medicare, a different government health insurance program for those 65 and older.

The families of deceased recipients also have to pay “capitation” or administrative fees. The current fee for recipients who are elderly, blind or disabled is $454 per month, or $5,449 per year.

Still, by planning far enough ahead, it’s possible to shield many assets from recovery, elder law attorneys say. Some of these steps have to be taken at least five years prior to applying for Medicaid.

“It’s easy to get around if you know what to do,” said Thomas D. Begley Jr., a lawyer.

Small sums recovered

An AARP Inc. report published in 2004 found that states recovered a total of just $347.4 million in 2003, only 0.13% of total Medicaid spending that year.

Those figures beg the question: Why even bother, if the amount recovered is so insignificant?

Matt Salo, executive director of the National Association of State Medicaid Directors, said one of the aims of the federal law is to deter recipients and their families from gaming the system.

As it stands, Medicaid is virtually the only source of long-term care coverage in the U.S., Salo said.

“As such, we have found that there has been a growing problem of people trying to get very, very creative, taking advantage of loopholes, or using estate planners and elder trust attorneys to figure out how they can shelter enormous amounts of money to the benefit of their family, while requiring no kind of obligation on behalf of that family towards the parent’s care,” he said.

Limit of $2,000

To qualify for long-term care under Medicaid, individuals generally can’t have more than $2,000 in total assets, but the person’s stake in their home doesn’t count toward that amount.

For older adults, then, Medicaid works something like a reverse mortgage, Salo said, enabling low-income individuals to use their homes as collateral for the government benefits they need, with the understanding that the state may seek reimbursement later on. “I think it’s good government,” he said.

Salo, for one, doesn’t believe the expansion of Medicaid will have much of an impact on recovery efforts across the country. Unless a recipient racks up significant medical costs, for an open-heart surgery, for example, it may be cost-prohibitive for the state to seek reimbursement, he said.

However, two states, Washington and Oregon, already have amended their recovery laws to exempt new Medicaid enrollees, after news reports sparked a public outcry.

Richard Pfieffer, however, said he has shared his experience with his friends and relatives as a cautionary tale. Though he and his siblings hired an attorney, in the end they had to repay the state in full out of the proceeds from the sale of their mother’s home.

“I say, ‘Guys, be careful with Medicaid, because if you receive benefits, be prepared to pay every penny back,’ ” he said.

Protecting your assets

It is considered a crime to hide assets from the government in order to qualify for Medicaid, but there are a number of legal ways to structure an estate to qualify for coverage, elder law attorneys say. The options may include:

• Transferring ownership of the home to a spouse.

• Giving gifts to family members other than a spouse.

• Leaving a spouse the minimum allowed by law in a will.

• Transferring assets to an irrevocable trust or transferring a home to a family member other than a spouse while retaining a life estate, a type of joint ownership arrangement, in the home.

• The rules governing Medicaid and estate recovery are notoriously complex, however, so it is best to consult with a reputable elder law attorney, experts say. For help finding an attorney, visit the website of the National Elder Law Foundation.