What is the Difference Between Medicare and Medicaid? Protecting Your Clients on Government Benefits
Medicare and Medicaid are often confused, yet each has very different requirements. If your client is Medicare- or Medicaid-eligible, it is crucial to understand the financial implications of a settlement.
What are Medicare benefits?
Medicare is an entitlement benefit. If your client had Medicare taxes taken out of their paycheck, they are entitled to Medicare coverage once they turn 65. There are a few other instances in which individuals can become Medicare-eligible.
Because Medicare benefits are earned, a settlement should not impact them. However, if Medicare pays for expenses that the settlement funds should have covered, your client could be penalized financially, and they could lose Medicare benefits. A Medicare Set-Aside (MSA) serves as a vehicle to hold funds for future settlement-related medical care. Funding an MSA with a structured settlement can provide valuable cost-savings, on top of ensuring the funds are there for future medical needs.
What are Medicaid benefits?
Medicaid is a needs-based benefit that provides health care coverage for low-income individuals. Eligibility is determined using an asset test; individuals cannot have more than $2,000 in assets, and married couples cannot have more than $3,0001. If an individual accepts a lump sum cash settlement that exceeds the asset threshold, s/he will lose Medicaid benefits.
While some may assume that a settlement can adequately replace needs-based benefits, the reality is that the cost of doctor’s visits, surgeries, medications, and medical equipment can quickly deplete the settlement. Your client may be eligible to place the settlement funds in a special needs trust (SNT). An SNT allows the individual with a disability to retain eligibility for needs-based benefits. SNT distributions pay for needs not covered by Medicaid, SSI, or other needs-based government benefits.
Contact Sage for Government Benefits Preservation
Your client must take steps to protect needs-based government benefits before the settlement is finalized. For more information, contact your Sage consultant today.
1 As of July 1, 2022, California raised its Medi-Cal asset limits. More information can be found here.