Does A Personal Injury Settlement Affect Medicaid?

If you or somebody you care about has been injured in an accident or as a result of the negligence of somebody else, you will have the right to pursue compensation through a personal injury claim or lawsuit.

You may be able to recover compensation through a personal injury settlement, and this could help pay your medical expenses, lost wages, out-of-pocket costs, and other losses that have arisen due to the injury. However, personal injury settlements could complicate a recipient’s efforts to obtain Medicaid benefits in the future.

Medicaid benefits

Medicaid is the means-dependent insurance program operated jointly by the US government and the respective state Medicaid agencies. Medicaid exists to provide lower-income individuals with access to basic medical care at little to no cost to them.

Medicaid differs from Medicare and other government benefit programs in that Medicaid recipients are subject to stricter eligibility requirements. Some of these requirements are retroactive.

Eligibility for Medicaid

The Medicaid program in Tennessee provides health care to mostly low-income pregnant women, parents or caretakers of minor children, children, and individuals who are elderly or have a disability. In order to be eligible for Medicaid in Tennessee, individuals must meet income and resource limitations.

There are various groups that qualify for Medicaid in Tennessee, and each group has different income limits. Some groups that we will list have limits based on how much a person owns, including bank account amount, cars, and land.

Some of the following groups are covered under TennCare Medicaid:

  • Children under age 21
  • Women who are pregnant
  • Parents or caretakers of a minor child (the child must live with the recipient and be a close relative)
  • Individuals who need treatment for breast or cervical cancer
  • People who get an SSI check (Supplemental Security Income)
  • People who have gotten both an SSI check and a Social Security check in the same month at least once since April 1977 AND who still get a Social Security check

A person who:

  • Lives in a medical institution, like a nursing home, and has income below $2,349 per month, or
  • Gets other long term care services that TennCare pays for

Exempt assets for Medicaid

In general, most assets are not exempt from Medicaid eligibility calculations. There are a few exemptions for things that are considered “core items” that individuals or couples could not reasonably be expected to live without. This could include:

  • A primary residence worth up to $500,000
  • An automobile
  • Funeral contracts
  • Various types of life insurance
  • Wedding and engagement rings

However, personal injury settlements are counted as assets when it comes to determining Medicaid eligibility.

How this affects Medicaid eligibility

Unstructured personal injury settlements could potentially push Medicaid recipients over the asset limitation for Medicaid could result in disqualification. If an individual receives a personal injury settlement during a period of Medicaid eligibility, they will be prohibited from receiving future Medicaid benefits.

In order to remain eligible for Medicaid, those who have not yet applied for Medicaid may attempt to dispose of the settlement amount that is above the limit for them to receive the government assistance, or they could try to put part of their settlement into exempt assets. However, these maneuvers could be problematic.

Structured personal injury settlements often do not push a recipient over the Medicaid income limits.

Can you fix this?

After a person receives their injury settlement, a personal injury attorney in Nashville, TN will be able to work with you to help you keep your Medicaid benefits or remain eligible for benefits in the future. In these cases, a “special needs trust” may need to be established that will keep the bulk of the settlement in safekeeping and exempt from Medicaid’s means-testing.

When a person has a special needs trust, they can use the settlement funds to pay for necessary services and goods without triggering the Medicaid penalty. However, special needs trusts must be set up properly to avoid any unintended consequences.