Will I lose Medicaid if I get a personal injury settlement in Pennsylvania?
If you sustained an injury due to the negligence of another party, you are entitled to compensation. Unfortunately, there have been cases in which a settlement has resulted in the loss of public benefits, like Medicaid. This result is especially difficult for those whose injuries have resulted in additional and long-term medical bills. The Reiff Law Firm attorneys explain how personal injury settlements may impact Medicaid eligibility and options for protecting your benefits.
What is Medicaid and how is it Determined?
Medicaid is government-subsidized healthcare coverage for vulnerable groups, typically children, pregnant women, low-income adults, or people with disabilities. Medicaid programs are state specific, so knowing how your settlement may affect your benefits will require you to look at eligibility in Pennsylvania. Pennsylvania Medicaid, also known as “Medical Assistance”, determines eligibility based on income/resources—computed using the Modified Adjusted Gross Income—and household size in comparison to income/resource limits. They also factor in age and disability in order to determine which income/resource limits apply. Under Federal Law, recipients of Supplemental Security Income are automatically eligible to receive Medicaid coverage in Pennsylvania.
Since Medicaid is need-based, they may pull benefits if additional income or resources determine an individual ineligible. Examples of such resources include checking or savings accounts, stocks and bonds, some trust funds, and life insurance. Small to medium settlement amounts may not affect access to Medicaid benefits, but receiving larger settlements may result in your loss of benefits if the settlement brings you above a particular percentage of the federal poverty level. Thus, it is important to have legal counsel advising you on how to avoid the loss of Medicaid benefits.
Medicaid Settlement Lein on Your Personal Injury Settlement
A third-party may file a request for a lein during your lawsuit, in which they may have the legal right to a portion of your settlement. In personal injury cases, leins are filed by any entity that paid any healthcare bills of the injured party. If you have Medicaid and you suffered an injury, Medicaid may be entitled to a lein on your settlement for any medical expenses that Medicaid covered as a result of the injury.
Medicaid Leins can be complicated as the state is only entitled to money covering medical expenses, but you likely recover compensation for medical costs, lost wages, and pain and suffering. You will receive a lump sum of money, not a break-down of recovery for each component part. Thus, there is a rule under Pennsylvania law that was adopted to determine how much of the settlement Medicaid is entitled to. The rule states that Medicaid is entitled to one-half of the settlement after legal expenses, or the actual amount the state paid covering medical bills—whichever is less. If you are not satisfied with the amount or believe there is an error, you have the right to appeal.
The important thing to note is that the lein only covers bills that are directly related to the injury, and should not contain any other bills during the specified time period. It is essential to have an attorney assist you to thoroughly examine the medical expenses to ensure there are not additional charges unrelated to the injury included, and resolve the lein through the litigation process.
Previous Court Cases Affecting Public Benefits
In Pennsylvania court case Sams v. Department of Public Welfare, Sams was driving his motorcycle when a vehicle hit him. He sustained a brain injury from the accident, and sued the negligent driver, reaching a settlement of $380,000. After paying his legal fees and a Medicaid Lein, he had $232,474 left, to which he agreed to a structured settlement annuity paying $967.23 monthly, with an annual interest rate of 3% for 360 months to continue for the rest of his life.
Before the monthly payments, Sams had been receiving Supplemental Security Income (SSI) and Medicaid. Unfortunately, once he began receiving the annuity payments, he became illegible for SSI benefits, thus canceling his Medicaid benefits as a result. Sams then applied directly for Medicaid, but was rejected on grounds of his transfer of assets from the settlement. Sams appealed to the court, arguing that he did not have actual possession of the settlement money—only the promise of the monthly payment of $967.23. Nonetheless, the court held that Sams was in constructive receipt of the funds in his decision to purchase the annuity, resulting in a denial of his appeal and the loss of his public benefits.
Protecting your Medicaid Benefits
There are ways to avoid the tragic result of Sams case and ensure that you will still be entitled to Medicaid Benefits following a personal injury settlement. The first option involves spending down the settlement proceeds—as the name suggests, you would spend the lump-sum money received to maintain eligibility for SSI or Medicaid benefits. The second option is establishing a special needs trust, in which the Government does not take into consideration when determining eligibility for Medicaid. The final option is setting up a pooled trust, a shared trust that is also disregarded when determining Medicaid eligibility.
There are several reasons that you may want to consider the spend down option. It may be wise if you received a relatively small settlement amount to avoid the set-up and ongoing costs that will accompany a special needs trust. Other reasons that you may want to spend down the money is if you have debts to pay, or are in the market for a home, vehicle or other high-priced items. The downside of this option is that you will sacrifice money in the future that could help pay for special needs. It is important to consider both alternatives in detail in order to make an informed decision that will best improve your quality of life.
In order for the spend down to not disqualify you from Medicaid, the money must be spent in the calendar month you received it, before the next calendar month. For example, if you received the funds on June 20th, you would have 10 days to spend the funds putting your benefits in jeopardy. Additionally, there are certain rules on what you are allowed to spend your money on while keeping your benefits. The money must be spent on exempt resources as defined by the SSA, in order to not be counted in the asset limitation in determining Medicaid eligibility. Some exempt resources include purchasing a home or paying the mortgage on your home, remodeling of the home, other medical expenses not covered by Medicaid, Education expenses, purchasing a car, and vacation travel.
You must report the spend down to Social Security by the 10th of the next calendar month following the month you completed the spend down. Receipts for all items you purchased as well as copies of bank statements from all accounts will be necessary to complete the report.
Another option that will allow you to maintain eligibility for Medicaid is putting the money into a special needs trust. Special need trusts, also known as supplementary need trusts, are ignored when determining asset limits for eligibility for Medicaid or SSI. You are able to open this kind of trust if you are under 65 and disabled under the Social Security Administration Standard. Special need trusts will provide security for permanently disabled individuals beyond what Medicaid and SSI can provide and will last as long as needed, or until funds are spent.
Though this is a viable option to maintain benefits, there are certain drawbacks to opening a special needs trust. The first is that there are strict regulations on disbursements as the money in the fund is meant to supplement the services provided through public benefits like Medicaid and SSI. Any use of the funds will directly affect eligibility, and improper use can disqualify you from receiving Medicaid. Thus, you may feel you have little control over your money. Additionally, there are costs to set up a special needs trust, you must file a tax return and handle other administrative duties. Nonetheless, many consider the benefits and long-term financial security of special needs trust to outweigh its costs.
The final option that can protect your public benefits is opening a pooled trust, usually a better option for a somewhat smaller settlement to avoid the associated costs of a special needs trust. An organization, typically sponsored by the state, will set up a trust that multiple special needs individuals may use. Your money will be pooled and invested together with the other individuals’ money, allowing the cost of the trust to be divided among the number of beneficiaries. The state will disregard the funds of a pooled trust when counting assets that will determine eligibility—in short, you can still receive Medicaid.
There are pros and cons to each solution—it is important to assess your short-term and long-term financial situation such as future medical expenses related to your injury to figure out a plan that will suit your needs. It may be in your best interest to have an attorney who has specialized knowledge of the options to maintain Medicaid benefits following a personal injury settlement.
Contact Our Pennsylvania Personal Injury Attorneys for a Free Consultation.
If you were injured by the negligence of another, you should have the right to compensation without risk of losing your public benefits like Medicaid. Our Philadelphia personal injury attorneys have over three decades of experience handling complex settlements and can offer expert advice that can help preserve your public benefits. If you were injured and are concerned about losing your Medicaid benefits, call our attorneys today at (215) 709-6940 for a free consultation.