No Good Deed Goes Unpunished: What Your Client Needs to Know about Crowdfunding if Your Client has SSI or Medicaid

By Guest Author, Evelynn Passino, J.D. – Executive Director of Pooled Trust Services

Crowdfunding is a method of online fundraising that allows people to raise money for any purpose. Anyone can start a fundraising campaign for themselves, a friend, a family member, etc. Several companies now operate in this space, GoFundMe being the most well-known, providing an electronic platform to fundraise from and facilitating the transactions. According to Go Fund Me, approximately one-third of their campaigns in 2017 were used to raise money to pay medical bills.[1] With the cost of healthcare on the rise and medical debt being the leading cause of bankruptcy,[2] it is no surprise that so many (even those who can afford health insurance)[3] need the assistance of generous friends, family members, and benevolent strangers when the unexpected happens. Despite the recovery you secure for your client, settlements are not always enough to take care of lifelong needs resulting from an accident. There is a strong possibility your client will turn to online crowdfunding when things get tough.

Crowdfunding is a blessing for those in need, but it can also be a double-edged sword if your client has government benefits. If your client has means-tested benefits such as SSI, Medicaid, food stamps, or Section 8 housing assistance, to name a few, the funds raised in their honor will likely be a countable resource. If so, crowdfunding will probably result in disqualification from those benefits until the funds are spent down.[4] Unfortunately, it probably will not take long because the cost of private healthcare is so much more expensive than utilizing Medicaid. Soon the client will be back on their benefits, but the money donated to them will be gone and probably will not have achieved the intended positive impact for your client. But with a little planning, it doesn’t have to be the case. Done properly, a client can maintain their benefits and use the donated funds to supplement those benefits rather than replace them temporarily.

Why Does Crowdsourcing Cause My Client to Lose His or Her Benefits?

For public benefits purposes, the general rule is that income and assets are countable unless the fall within certain exclusions set by rule.[5] If the client’s income and/or assets exceed the caps for their benefit programs, they will lose their benefits. Both SSI and Medicaid exempt one vehicle[6] and one (residential) home,[7] which takes care of the largest, and arguably most important, assets most people own. SSI excludes these resources up to any value, and although some state Medicaid programs exclude these items only up to a certain limit, most do not apply a limit. Household and personal effects are also generally excluded so long as they are not held solely for their value.[8] For example, a diamond ring you wear every day is excluded (not countable), where as a diamond you keep in a safe and plan to sell is not excluded (countable).

Cash, being the most liquid of assets, is always countable, and that’s usually where people get into trouble. There are some misconceptions, however, about how crowdsourced funds may be viewed while they remain in whatever platform the campaign organizer has selected. At the time of this article, the POMS (the Social Security Administration’s manual for the SSI program) has not been updated to discuss crowdfunding. The most relevant provision discusses unearned income (this includes gifts and fundraising) which states that unearned income is counted when it is “received by the individual; credited to the individual’s account; or set aside for the individual’s use.”[9] Interpreted broadly, the funds could become countable as soon as the donation is completed because they are essentially earmarked for the person set to receive them. Fundraising done for the injured person and his or her family does not avoid this problem. If the injured person is a minor, the answer is clear: any money received by the parents is deemed to the child. If the injured person is an adult, the answer is less clear, but the SSA’s policy is that joint accounts are counted 100% against the SSI recipient.[10]

The response from Medicaid varies state to state. Some Medicaid programs are closely scrutinizing the accounts and what they were spent on,[11] and some Medicaid manuals have issued crowdfunding-specific provisions. In Wisconsin, crowdfunding accounts are countable to the extent the funds are available the person with Medicaid and counted as unearned income as the funds are withdrawn.[12]   Any withdrawn funds retained into the following month becomes an asset. Kansas takes a different approach, counting crowdfunding contributions if the person making the donation expected to receive something in return.[13] Contributions of less than $50 that are purely gratuitous in nature are exempt as resources.[14] Alaska Medicaid counts income from crowdfunding unless it goes directly to a vendor.[15] It is important to keep in mind, however, that in most states qualifying for $1 of SSI automatically qualifies the person for Medicaid. Even if Medicaid does not count the crowdfunding account, the Social Security Administration might, resulting in a loss of SSI. If SSI is lost, so too will the person’s Medicaid be lost unless the person has some other means of qualifying directly.

The Risks of Not Reporting

Commonly, there are two questions which naturally get asked regarding this:

1. What if I just don’t tell Medicaid about the Go Fund Me? How will they know?

First, anyone who has public benefits has an obligation to keep the relevant agencies updated. Intentionally keeping them in the dark is fraud, which carries both civil and criminal penalties, punishable with jail time (up to 5 years for defrauding the Social Security Administration) and fines.[16]

Second, crowdfunding sites are generally open to the public, and some campaigns are publicized by local news organizations. Just because the client does not report the account to Medicaid or Social Security does not mean these agencies will not find out.

[1] https://www.fastcompany.com/90229961/gofundme-doesnt-want-to-be-a-social-safety-net-but-it-is

[2] https://www.cnbc.com/2019/02/11/this-is-the-real-reason-most-americans-file-for-bankruptcy.html

[3] https://www.wbur.org/onpoint/2019/08/07/health-care-insurance-medical-bills-gofundme-crowdfunding

[4] https://www.foxnews.com/health/when-gofundme-goes-wrong-woman-faced-losing-state-assistance-after-raising-money-for-daughter-with-aggressive-cancer

[5] SSI’s excluded assets can be found here: https://secure.ssa.gov/poms.nsf/lnx/0501110210. See your state Medicaid manual for excluded assets in your state.

[6] https://secure.ssa.gov/poms.nsf/lnx/0501130200

[7] https://secure.ssa.gov/poms.nsf/lnx/0501130100

[8] https://secure.ssa.gov/poms.nsf/lnx/0501130430

[9] SI POMS 00830.010A

[10] SI POMS 01140.205.C.2 To be clear, this provision applies to checking and savings accounts, but it is not a stretch to imagine the same treatment could be applied to crowdfunding accounts intended for multiple recipients.

[11] https://www.theday.com/article/20190510/NWS01/190519998; https://www.standard.net/news/thinking-about-starting-a-gofundme-here-s-what-you-need/article_80953fec-8ac8-5b57-8040-3cb9e19e1e38.html

[12] 16.7.31 https://www.dhs.wisconsin.gov/publications/p1/p10030-18-03.pdf

[13] 6410(59) http://www.kdheks.gov/hcf/kancare/Sept_2019_Output/9-19_Final.htm

[14] 6410(27) http://www.kdheks.gov/hcf/kancare/Sept_2019_Output/9-19_Final.htm

[15] 520M http://dpaweb.hss.state.ak.us/manuals/adltc/adltc.htm

[16]  42 U.S.C. § 1383a(a)(1)-(4)