Do I Have To Report My Settlement To Medicaid?

Do I Have To Report My Settlement To Medicaid?

image of a social worker reporting a settlement to medicaid office

If you are injured by the negligent actions of someone else, you may be entitled to a personal injury loan.

While this settlement is intended to compensate you for your costs, lost income, damages, and emotional pain and suffering, a settlement could impact your ability to obtain future Medicaid benefits. 

Your eligibility criteria for Medicaid will dictate whether a lump sum personal injury payment will affect your coverage. Today’s guide outlines the different types of Medicaid eligibility categories and the different ways in which lump sum settlement impacts benefits.

What Are Medicaid Benefits?

Medicaid is a means-dependent insurance program jointly operated by the U.S. government and state Medicaid agencies. Medicaid is intended to provide access to basic medical care for those with lower incomes at little or no cost. 

Unlike other government benefit programs, Medicaid subjects applicants to much stricter eligibility requirements. Some requirements are retroactive.

Different Types of Medicaid Eligibility Categories and How They Impact Medicaid Coverage

Lump sum payments affect Medicaid eligibility in different ways depending on the eligibility category. 

These are the two main Medicaid categories: 

  1. MAGI (modified adjusted gross income) Medicaid
  2. Non-MAGI Medicaid

1) MAGI (modified adjusted gross income) Medicaid

Modified adjusted gross income Medicaid is intended for: 

  • Children aged under 19.
  • Adults aged 19 to 64 without Medicare coverage.
  • Parents
  • Pregnant women.
  • Caretaker relatives with or without Medicare coverage.
  • Certified disabled individuals without Medicare coverage.

To qualify for this category of Medicaid, your household’s monthly income must not exceed state limits. Income limits vary from state to state.

MAGI Medicaid has no asset or resource limits, meaning that property, bank accounts, cash savings, and other personal assets are not qualifying factors for MAGI Medicaid eligibility.

Per modified adjusted gross income Medicaid, a lump sum payment counts as income if applicable income tax rules consider the lump sum payment as income. 

For those with this type of Medicaid coverage, it is unlikely that a lump sum settlement loan will impact your benefits immediately. Regardless of whether or not your payment pushes your income beyond the qualifying monthly limit, you should get Medicaid coverage until the initial authorization period expires. You may be deemed ineligible to re-certify, but you need only wait for a month or so before reapplying. 

2) Non-MAGI Medicaid

This type of Medicaid is intended for the following:

  • Adults aged over 65.
  • Recipients of Medicare.
  • Recipients of SSI
  • Recipients of TANF
  • Recipients of foster care

To qualify for non-modified adjusted gross income Medicaid, total household income must be below state monthly limits. Additionally, resources like property, bank accounts, cash savings, and other personal assets must be lower than state resource limits.

For this type of Medicaid, lump sum payments are considered as income for the month payment is received. There is an asset-resource test for non-MAGI Medicaid.

If a personal injury settlement causes your monthly household income to exceed state monthly income limits, you will only be ineligible for that month. You may also be held accountable for any Medicaid services received in that month.

If you retain any of the payment moving forwards, you may be held liable for the costs of all Medicaid services received during the months in which your household income exceeds state resource limits. 

An effective way of minimizing the sum repayable to Medicaid is to transfer the lump sum settlement in the month that payment arrives. Taking this approach, you will limit your exposure to Medicaid ineligibility to just one month.

What Assets are Exempt for Medicaid?

Most assets are considered countable assets for the purposes of establishing Medicaid eligibility. These are the main exceptions:

  • Your primary residence valued at up to $500,000.
  • A motor vehicle.
  • Some types of life insurance.
  • Funeral contracts.
  • Wedding or engagement rings.

Personal injury loans are considered as countable assets when establishing eligibility for Medicaid.

The prevailing factor for eligibility, though, is your present financial situation. Medicaid is intended to provide low-cost medical care for those without private health insurance plans and without access to employer health insurance plans. 

For individuals without disabilities, Medicaid determines financial eligibility for coverage by assessing your countable assets. If those countable assets exceed the state limits, your Medicaid eligibility could be rescinded.

What are countable assets, then?

What Are Considered Countable Assets for the Purposes of Medicaid?

Government-funded financial assistance is intended for those without the assets to fund care services. If you request coverage from Medicaid, the office will assess your financial resources by examining your countable assets. 

A countable asset is any asset that may count against the state asset limit used to establish who qualifies for Medicaid coverage.

Countable assets include:

  • Property
  • Bank accounts
  • Liquid funds
  • SSI (social security income)
  • Bonds
  • Stocks
  • Mutual funds

Beyond your countable assets, the main qualifying factor for Medicaid coverage is your placement on the federal poverty line. 

The Relationship Between the Federal Poverty Line and Medicaid Eligibility

Your placement on the federal poverty line depends on: 

  • Your monthly and annual income.
  • The number of people in your household.

Your placement on the poverty line is used to establish whether or not you are eligible for Medicaid and Medicare. Although monthly income limits vary from state to state, household monthly income must not exceed $2,000 to qualify for Medicaid.

You must not own property exceeding the monthly minimum income value, typically items from $2,000 to $3,000. This limit only applies to non-essential items.

Will My Personal Injury Settlement Affect My Medicaid Coverage?

If a lump sum payment from a personal injury settlement pushes your monthly income over the state limits, this may render you ineligible for Medicaid coverage. 

Any lump sum payment that adds to your countable assets may mean you become ineligible for Medicaid benefits. 

Do I Have to Report My Settlement to Medicaid?

Yes, you must report any lump sum award to Medicaid.

Recipients of MAGI Medicaid must report lump sum payments to NYSOH (New York State of Health). In most cases, recipients will maintain Medicaid benefits throughout the initial authorization period.

Recipients of non-MAGI Medicaid must report lump sum payments to HRA (New York City Human Resources Administration) in the month payment is received. HRA will then recalculate your Medicaid eligibility taking the payment into account.

What Are the Consequences of Not Reporting a Lump Sum Payment to Medicaid?

If you fail to report a lump sum personal injury settlement to Medicaid in the month of receipt, you could be required to reimburse Medicaid for the cost of any services received during months when you were ineligible if this information comes to light.

How Can I Protect My Medicaid Benefits?

If you are expecting a personal injury settlement and you are currently in receipt of Medicaid benefits, the best way to protect your coverage is to seek expert legal guidance. While it is challenging to maintain Medicaid coverage, how you use the lump sum after settling your case is the deciding factor in whether you remain eligible.

Personal injury settlements, as outlined above, are considered as countable assets. That said, this only becomes such when the payment is transferred into your bank account for immediate use.

To explore the most effective way of reallocating those funds, consider retaining a personal injury attorney on a contingency fee basis. They can advise you on the best steps to take to reallocate funds from a lump sum settlement without jeopardizing your Medicaid coverage – by using a Special Needs Trust, for instance. An attorney may refer you to a financial professional specializing in this field.

What Are Special Needs Trusts?

A Special Needs Trust is typically intended for those without the capacity to manage substantial sums or with impaired mental faculties. These trusts can also be created to store lump sum payments from personal injury settlements. 

By locking the funds up in this type of trust, you will be prevented from freely accessing the funds. As such, you may find you remain eligible for Medicaid coverage since you will not have immediate control over the funds.

Systems and guidelines are implemented to preserve the funds for a specified purpose. Typically, funds may only be withdrawn to meet the costs of accident-related expenses.

Placing the settlement funds in trust means they are no longer considered a countable asset. The funds will be sent to medical providers who had placed liens on them, meaning you would otherwise be spending the funds in any case.

Tribeca Lawsuit Loans: Fast and Risk-Free Settlement Funding

If you are waiting for a personal injury case to settle, you may find yourself facing mounting expenses for medications, surgery, and rehabilitation, while at the same time needing time off work and losing income. 

One risk-free solution is to consider pre-settlement funding, otherwise known as lawsuit loans or legal funding. At Tribeca, we provide a cash advance of between $500 and $2 million based purely on the strength of your personal injury case. Your income, employment status, and creditworthiness are not relevant to your application.

You are only legally obliged to repay this cash advance if you win your case. Get a cash advance in 24 to 48 hours from Tribeca by calling (866) 388-2288.

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