Suffering even a moderate personal physical injury can create difficult challenges both financially and emotionally for even the strongest among us. However, what happens when someone suffers a serious or catastrophic personal physical injury causing permanent disability? Do they get the proper counseling regarding the form of the settlement to protect their current assets, preserve public benefits and safeguard the physical injury recovery? Will the recovery be enough to pay for all the victim’s future medical needs without public assistance? Can they recover physically? Can they recover emotionally? All these issues can be very difficult to face for someone that is seriously injured. Personal injury practitioners who represent disabled clients should be aware of their obligations to advise these clients properly and understand the hurdles faced by the injury population in terms of recovery both financially as well as physically. This post addresses issues of major importance when navigating settlement of a personal injury matter involving a disabled client.
Public Assistance Primer
Because most of a lawyer’s malpractice exposure at settlement is related to public benefit preservation, it is important to understand the basics of these benefits. Ethically, a lawyer must be able to explain these matters sufficiently to allow the client to make educated decisions. 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 connected Supplemental Security Income benefit (SSI). The second is the Medicare program and the related Social Security Disability Income/Retirement benefit (SSDI). Both Medicaid and Medicare can be adversely impacted by an injury victim’s receipt of a financial recovery. Understanding the basics of these programs and their differences is imperative to protecting the client’s eligibility.
Medicaid and Supplemental Security Income (hereinafter SSI) are income and asset sensitive public benefits that require special planning to preserve post settlement. 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 with different rules/programs in each state. Eligibility requirements and services available vary by state. Because Medicaid and SSI are income and asset sensitive, creation of a special needs trust may be necessary which is discussed in greater detail below.
Medicare and Social Security Disability Income (SSDI) benefits are an entitlement and are not income or asset sensitive. Clients who meet Social Security’s definition of disability and have paid 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 regulations. Since Medicare is an entitlement, a special needs trust is not necessary to protect eligibility for these benefits. However, the Medicare Secondary Payer Act (MSP) may necessitate the use of a Medicare Set Aside discussed in more detail below.
Laws that Impact Eligibility for Public Benefits
There are important federal laws that can impact a client’s eligibility for public benefits post settlement that must be explained. Below, I will discuss these issues in more detail with a focus on the ethical and malpractice issues raised in discussing the form of a personal injury settlement.
42 U.S.C. 1396p(d)(4)
The receipt of a settlement or financial recovery by someone seriously injured can cause ineligibility for needs based government benefit programs (Medicaid & SSI). Even as little as $2,000.00 could cause a problem. 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 trust is authorized by the Federal law.
The 1396p provisions in the United States Code govern the creation and requirements for such trusts. First and foremost, a client must be disabled to create a SNT. 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. 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.
The Medicare Secondary Payer Act
A client who is a current Medicare beneficiary or reasonably expected to become one within 30 months should concern every trial lawyer because of the implications of the Medicare Secondary Payer Act (MSP). The MSP is a series of statutory provisions enacted in 1980 as part of the Omnibus Reconciliation Act with the goal of reducing federal health care costs. The MSP provides that if a primary payer exists, Medicare only pays for medical treatment relating to an injury to the extent that the primary payer does not pay. The regulations that implement the MSP provide “[s]ection 1862(b)(2)(A)(ii) of the Act precludes Medicare payments for services to the extent that payment has been made or can reasonably be expected to be made promptly under any of the following” (i) Workers’ compensation; (ii) Liability insurance; (iii) No-fault insurance.
There are two issues that arise when dealing with the application of the MSP: (1) Medicare payments made prior to the date of settlement (conditional payments) which is beyond the scope of this post and (2) future Medicare payments for covered services (Medicare set asides). Since Medicare is not the proper payer of future medical expenses covered by a liability or Workers’ Compensation settlement, judgment or award, CMS recommends that injury victims set aside enough 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.
In certain cases, a Medicare Set Aside may be advisable 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 health care. 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.
The problem is that MSAs are not required by a federal statute even in Workers’ Compensation cases where they are commonplace. There are no regulations, at this time, related to MSAs either. Instead, CMS has intricate guidelines and FAQs on their website for nearly every aspect of set asides from submission to administration. There are only limited guidelines for liability settlements involving Medicare beneficiaries. While there is no legal requirement that an MSA be created, the failure to do so may result in Medicare refusing to pay for future medical expenses related to the injury until the entire settlement is exhausted. There has been a slow progression towards a CMS policy of creating set asides in liability settlements over the last several years because of the Medicare Medicaid SCHIP Extension Act’s passage. All the uncertainty surrounding set asides creates a difficult situation for Medicare beneficiary-injury victims and contingent liability for legal practitioners as well as other parties involved in litigation involving Medicare beneficiaries. There do appear to be regulations on the horizon for set asides based upon Medicare’s renewed focus on it for 2018. For the time being, a set aside analysis should be considered for settlements or judgments involving current Medicare beneficiaries.
Dual Eligibility: The Intersection of Medicare and Medicaid – Special Needs Trust/Medicare Set-Aside
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 Medicaid/SSI. If the Medicare Set-Aside account is not set up inside a Special Need Trust, the client will lose Medicaid/SSI eligibility. Accordingly, 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 a client with dual eligibility.