Preserving Dual Eligibility: Strategies for Safeguarding Medicaid and Medicare Benefits

By Jason D. Lazarus, J.D., LL.M., CSSC, MSCC

Some individuals are “dual eligible” meaning they qualify for both Medicaid and Medicare.  In certain cases, a Medicare Set Aside/special needs trust or pooled trust sub-account may be necessary to preserve the client’s dual eligibility.  As discussed previously, Medicare Set Asides are a device used to preserve future Medicare eligibility.  Currently, the use of set asides in liability settlements is at best a grey area.  However, in an abundance of caution, it may be prudent to consider setting one up when the injury victim is a Medicare beneficiary or reasonably expected to become Medicare eligible within 30 months.  A special needs trust or pooled special needs trust is appropriate for clients receiving Supplemental Security Income (“SSI”) and/or Medicaid benefits.  Federal law allows creation of either an SNT or pooled special needs trust to preserve eligibility for needs-based benefits, such as SSI and Medicaid, post settlement of a personal injury claim.

This chapter will explore the concept of dual eligibility.  I will discuss exactly what it is and how Medicaid coordinates with Medicare for those that are dual eligible.  Finally, I will detail the techniques to preserve Medicaid and Medicare for those that have dual eligibility.

Dual Eligibility

Dual eligibility is not extremely common, but there is a subset of the injury population who will be dual eligible.  Understanding who qualifies for both Medicaid and Medicare is vitally important for the personal injury practitioner to ensure that the injury victim’s benefits are adequately protected.  By CMS’s definition, dual eligible clients are those who qualify for Medicare Part A and/or Part B and also qualify for Medicaid programs as well.  Medicare coverage can be obtained prior to age 65 if an injury victim qualifies for Social Security Disability.  It takes a total of 30 months for someone who is disabled to qualify for Medicare (Medicare coverage begins 24 months after the first SSDI check is received which takes 5 months and includes the month of receipt, so plus 1 month).

Medicare Part A provides inpatient hospital care, acute hospital care and limited nursing home care.  Physician care in the hospital is also covered by part A.  There are no premiums to be paid for Medicare Part A if an individual has enough work credits (“qualifying quarters”).  However, one can pay for the coverage if they do not have sufficient work credits.  Medicare Part B, by contrast, covers outpatient medical services, physician services outside the hospital and other miscellaneous services not covered by Part A.  Medicare Part B has a monthly premium associated with it which is often deducted from the recipient’s Social Security check and the premiums for the Part B coverage increases for those with more income.

Some Medicare beneficiaries have so little income or assets that they also qualify for state programs through Medicaid that pay for certain out of pocket expenses not covered by the Medicare program.  There are several different programs that injury victims who qualify for Medicaid may be entitled to that help with expenses not covered by Medicare.  In addition, there are services that Medicare does not pay for that can be covered by state Medicaid programs.  For example, Medicare does not cover nursing home care beyond one hundred days yet Medicaid does, if one qualifies, cover that care.

The programs that cover out of pocket expenses provide limited Medicaid benefits to those who qualify.  Through these programs, Medicaid will pay Medicare premiums, co-payments and deductibles within prescribed limits.  There are two different programs.  First, is Qualified Medicare Beneficiaries (“QMB”).  The QMB program pays for the recipients Medicare premiums (Parts A and B), Medicare deductibles and Medicare coinsurance within the prescribed limits.  QMB recipients also automatically qualify for extra help with the Medicare Part D prescription drug plan costs.  The income and asset caps are higher^[1] than the normal SSI/Medicaid qualification limits.  Second is Special Low-Income Medicare Beneficiary (“SLMB”).  The SLMB program pays for Medicare premiums for Part B Medicare benefits.  SLMB recipients automatically qualify for extra help with Medicare Part D prescription drug plan costs.  Again, the income and asset caps are higher^[2] than the normal SSI/Medicaid qualification limits.

The Centers for Medicare and Medicaid Services (“CMS”) provides the following chart on their website of available benefits for those with dual eligibility:

According to CMS, the “plus” categories were “created when Congress changed eligibility criteria for QMBs and SLMBs to eliminate the requirement that QMBs and SLMBs could not otherwise qualify for Medicaid.”  QDWI stands for Qualified Disabled and Working Individual, which is someone who lost Medicare Part A coverage after returning to work who may enroll in and purchase Medicare Part A.  There are income and assets caps^[3] for this program similar to other programs.

Preservation of Public Benefits for those who are Dual Eligible

For injury victims who are Medicare eligible or reasonably likely to be within 30 months, a trial lawyer must carefully consider compliance with the Medicare Secondary Payer Act (“MSP”).  For those injury victims receiving needs-based benefits such as SSI and Medicaid, planning is necessary to preserve those benefits.  If you represent a client who is a Medicaid and Medicare recipient, extra planning may be necessary.  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.  In this instance you would have a hybrid trust which addresses both Medicaid and Medicare.  It is a complicated planning tool but one that is essential when you have those with dual eligibility.

Dual Eligibility Case Study

To better understand how to apply the foregoing information, I will illustrate with a case example.  Suppose you represent an injury victim, Mitch Smith, who was hit by a car while crossing a street in a pedestrian crosswalk.  At the time of the accident, Mitch was sixty-two years old and a low wage earner but had paid enough into the system to be fully insured.  When he got hit, he had very few assets.  After the accident, he qualified for and started to receive SSDI and consequently Medicare.  He also qualified for the QMB Medicaid program.  The settlement you have secured is for the policy limits of $500,000.  Mr. Smith suffered primarily lower extremity orthopedic injuries and a slight TBI.  It is anticipated he may need one future surgery to correct some of the damage done to his right knee.  Because he is older and due to his injuries, he will never work again.  He needs every penny of government assistance he gets.  Medicare is primary but Medicaid pays for what Medicare does not cover so it is comprehensive coverage.

In this scenario, you need to worry about both a Medicare set-aside and a special needs trust to preserve those precious benefits.  Here, it is recommended that you do the analysis to set up a Medicare set-aside.  However, that only deals with the Medicare preservation.  For Medicaid planning purposes, he would need both an MSA/SNT and an SNT.  So, the MSA that is to be created would be held inside of an SNT to avoid it being a countable resource.  This planning will make sure that the client not only has the benefit of Medicaid but also Medicare as well.

[1] Resources must be at or below twice the standard allowed under the Supplemental Security Income (SSI) program and income at or below 100% of the federal poverty level.

[2] Resources must be at or below twice the standard allowed under the SSI program and income exceeding the QMB level, but less than 120% of the federal poverty level.

[3] Resources must not exceed twice the SSI limit and must have income of 200% of federal poverty level or less.  QDWIs must not be otherwise eligible for Medicaid benefits.