How to Preserve Your Client’s Medicaid Eligibility
Personal injury victims who receive Non-Modified Adjusted Gross Income ("Non-MAGI") Medicaid benefits require careful settlement planning. Medicaid assets may be exceeded, and health benefits compromised if your client accepts the settlement as a cash lump sum. Your settlement consultant can help create a plan that protects your client's benefits and preserves funds for the future.
Non-MAGI Medicaid and Medi-Cal Asset Limits
To qualify for Non-MAGI Medicaid in most states1, a person must either be:
- Disabled;
- Blind; or
- Age 65 or older.
Generally, assets cannot exceed $2,000, and a married couple's assets cannot exceed $3,000. California recently made changes to this rule. In 2022, California significantly increased Medi-Cal's (California's Medicaid program) asset limits for Non-MAGI Medi-Cal programs to $130,000 or more, depending on family size. Pending approval from The Centers for Medicare and Medicaid Services (CMS), California will remove Medi-Cal asset limits for Non-MAGI Medi-Cal programs starting January 1, 2024.
How Does a Settlement Impact Your Client's Medicaid Eligibility?
When a client accepts a lump sum cash settlement, the money typically exceeds Medicaid asset limits (even in California, depending on the size of the settlement). Exceeding the asset limit will cause your client to lose Medicaid benefits and eligibility for other needs-based public assistance programs, including Supplemental Security Income (SSI), SNAP/CalFresh (food stamps), subsidized housing, and more.
Special Needs Trusts
Clients who are disabled may be eligible for a first-party Special Needs Trust ("SNT") if they are under 65 years old. The SNT can pay for goods and services not covered by government benefits. A first-party SNT can be funded with the settlement, sheltering it from being considered a countable asset by Medicaid. Funds remaining in the trust after the client's passing would initially be used to reimburse Medicaid, with any remaining balance passing to named beneficiaries.
Adults over 65 may be eligible for a Pooled Special Needs Trust ("PSNT"). However, some states impose a penalty if the PSNT is funded after the beneficiary is older than 65. Available options are based on jurisdiction.
Funding an SNT with a Structured Settlement Annuity
A structured settlement annuity provides guaranteed2, long-term, tax-free income. Unfortunately, in many states, structured settlement payments are considered countable assets.
Your client may be able to take advantage of the benefits of a structured settlement annuity by using it to fund their SNT. This approach provides the growth and safety of a structured settlement annuity and the asset-sheltering benefits of a Special Needs Trust. It can also offset certain trust-related fees.
Your settlement consultant can walk through the different options and help create a plan that best suits your client's needs.
Learn More
To learn more about these or more settlement options, contact your Sage consultant today.
1 Medicaid eligibility varies by jurisdiction.
2 Guarantees are subject to the claims-paying abilities of the issuing life insurance company.