If you sustained an injury due to the negligence of another party, you are entitled to compensation. Unfortunately, there have been cases in which a settlement has resulted in the loss of public benefits, like Medicaid. This result is especially difficult for those whose injuries have resulted in additional and long-term medical bills. The Reiff Law Firm Pennsylvania personal injury attorneys explain how personal injury settlements may impact Medicaid eligibility and options for protecting your benefits.
What Factors Go Into How Medicaid Benefits are Determined?
Medicaid is government-subsidized healthcare coverage for vulnerable groups, typically children, pregnant women, low-income adults, or people with disabilities. Medicaid programs are state specific, so knowing how your settlement may affect your benefits will require you to look at eligibility in Pennsylvania. Pennsylvania Medicaid, also known as “Medical Assistance”, determines eligibility based on income/resources—computed using the Modified Adjusted Gross Income—and household size in comparison to income/resource limits. They also factor in age and disability in order to determine which income/resource limits apply. Under Federal Law, recipients of Supplemental Security Income are automatically eligible to receive Medicaid coverage in Pennsylvania.
Since Medicaid is need-based, they may pull benefits if additional income or resources determine an individual ineligible. Examples of such resources include checking or savings accounts, stocks and bonds, some trust funds, and life insurance. Small to medium settlement amounts may not affect access to Medicaid benefits, but receiving larger settlements may result in your loss of benefits if the settlement brings you above a particular percentage of the federal poverty level. Thus, it is important to have legal counsel advising you on how to avoid the loss of Medicaid benefits.
Medicaid Settlement Lien on Your Personal Injury Settlement
A third-party may file a request for a lien during your lawsuit, in which they may have the legal right to a portion of your settlement. In personal injury cases, liens are filed by any entity that paid any healthcare bills of the injured party. If you have Medicaid and you suffered an injury, Medicaid may be entitled to a lien on your settlement for any medical expenses that Medicaid covered as a result of the injury.
Medicaid Liens can be complicated as the state is only entitled to money covering medical expenses, but you likely recover compensation for medical costs, lost wages, and pain and suffering. You will receive a lump sum of money, not a break-down of recovery for each component part. Thus, there is a rule under Pennsylvania law that was adopted to determine how much of the settlement Medicaid is entitled to. The rule states that Medicaid is entitled to one-half of the settlement after legal expenses, or the actual amount the state paid covering medical bills—whichever is less. If you are not satisfied with the amount or believe there is an error, you have the right to appeal.
The important thing to note is that the lien only covers bills that are directly related to the injury, and should not contain any other bills during the specified time period. It is essential to have an Allentown personal injury attorney assist you to thoroughly examine the medical expenses to ensure there are not additional charges unrelated to the injury included, and resolve the lien through the litigation process.
Previous Court Cases Affecting Public Benefits
In Pennsylvania court case Sams v. Department of Public Welfare, Sams was driving his motorcycle when a vehicle hit him. He sustained a brain injury from the accident, and sued the negligent driver, reaching a settlement of $380,000. After paying his legal fees and a Medicaid Lien, he had $232,474 left, to which he agreed to a structured settlement annuity paying $967.23 monthly, with an annual interest rate of 3% for 360 months to continue for the rest of his life.
Before the monthly payments, Sams had been receiving Supplemental Security Income (SSI) and Medicaid. Unfortunately, once he began receiving the annuity payments, he became illegible for SSI benefits, thus canceling his Medicaid benefits as a result. Sams then applied directly for Medicaid, but was rejected on grounds of his transfer of assets from the settlement. Sams appealed to the court, arguing that he did not have actual possession of the settlement money—only the promise of the monthly payment of $967.23. Nonetheless, the court held that Sams was in constructive receipt of the funds in his decision to purchase the annuity, resulting in a denial of his appeal and the loss of his public benefits.
Protecting your Medicaid Benefits
There are ways to avoid the tragic result of Sams case and ensure that you will still be entitled to Medicaid Benefits following a personal injury settlement. The first option involves spending down the settlement proceeds—as the name suggests, you would spend the lump-sum money received to maintain eligibility for SSI or Medicaid benefits. The second option is establishing a special needs trust, in which the Government does not take into consideration when determining eligibility for Medicaid. The final option is setting up a pooled trust, a shared trust that is also disregarded when determining Medicaid eligibility.
There are several reasons that you may want to consider the spend down option. It may be wise if you received a relatively small settlement amount to avoid the set-up and ongoing costs that will accompany a special needs trust. Other reasons that you may want to spend down the money is if you have debts to pay, or are in the market for a home, vehicle or other high-priced items. The downside of this option is that you will sacrifice money in the future that could help pay for special needs. It is important to consider both alternatives in detail in order to make an informed decision that will best improve your quality of life.
In order for the spend down to not disqualify you from Medicaid, the money must be spent in the calendar month you received it, before the next calendar month. For example, if you received the funds on June 20th, you would have 10 days to spend the funds putting your benefits in jeopardy. Additionally, there are certain rules on what you are allowed to spend your money on while keeping your benefits. The money must be spent on exempt resources as defined by the SSA, in order to not be counted in the asset limitation in determining Medicaid eligibility. Some exempt resources include purchasing a home or paying the mortgage on your home, remodeling of the home, other medical expenses not covered by Medicaid, Education expenses, purchasing a car, and vacation travel.
You must report the spend down to Social Security by the 10th of the next calendar month following the month you completed the spend down. Receipts for all items you purchased as well as copies of bank statements from all accounts will be necessary to complete the report.
Another option that will allow you to maintain eligibility for Medicaid is putting the money into a special needs trust. Special need trusts, also known as supplementary need trusts, are ignored when determining asset limits for eligibility for Medicaid or SSI. You are able to open this kind of trust if you are under 65 and disabled under the Social Security Administration Standard. Special need trusts will provide security for permanently disabled individuals beyond what Medicaid and SSI can provide and will last as long as needed, or until funds are spent.
Though this is a viable option to maintain benefits, there are certain drawbacks to opening a special needs trust. The first is that there are strict regulations on disbursements as the money in the fund is meant to supplement the services provided through public benefits like Medicaid and SSI. Any use of the funds will directly affect eligibility, and improper use can disqualify you from receiving Medicaid. Thus, you may feel you have little control over your money. Additionally, there are costs to set up a special needs trust, you must file a tax return and handle other administrative duties. Nonetheless, many consider the benefits and long-term financial security of special needs trust to outweigh its costs.
The final option that can protect your public benefits is opening a pooled trust, usually a better option for a somewhat smaller settlement to avoid the associated costs of a special needs trust. An organization, typically sponsored by the state, will set up a trust that multiple special needs individuals may use. Your money will be pooled and invested together with the other individuals’ money, allowing the cost of the trust to be divided among the number of beneficiaries. The state will disregard the funds of a pooled trust when counting assets that will determine eligibility—in short, you can still receive Medicaid.
There are pros and cons to each solution—it is important to assess your short-term and long-term financial situation such as future medical expenses related to your injury to figure out a plan that will suit your needs. It may be in your best interest to have a Delaware County injury attorney who has specialized knowledge of the options to maintain Medicaid benefits following a personal injury settlement.
Contact Our Pennsylvania Personal Injury Attorneys for a Free Consultation.
If you were injured by the negligence of another, you should have the right to compensation without risk of losing your public benefits like Medicaid. Our Philadelphia personal injury attorneys have over three decades of experience handling complex settlements and can offer expert advice that can help preserve your public benefits. If you were injured and are concerned about losing your Medicaid benefits, call our attorneys today at (215) 709-6940 for a free consultation.
FAQs
Will a personal injury settlement affect my Social Security benefits? ›
Individuals who receive Social Security Disability (SSDI) have essentially met eligibility requirements by paying into the social security system and being classified as disabled by the Social Security Administration's standards. A personal injury settlement will not affect SSDI benefits.
Does a personal injury settlement Affect Medi Cal? ›A personal injury settlement will not cause a cancellation or have any other adverse effects on an injured party's Medi-Cal coverage. Rather, the program is structured like all other health insurance such that an injured accident victim will not recover double benefits for the same injuries.
How do you negotiate a personal injury settlement with an insurance company? ›- 1) Have a Settlement Amount in Mind. ...
- 2) Avoid Falling for the First Offer. ...
- 3) Communicate About the Emotional Damage. ...
- 4) Get the Final Settlement in Writing.
Medicaid is the nation's public health insurance program for people with low income. Medicaid is the nation's public health insurance program for people with low income. The Medicaid program covers 1 in 5 Americans, including many with complex and costly needs for care.
Do settlements count as income? ›Settlement money and damages collected from a lawsuit are considered income, which means the IRS will generally tax that money. However, personal injury settlements are an exception (most notably: car accident settlements and slip and fall settlements are nontaxable).
How does a lump sum settlement affect Social Security? ›If you receive a lump-sum payment in settlement of your workers' compensation case, Social Security divides the amount of the settlement by your monthly SSD benefits. For example, if you get a lump-sum payment of $20,000 and divide it by the $2,000 monthly SSDI benefit, the result is 10.
Can IRS take my personal injury settlement? ›How are Personal Injury Settlements Taxed? Generally, the IRS will not tax you on settlements won in a personal injury case. This is because the compensation you receive in a settlement is intended to reimburse for economic losses like injury and expenses.
Does accident compensation affect benefits? ›If you currently receive state funded benefits, such as Universal Credit or similar, making a claim for personal injury compensation could affect your benefits entitlement and the amount of benefit payment that you receive.
How much money can I have in the bank on Medi-Cal? ›Te Medi-Cal program applies an asset limit of $2,000 for an individual and $3,000 for a couple for adults over age 65, persons under age 65 with a disability, and residents of long-term care facilities enrolled in Medi-Cal.
How do you ask for more money in a settlement? ›Send a Detailed Demand Letter to the Insurance Company
Because the insurance company will likely reply with an offer for an amount lower than what you've asked for in the demand letter, you should ask for between 25 and 100 percent more than what you would be willing to settle for.
Do insurance companies want to settle quickly? ›
The less they pay out for claims, the more profit they make. Insurance companies like to offer quick settlements because victims often take them, out of fear they may not get another offer. They also may feel anxious as bills and expenses pile up and they cannot work.
How do you counter offer a Personal Injury settlement? ›From the standpoint of procedure, you will need to make a counter-offer in writing. Be sure you send your letter to the appropriate person, whether that be an insurance adjuster or an attorney. Make it clear that you are rejecting their initial offer and include your reasons for doing so.
What is the highest income to qualify for Medicaid? ›Federal Poverty Level thresholds to qualify for Medicaid
The Federal Poverty Level is determined by the size of a family for the lower 48 states and the District of Columbia. For example, in 2022 it is $13,590 for a single adult person, $27,750 for a family of four and $46,630 for a family of eight.
Disadvantages of Medicaid
They will have a decreased financial ability to opt for elective treatments, and they may not be able to pay for top brand drugs or other medical aids. Another financial concern is that medical practices cannot charge a fee when Medicaid patients miss appointments.
Children aged 18 and under. Pregnant women. Parents and caretakers of children under 21. Adults ages 19-64 with incomes at or below 133 percent of the Federal Income Poverty Guidelines (FPIG)
Do I have to report personal injury settlement to IRS? ›That payment will likely be considered a source of employment income, as it is a standard form of compensation paid to an employee when their employment is severed. As a result, that amount of your settlement will likely be taxable.
Do you have to claim a settlement on your taxes? ›The general rule of taxability for amounts received from settlement of lawsuits and other legal remedies is Internal Revenue Code (IRC) Section 61 that states all income is taxable from whatever source derived, unless exempted by another section of the code.
How do I avoid taxes on a settlement? ›Spread payments over time to avoid higher taxes: Receiving a large taxable settlement can bump your income into higher tax brackets. By spreading your settlement payments over multiple years, you can reduce the income that is subject to the highest tax rates.
Does a settlement count as income for Social Security? ›Generally, if you're receiving SSDI benefits, you typically won't need to report any personal injury settlement. Since SSDI benefits aren't based on your current income, a settlement likely wouldn't affect them. But if you're receiving SSI benefits, you need to report the settlement within 10 days of receiving it.
What is the highest permanent partial disability rating? ›(4) A permanent partial disability award granted an injured worker may not exceed a permanent partial disability rating of 100%.
Is permanent partial disability a settlement? ›
While there is no average settlement for a permanent partial disability claim, you could receive a lump-sum settlement or ongoing payments to cover income loss, medical bills, and other expenses. The process of recovering a PPD settlement can be complex.
Do I get a 1099 for a lawsuit settlement? ›You won't receive a 1099 for a legal settlement that represents tax-free proceeds, such as for physical injury. A few exceptions apply for taxed settlements as well. If your settlement included back wages from a W-2 job, you wouldn't get a 1099-MISC for that portion.
Do insurance companies report claims to IRS? ›Generally, insurance companies will only be required to file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, to report cash received as payment for insurance products if the cash received is in the form of currency (U.S. and foreign coin and paper money) in excess of $10,000.
Do settlement payments require a 1099? ›The IRS requires the payer to send the recipient a 1099-MISC, as long as the settlement meets the following conditions: The payee received more than $600 in a calendar year. The settlement money is taxable in the first place.
What is the 52 week rule compensation? ›Compensation and Benefits
Your compensation payment will not be counted towards your savings threshold for 52 weeks from the date it is paid (even if the first payment is an interim payment), but the way in which you spend it will be examined for “reasonableness” of someone who is in receipt of your type of benefit.
If you make a personal injury claim after a car accident, it may affect your car insurance premium if it is part of a claim that includes the repairs to your vehicle. This is because even if the accident was not your fault, your insurer may consider that you have a higher risk of having further accidents in the future.
Is a lump sum compensation payment classed as income? ›The short answer is no. Under the Income Tax Assessment Act 1997, the payment of a lump sum amount in relation to a motor vehicle accident, workers' compensation or slip & fall compensation claim is not assessed as income and does not need to be included in your tax return.
Does Medi-Cal check your bank account? ›Furthermore, a Medicaid agency can ask for bank statements at any time, not just on an annual basis. An important note: For long-term care Medicaid, there is a 60-month look back period (30-months in California).
What is the Medi-Cal asset test? ›The purpose of this “asset test” is to limit access to Medicaid to only those who do not have access to sufficient resources to pay for their own medical care. The idea is that if people have substantial assets, they could use those to pay for the care they need.
How do I qualify for dual Medicare and Medicaid? ›Persons who are eligible for both Medicare and Medicaid are called “dual eligibles”, or sometimes, Medicare-Medicaid enrollees. To be considered dually eligible, persons must be enrolled in Medicare Part A (hospital insurance), and / or Medicare Part B (medical insurance).
What is a reasonable settlement agreement? ›
By Ben Power 8 April 2022. A settlement agreement is a contract between two parties, usually (but not always) an employer and an employee, which settles the employee's claims against their employer.
What should you not say to an insurance adjuster? ›- admitting fault,
- saying that you are not hurt,
- describing your injuries,
- speculating about what happened, or.
- saying anything on the record.
Negotiations can take weeks to several months to years and usually come to an end when both parties are agreeable to a number that has been offered. In the process of negotiating to settle, parties will typically refuse offers and make counteroffers in different amounts.
Why would an insurance company not want to settle? ›Insurance companies are businesses. Settling a claim often means paying out more than they want to. Their goal is paying as little as possible and limiting their liability in the event of an accident. For this reason, insurers may refuse to settle because they want to try to lessen how much they pay, if anything.
Why do insurance companies want to settle? ›THEY WANT TO AVOID A LAWSUIT
When an insurance company offers you a settlement, they are essentially acknowledging their client's fault in the accident. They want you to settle to avoid litigation or going to court. Insurance companies usually do not want to get legal help involved.
The insurers have 40 days to accept or dismiss the claims. They must then begin the investigation and pay the compensation benefits as decided in the settlement agreement within 30 days. These are timeframes as stated in the California Code of Regulations.
How do you respond to a low ball settlement offer? ›- Remain Calm and Analyze Your Offer. Just like anything in life, it's never a good idea to respond emotionally after receiving a low offer. ...
- Ask Questions. ...
- Present the Facts. ...
- Develop a Counteroffer. ...
- Respond in Writing.
- WRITE DOWN EVERYTHING FROM YOUR ACCIDENT. ...
- TAKE PHOTOGRAPHS OF YOUR ACCIDENT. ...
- JOURNAL ALL OF YOUR PAIN AND SUFFERING. ...
- SEEK IMMEDIATE MEDICAL ATTENTION. ...
- TELL YOUR DOCTOR EVERYTHING THAT HURTS. ...
- DO WHAT THE DOCTOR ORDERS. ...
- TURN TREATMENT INTO TESTIMONY.
- Call toll-free at 800-252-8263, 2-1-1 or 877-541-7905.
- Choose English or Spanish.
- Choose option 2. The person you speak with can help you find out if you have Medicaid or not.
Inheriting money or receiving any other windfall, such as a lottery payout, does not bar you in any way from receiving Medicare benefits. An inheritance won't prevent you from receiving Social Security retirement benefits or Social Security disability benefits either.
Who qualifies for free Medicare B? ›
Be age 65 or older; Be a U.S. resident; AND. Be either a U.S. citizen, OR. Be an alien who has been lawfully admitted for permanent residence and has been residing in the United States for 5 continuous years prior to the month of filing an application for Medicare.
Which state has the best Medicaid program? ›When uncovered costs become too great, physicians are ethically justified in refusing to accept Medicaid patients, according to Sade. “If they do accept such patients, however, they are ethically obligated to offer them the same care as they do for all of their patients,” Sade says.
Is Medicaid considered welfare? ›There are seven major welfare programs in America, they include Medicaid, Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP), Child's Health Insurance Program (CHIP), Temporary Assistance to Needy Families (TANF), housing assistance, and the Earned Income Tax Credit (EITC).
What is the asset limit for Medicaid in Pennsylvania? ›Once one has met their spend down, they will be income eligible for Medicaid services for the remainder of the period. The MNO-MA asset limits are $2,400 for an individual and $3,200 for a couple. There is no additional asset disregard.
What is the maximum income for Medicaid in PA? ›...
Who is eligible for Pennsylvania Medicaid Program?
| Household Size* | Maximum Income Level (Per Year) |
|---|---|
| 1 | $18,075 |
| 2 | $24,353 |
| 3 | $30,630 |
| 4 | $36,908 |
Any asset that was transferred, sold, or given away within the past 60 months (look-back period) must be reviewed by the county assistance office when a person applies for Medicaid long-term care.
Does a settlement count as income for SSI? ›The settlement would be placed into a trust and managed by a trustee. That trustee can pay necessary expenses and costs for the recipient. Since the trust doesn't count as income, it typically won't affect any SSI eligibility or benefits.
How much money can I have in the bank on SSI? ›The general rule is that if you have more than $2000 as a single person or $3000 as a married couple, then you will likely not be able to receive SSI benefits – even if you are disabled. These assets can include: Any money in any bank accounts, including savings, or any cash you have. More than one vehicle to your name.
Does SSI monitor your bank account? ›If you receive benefits through the federal Supplemental Security Income (SSI) program, the Social Security Administration (SSA) can check your bank account. They do this to verify that you still meet the program requirements.
What types of income do you have to report to Social Security disability? ›
There are two kinds of income you are required to report to the SSD benefits program, earned income and unearned income. Earned income is any money you receive in exchange for work you performed, whether you work for an employer or you are self-employed.
How can I protect my settlement money from SSI? ›One of the best options is to set up a special needs trust. This trust allows injured parties to keep settlement proceeds and keep their SSI benefits. The special needs trust can be used to cover services that are not covered by SSI programs such as transportation, nursing care, or therapies.
What can affect my disability benefits? ›- Financial Circumstances and SSD Benefits. ...
- Employment Income. ...
- Other Disability Benefits. ...
- Marital Status or Family Income. ...
- Retirement Benefits.
The SSA is not concerned with the value of the vehicle. Owning one $20,000 car won't count hurt you. However, owning two cars that are valued at just over $1,000 will count against you. While that may seem odd, keep in mind that they are looking at this as if you could sell excess assets in order to pay bills, etc.
Is there really a $16728 Social Security bonus? ›You can receive as much as a $16,728 bonus or more every year. A particular formula will determine the money you'll receive in your retirement process. You must know the hacks for generating higher future payments.
Can I have a savings account while on Social Security? ›Yes. If you receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) you can have a savings account.
Do millionaires get Social Security? ›Although to some degree it might seem as if billionaires and millionaires in the U.S. shouldn't be collecting Social Security, the truth is there is no law against it, and mathematically it makes sense. Social Security isn't simply a welfare program, with money handed out to anyone who asks.
Why did I get two Social Security checks this month 2022? ›The most common reason someone might be receiving two Social Security payments in a single month is that they are receiving both Social Security Disability Insurance (SSD or SSDI) benefits and Supplement Security Income (SSI) benefits.
How often does SSI monitor your bank account? ›As we explain in this blog post, SSI can check your bank accounts anywhere from every one year to six years, or when you experience certain life-changing experiences. The 2022 maximum amount of available financial resources for SSI eligibility remains at $2,000 for individuals and $3,000 for couples.
Can you have 2 bank accounts on SSI? ›Currently our system allows direct deposit only to a single account, at a financial institution (e.g. checking account, savings account, or prepaid card account). However, you may preauthorize your financial institution to transfer funds into your other bank accounts.
Do you have to file a tax return if you are on Social Security? ›
Some people who get Social Security must pay federal income taxes on their benefits. However, no one pays taxes on more than 85% percent of their Social Security benefits. You must pay taxes on your benefits if you file a federal tax return as an “individual” and your “combined income” exceeds $25,000.
How much can you make on Social Security Disability without being penalized? ›During the 36-month extended period of eligibility, you usually can make no more than $1,350 ($2,260 if you are blind) a month in 2022 or your benefits will stop. These amounts are known as Substantial Gainful Activity (SGA).
Can you go to jail for not reporting income to SSI? ›If you intentionally withhold information to continue to receive payments, you may face criminal prosecution. Criminal penalties can include fines and imprisonment.