Olympia, Wash. (CBS SEATTLE) — Washington State officials are scrambling to change a state rule that allows a “payback” health care bill to be sent to a Medicaid recipient’s estate after their death.

The fine print of the state’s expanded Medicaid program allows for a post-death penalty for ordinary health-care expenses to be charged to low and middle-income Medicaid recipients who have managed to hold on to their home, savings or other types of assets, the Seattle Times reports.

Those looking to pass on a house or other type of savings to their children or other relatives after their death may end up seeing such assets penalized by the current government policy.

The Affordable Care Act now allows more low-income residents to qualify for Medicaid, which has well-established policies for tapping into estate assets. Many low-income people who now qualify for Medicaid are not eligible for tax credits to subsidize private health plans under the federal health care law, which mandates American adults to have insurance by March 31, 2014.

And the collision of state and federal rules means that the lower-income portions of the estimated 223,000 Washington adults now seeking health insurance are subject to the state’s estate-recovery rules.

On Friday, Washington Gov. Jay Inslee’s office announced they are working with the state’s Medicaid office — called Apple Health in Washington — to draft an emergency rule for limiting estate penalties to expenses related to long-term nursing home type care.

Inslee’s senior health-policy adviser, Dr. Bob Crittenden, told the Seattle Times that the federal and state policy problem was not intended to expand consumer penalties.

“There was no intent on the part of the ACA to do estate recovery on people going into Medicaid,” said Crittenden. “The idea was to expand coverage.”

Many see the Medicaid insurance option as more of a loan for Washington residents over the age of 55. And current Medicaid recipients over 55, unlike many in the past, are more likely to have a home or similar assets to their name after an early retirement or a recession lay-off.

People in their 50s and 60s compose nearly 30 percent of adults who have signed up for insurance through the state’s exchange marketplace.

One Washington health official told the Times that part of the problem is the ACA rules that essentially require people who qualify for Medicaid to accept that coverage – meaning people can’t receive tax credits to subsidize purchasing a private health plan, said Washington Health Benefit Exchange spokeswoman Bethany Frey.

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