Personal Injury Settlements: How They Impact Medicaid
- Personal Injury
For most people, reaching a settlement on their personal injury case is a time for celebration. It is the closing chapter of a stressful period of their life, and the money they receive provides much-needed assistance for moving past their injuries.
For some, however, the money can present problems they never even considered beforehand. Unfortunately, this is commonly the situation for people who receive Medicaid assistance.
If you are a current Medicaid recipient or are considering signing up for Medicaid benefits in the future (and also have a personal injury case), you may have heard about some of these issues. While it’s true that Medicaid’s rules can create some complications, you do have options to avoid or minimize them.
What Is Medicaid?
Medicaid is a federal and state program that provides health care coverage for people who cannot afford private health insurance. With the passage of the Affordable Care Act in 2010, Medicaid coverage expanded significantly. Currently, roughly a quarter of the American population is enrolled in Medicaid, and it pays for half of all births in the United States.
- Medicaid recipients fall into four categories:
- Pregnant women
- Parents with children under the age of 18
- People with a disability who receive Supplemental Security Income (SSI)
- People over the age of 65
Beyond falling into one of these categories, Medicaid recipients must meet financial requirements. Their monthly income cannot exceed a certain amount (which can vary by state and category). Additionally, possession of so-called “countable assets” (non-essential property) in excess of a defined limit (usually $2,000–$3,000) can also disqualify someone from Medicaid.
Complications with Settlements
As described above, Medicaid is a needs-based health care program. If a person has more than the allowed amount of countable assets, they are not eligible for Medicaid. The loss of Medicaid leaves people in a very vulnerable position, where a single visit to a doctor or hospital can have disastrous financial consequences. Even worse, people who are disqualified from Medicaid may have to pay back the government for past medical expenses.
Some property, such as a home, is exempt from the list of countable assets. Unfortunately, money received as part of a personal injury settlement is not exempt. This means that even a small settlement will often disqualify someone from Medicaid, even if their long-term financial prospects haven’t changed.
Options for Medicaid Recipients
Some people may try to hide their assets from the government by transferring them to someone else or sinking the money into a non-countable asset. We don’t advise doing this.
First, if you gift the money to someone else, they may simply keep the money, and you will have little recourse against them. Second, if the government finds out you’ve hidden the money, you will lose your Medicaid and may be ordered to pay back past medical bills.
There is another way that avoids these problems: a special-needs trust. If the settlement money is transferred to a special-needs trust, it can be used to pay certain expenses, such as medical bills. You would not have full access to the money all at once, but for that very reason, it will not count against your Medicaid eligibility.
Special-needs trusts, like any other trust, must be carefully set up and meet a number of legal requirements. Creating one will require the assistance of an attorney.
We’re Here to Guide You
If you are a Medicaid recipient who has received or will receive a personal injury settlement, you should proceed carefully to ensure you don’t imperil your finances. Schedule a meeting to discuss your situation with one of our experienced attorneys and create a plan that is right for you. Contact our office today.
