New Law Alert!! — Medicaid Claims Against Personal Injury Lawsuits

February 4, 2014

This edition of the Koldin Report E-Newsletter continues a series of newsletters on the use of Supplemental Needs Trusts for individuals with disabilities. This edition reviews a major change in the law regarding personal injury cases with settlements in favor of a person with disabilities. In the previous issue we reviewed how a person with disabilities could transfer his/her own savings and certain income to a First Party Supplemental Needs Trust. One example provided in this prior newsletter was how a First Party Supplemental Needs Trust can be very valuable in a personal injury situation. The injured person is no longer required to deplete personal injury settlements on the cost of care. A Supplemental Needs Trust can protect the settlement so he/she can qualify immediately for Medicaid. All past issues are saved on our website can be found by clicking here. OLD LAW: In a case decided a few years ago, the U.S. Supreme Court held that the Medicaid Agency has the right to be reimbursed for expenses it paid on the injured person, but solely from the portion of the personal injury lawsuit award allocated to medical expenses. Funds allocated to pain and suffering or lost wages could be retained by the injured person. Any funds remaining after the Medicaid reimbursement had been satisfied could then be transferred to a “First Party Supplemental Needs Trust.” NEW LAW: In the recent federal budget agreement under the Bipartisan Budget Act of 2013 enacted by Congress and signed by the President, the U.S. Supreme Court restriction on Medicaid recovery being limited solely from the portion of the award allocated to medical expenses has been reversed. Now, effective October 1, 2014, the Medicaid Agency will be entitled to be reimbursed from the entire personal injury award. This means that if the Medicaid Agency has spent more on medical care than the amount of the personal injury award, the Medicaid Agency will be entitled to collect the entire award and the injured person will receive nothing. We encourage all of our newsletter readers to contact their Congressperson or Senator and urge them to repeal this legislation. It is critical that parties to a personal injury case where Medicaid is involved be aware that the Medicaid Agency is entitled to reimbursement from the entire settlement award and therefore when negotiating a settlement, the Medicaid Agency should be consulted to negotiate the amount of the recovery it will seek. Sometimes, to encourage settlements and in the interest of fairness, the Medicaid Agency may accept a lower recovery amount. Once the settlement has been negotiated, there should then be a discussion on the advisability of establishing a First Party Supplemental Needs Trust to hold the funds. The Koldin Law Center, P.C. is available to review your options regarding establishing a Supplemental Needs Trust. We have been retained by many personal injury attorneys to prepare Supplemental Needs Trusts for their clients. The next issue of the Koldin Report E-Newsletter will review how others can set up a Supplemental Needs Trust for the benefit of a person with disabilities so they can make gifts to that person. This is commonly known as a “Third Party Supplemental Needs Trust.”