Are Your Client's Government Benefits in Jeopardy?
With continuing state- and federal-level battles over Medicaid access, millions of disabled and low-income Americans walk a tightrope of trying to maintain healthcare coverage. But did you know that claimants involved in legal settlements are particularly vulnerable to losing their Medicaid benefits—and more?
When the Settlement Proceeds Aren’t Enough
While the common public may assume that settlement proceeds preclude an individual from needing government assistance, the opposite is often true. The net settlement may not sufficiently cover the claimant’s medical and daily living needs. In reality, the financial impact of an injury can be devastating, and even a multi-million dollar settlement can be eaten up quickly by the cost of liens, attorney fees, medical equipment, medications, physical therapy, adaptable vehicles and home modifications, attendant care, and so on.
Accepting settlement proceeds as a lump sum cash payment almost always renders a claimant ineligible for needs-based government benefits. To make matters worse, many claimants are unaware of the implications until it’s time to settle. That’s why it is vitally important to understand which benefits may be affected and work with an expert to preserve the benefits and the settlement proceeds.
AFFECTED: Needs-Based Benefits
Needs-based government benefits are programs that have income and/or asset tests. In many states, assets totaling as little as $2000 ($3000 if married) can be enough to render an individual ineligible for certain benefits. Programs that could be negatively impacted by accepting a lump-sum settlement include, but are not limited to:
Medicaid (Medi-Cal in California): A joint state and federal program that provides medical coverage for low-income individuals and families.
Supplemental Security Income (SSI): A federal program that provides cash to meet basic needs such as food and shelter.
Supplemental Nutrition Assistance Program (SNAP; CalFresh in California): A state program, formerly referred to as “food stamps,” that helps low-income individuals and families purchase food. Income and asset eligibility may vary by state and/or county.
Temporary Assistance for Needy Families (TANF): A state program that provides temporary financial and medical assistance to families in need. Eligibility is based on family size and income.
Subsidized Housing: Assists with the cost of housing and rent; is sometimes referred to as HUD or Section 8 housing.
Children’s Health Insurance Program (CHIP): A state program that provides medical coverage for children whose families’ incomes are too high to qualify for Medicaid, but too low to afford private healthcare coverage.
NOT AFFECTED: Entitlement Benefits
Unlike needs-based benefits, entitlement benefits do not have income tests nor asset tests to determine eligibility. As a result, they should not be affected by accepting a lump sum settlement. Examples of entitlement benefits include:
Social Security Disability Insurance (SSDI): Delivers Social Security benefits to the recipient based on two factors: 1) the number of years of employment during which the individual contributed to Social Security via FICA tax and 2) Social Security’s determination that the person is disabled.
Social Security Retirement Income: Provides Social Security retirement benefits for a United States taxpayer who was covered under Social Security and received credits for their previous employment record.
Medicare: A federal health insurance program for people 65 years of age and older, some disabled people under the age of 65, and individuals who meet certain other criteria.
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