How to avoid losing your Medicare, Medicaid, SSI or SSDI when you settle your car, truck or motorcycle claim

How to avoid losing your Medicare, Medicaid, SSI or SSDI when you settle your car, truck or motorcycle claim

When someone suffers a serious or catastrophic personal physical injury causing permanent disability, they must get the proper counseling regarding the form of the settlement so as to protect their current assets, preserve public benefits and safeguard the physical injury recovery. Personal injury practitioners who represent disabled clients should be aware of their obligations to advise these clients properly and also understand the hurdles faced by the injury population in terms of recovery both financially as well as physically. This article addresses the issues of major importance when dealing with the form of settlement for a personal injury matter involving a disabled client.

There are two primary public benefit programs that are available to those that are injured and disabled. The first is the Medicaid program and the intertwined Supplemental Security Income benefit (“SSI”). The second is the Medicare program and the related Social Security Disability Income/Retirement benefit (“SSDI”). Both programs can be adversely impacted by an injury and victim’s receipt of a personal injury recovery. Lawyers job is to protect the client’s eligibility for these benefits.

Medicaid and Supplemental Security Income (hereinafter SSI) are income and asset sensitive public benefits that require special planning to preserve. In many states, one dollar of SSI benefits automatically provides Medicaid coverage. This is very important, as it is imperative in most situations to preserve some level of SSI benefits if Medicaid coverage is needed in the future. SSI is a cash assistance program administered by the Social Security Administration. It provides financial assistance to needy aged, blind, or disabled individuals. To receive SSI, the individual must be aged (sixty-five or older), blind or disabled and be a U.S. citizen. The recipient must also meet the financial eligibility requirements. Medicaid provides basic health care coverage for those who cannot afford it. It is a state and federally funded program run differently in each state. Eligibility requirements and services available vary by state. Medicaid can be used to supplement Medicare coverage if the client is eligible for both programs (“dual eligible”). For example, Medicaid can pay for prescription drugs as well as Medicare co-payments or deductibles. Because Medicaid and SSI are income and asset sensitive, creation of a special needs trust may be necessary.

Medicare and Social Security Disability Income (hereinafter SSDI) benefits are an entitlement and are not income or asset sensitive. Clients who meet Social Security’s definition of disability and have paid in enough quarters into the system can receive disability benefits without regard to their financial situation. The SSDI benefit program is funded by the workforce’s contribution into FICA (social security) or self-employment taxes. Workers earn credits based on their work history and a worker must have enough credits to get SSDI benefits should they become disabled. Medicare is a federal health insurance program. Medicare entitlement commences at age sixty-five or two years after becoming disabled under Social Security’s definition of disability. Medicare coverage is available again without regard to the injury victim’s financial situation. Accordingly, a special needs trust is not necessary to protect eligibility for these benefits. However, a Medicare Set Aside may be necessary when the case is settled.

The receipt of personal injury proceeds by someone seriously injured can cause ineligibility for needs- based government benefit programs. Medicaid and SSI are two such programs. However, there are planning devices that can be utilized to preserve eligibility for disabled injury victims. A special needs trust can be created to hold the recovery and preserve public benefit eligibility since assets held within a special needs trust are not a countable resource for purposes of Medicaid or SSI eligibility. The creation of a special needs trusts is authorized by the Federal law. Special needs trusts, are for those under the age of sixty- five. However, another type of trust is authorized under the Federal law with no age restriction and it is called a pooled trust, commonly referred to as a (d)(4)(c) trust.

The 1396p provisions in the United States Code govern the creation and requirements for such trusts. First and foremost, a client must be disabled in order to create a Special needs trust. There are two primary types of trusts that may be created to hold a personal injury recovery each with its own requirements and restrictions. First is the (d)(4)(A) special needs trust which can be established only for those who are disabled and are under age 65. This trust is established with the personal injury victim’s recovery and is established for the victim’s own benefit. It can only be established by a parent, grandparent, guardian or court order. The injury victim can’t create it on his or her own. Second is a (d)(4)(C) trust typically called a Pooled Trust that may be established with the disabled victim’s funds without regard to age. A pooled trust can be established by the injury victim unlike a (d)(4)(A).

A client who is a current Medicare beneficiary or reasonably expected to become one within 30 months must take Medicare into consideration when settling their claim. Medicare only pays for medical treatment relating to an injury to the extent that the primary payer does not pay.

Since Medicare isn’t supposed to pay for future medical expenses covered by a liability or Workers’ Compensation settlement, judgment or award, CMS recommends that injury victims set aside a sufficient amount to cover future medical expenses that are Medicare covered. CMS’ recommended way to protect an injury victim’s future Medicare benefit eligibility is establishment of a Medicare Set Aside (“MSA”) to pay for injury related care until exhaustion.

Medicare Set Aside may be advisable in order to preserve future eligibility for Medicare coverage. A Medicare set aside allows an injury victim to preserve Medicare benefits by setting aside a portion of the settlement money in a segregated account to pay for future Medicare covered healthcare. The funds in the set aside can only be used for Medicare covered expenses for the client’s injury related care. Once the set aside account is exhausted, the client gets full Medicare coverage without Medicare ever looking to their remaining settlement dollars to provide for any Medicare covered health care. In certain circumstances, Medicare approves the amount to be set aside in writing and agrees to be responsible for all future expenses once the set aside funds are depleted.

If you have a client that is a Medicaid and Medicare recipient, extra planning may be in order. If it is determined that a Medicare Set Aside is appropriate, it raises some issues with continued Medicaid eligibility. A Medicare Set Aside account is considered an available resource for purposes of needs- based benefits such as SSI/Medicaid. If the Medicare Set Aside account is not set up inside a Special Need Trust, the client will lose Medicaid/SSI eligibility. Therefore, in order for someone with dual eligibility to maintain their Medicaid/SSI benefits the MSA must be put inside a Special Needs Trust.

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