If you are a Medicare beneficiary and are about to receive a personal injury settlement, your lawyer may have already informed you about issues that will likely arise regarding your eligibility for the program. Without careful settlement planning, you might not comply with Medicare’s rules and you could lose your benefits. Below are a few basic guidelines about Medicare compliance and some options people have to maintain eligibility after receiving an injury settlement.
Secondary Payer Rules
Medicare is a needs-based government health insurance program that assists people with hospital care, medical costs, and other expenses. Individuals who qualify are:
- Age 65 or older,
- Younger than age 65 with certain disabilities, or
- A person at any age with permanent kidney failure.
There are laws that protect Medicare’s interests when a person has been injured and has insurance coverage in addition to Medicare. The additional insurance companies might include:
- Liability insurance (including self-insurance),
- Group health plan insurance,
- No-fault insurance,
- Workers’ compensation if applicable, and/or
- Those held liable for the victim’s injuries.
Also known as “payers,” these parties are legally responsible for paying first for medical expenses related to the injury before Medicare pays. If that payment does not cover the full cost of services, Medicare may then become a “secondary payer” responsible for the balance of payment. Medicare beneficiaries risk denial of coverage for future medical expenses if they do not appropriate consider Medicare’s interests.
Complying with Government Benefits After Receiving a Personal Injury Settlement
Certain settlement planning tools can help ensure a person does not lose Medicare benefits eligibility after settlement arrives. A Medicare set-aside (MSA) is a voluntary arrangement that demonstrates a good-faith effort to fund future care without relying solely on Medicare. Establishing an MSA is not mandatory, but it adequately protects Medicare’s interests while ensuring a person’s settlement is as beneficial to his or her future as possible.
The process to establish an MSA is complex. Bank accounts must be established, health care providers must be notified, and claims must be properly paid and recorded. Our recommended four-step process is as follows:
- Determine if a MSA is legally necessary based on the individual’s anticipated settlement amount, potential cost of future related medical care, and current Medicare status and eligibility.
- Determine the appropriate allocation. An expert allocator will gather information about the beneficiary’s covered and non-covered medical needs.
- Prepare for compliance. Plaintiffs MAY choose to self-administer their MSAs. However, self-administration could mean making critical accounting errors and improperly using funds.
- Implement the most cost-effective funding solution. MSAs can be funded in different ways. An expert can weigh these options for the best tax-saving benefits, flexibility, and cost.
An expert settlement planner will take a streamlined, systematic approach to setting up the arrangement. Doing so ensures the beneficiary does not lose Medicare eligibility after settlement.
Special Needs Trust
A special needs trust allows a person to use a portion of the settlement proceeds for items that can enhance quality of life without compromising eligibility for needs-based government benefits. This type of trust is meant to supplement financial help from government programs. Funds from a special needs trust can be used for “non-countable” services, expenses, or equipment. These items include (but are not limited to):
- A home
- Home furnishings and personal belongings
- A vehicle
- Occupational goals, such as the pursuit of a college degree or vocational training
- Essentials for self-support
- Life insurance policies
- Burial expenses
Establishing a trust provides peace of mind that a person with special needs will have funds well into the future to cover these important costs.
There are different types of special needs trusts, but each type enables a disabled individual to receive settlement proceeds while maintaining government benefits eligibility.
Getting Expert Help
By taking a logical approach to compliance with government benefits programs, injured individuals can be assured they are complying with secondary payer laws and that coverage for their future medical needs will be protected. However, each beneficiary’s situation is different and must be reviewed as such. If you are receiving benefits and are about to reach settlement, we would be happy to answer your questions about compliance. Feel free to comment below with any questions or contact my settlement planning firm, Milestone Consulting, for assistance.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).