The Settlement Alliance

Does a Personal Injury Settlement Affect Medicaid?

Does a Personal Injury Settlement Affect Medicaid?

Jan 24, 2017

When you are injured, the last thing you want to think about is losing money that provides for your medical needs. Did you know that accepting a personal injury settlement could jeopardize your Medicaid benefits, or that you may have to reimburse Medicaid for injury-related expenses for which it has previously paid? Luckily, there are options to consider when it comes to maintaining your eligibility for government benefits, and protecting the settlement funds you’ve been awarded.

What is Medicaid?

With so many rule changes and varied state eligibility requirements, Medicaid can be challenging to fully understand.  Medicaid is:

  • A state AND federally funded healthcare program that provides medical coverage for needy and low-income citizens. 
  • A needs-based government program, which means that to be eligible, one must not exceed specific income and asset criteria (individually determined by each state).  

If an individual were to accept a personal injury settlement, it may possibly disqualify them from continuing their current Medicaid coverage—AND a portion of the settlement may have to be used to reimburse Medicaid for previous medical coverage.

What if a Medicaid lien has been placed on my settlement award?

If Medicaid paid any injury-related medical expenses, a lien may be placed on the settlement award to protect Medicaid’s reimbursement rights.  The reimbursement demand would likely include any amount paid out from the date of your injury until the date your settlement is finalized. 

Personal injury lawsuits can take many months, or even years to finally come to a settlement agreement.  The longer an individual is covered by Medicaid after a personal injury incident, the more likely that the dollar amount of funds to be recovered will rise.  By law, the lien must be resolved after the attorney’s fees and expenses are paid, and before the settlement funds are released to the injured party. 

If you have a Medicaid lien, consider bringing a settlement planner in on your case early in the process. Liens can take time to resolve, and your lien report will need to be audited to ensure that there are no unrelated expenses. A settlement planner can help facilitate the lien resolution process, while preserving as much of the settlement recovery as possible.

Special Needs Trusts and Medicaid

A Special Needs Trust (SNT) may allow a disabled individual who has been awarded a settlement to continue receiving Medicaid, while providing supplemental funds for medical expenses and personal care. To be considered eligible for an SNT, an individual must be deemed disabled and must meet the age requirement (usually under 65) and government benefit qualifications in the individual’s state of residence:

Special Needs Trusts can:

  • Allow the beneficiary to have assets, held in trust, strictly for their future needs
  • Exempt the settlement assets from the needs-based qualifications of Medicaid
  • Be managed by either a professional or personal trustee
  • Allow funds to be dispersed ONLY for goods and services to benefit the disabled individual:
    • Excess medical expenses (in addition to what Medicaid covers)
    • Home and vehicle
    • Accessibility upgrades (e.g. ramps, wheelchairs, etc.)
    • Personal hygiene
    • Entertainment and positive experiences

It is important to note that at the dissolution of a Special Needs Trust (usually the beneficiary’s death), the primary responsibility of the SNT is to reimburse Medicaid for the medical expenses it has paid out. After Medicaid has been fully reimbursed, the remaining funds may be available to distribute to any heirs or beneficiaries. Each state has specific guidelines regarding disbursement of funds and Medicaid recovery after the dissolution of trusts. 

Contact the Personal Injury Settlement Experts

There are many financial questions that arise when faced with accepting a personal injury settlement. Our experienced settlement planners can help walk you through options to preserve your Medicaid benefits. For more information about government benefit preservation, trust services, or other settlement-related questions, contact The Settlement Alliance today.

We are proud to partner with the highest rated structured settlement providers in the industry:

  • American general Life Companies
  • Berkshire Hathaway Structured Settlements
  • Liberty Life Assurance Company of Boston
  • MetLife
  • Mutual of Omaha
  • New York Life
  • Pacific Life
  • Prudential