HEALTH CARE OBLIGATIONS WHEN SETTLING A PERSONAL INJURY CASE
FEDERAL, STATE AND PRIVATE
Under the laws of most states, when a plaintiff receives a personal injury settlement, he or she must use part of that settlement to pay back whoever paid for the medical care needed to treat the injury, whether it’s the government, your employee health plan, or your health insurance company. These health care “liens” or “reimbursement obligations” are now a part of almost all personal injury settlements. Yet many plaintiffs are not aware that they may have such obligations when they settle their personal injury case. Courts, defendants, and health care providers are placing stronger emphasis on satisfying health care liens related to a personal injury settlement. Laws and regulations, and the healthcare coverage policies that interpret them, often place the burden on the plaintiff to verify whether or not a health care provider has a lien and, if so, to resolve it. Therefore, as a plaintiff, you should take a few moments to make sure you understand your health care benefits, your obligations and your rights. Doing so will ensure that your personal injury claim best serves you by proactively evaluating and resolving the health care provider’s interest in the most efficient and favorable fashion as well as providing for your continued access to good quality health care.
What is a Lien?
We often think that healthcare coverage is meant to pay for all of our medical needs, no matter what the cause. However, the concept behind health care liens in personal injury settlements is that the responsible/negligent party should pay the medical bills. Therefore, regardless of your past premiums, co-pays or deductibles, if a third party (i.e a “defendant” in a personal injury claim) is liable for your injury, that third party ultimately should pay for your medical bills, not your health care provider. Most healthcare plans, whether provided by the government (federal or state programs) or by your employer, create their right to a claim or lien on any settlements when you originally became entitled and accepted coverage. This right of recovery is disclosed within the plan documents, but many individuals are not be aware of this or even think about it because most never foresee themselves a victim of a personal injury event.
A health care provider’s lien is typically focused solely on injury-related medical expenses paid for from the date of the injury through the date of settlement.
What are the Different Types of Health Care Providers?
As mentioned above, any health care plans’ right of recovery is disclosed in the plan documents. The first order of businesses is to have a strong grasp of the type(s) of coverage you currently receive or expect to rely upon in the future. Within the U.S., there are numerous ways for obtaining health care coverage. This document describes three of the most prevalent: Medicare, Medicaid, and private health insurance. Medicare is the federal government’s healthcare program, it provides healthcare for those 65 or older or those under 65 who are disabled, suffering from permanent kidney failure, or diagnosed with Lou Gehrig’s disease. Medicaid is the state government’s needs-based healthcare program. Each state administers its own program; therefore the laws for each program may vary. For the government programs, reimbursement obligations or liens arise from statutes. This occurs as soon as a recipient of government (state or federal) healthcare receives the first dollar of coverage. Private
insurance is administered by many different insurance companies. Most Americans on private insurance get their coverage through their employer. For this type of insurance, lien obligations arise out of a pre-existing contract between the client and health plan.
This settlement planning guide focuses on clients who are settling a personal injury case and who are receiving Medicaid.
Medicaid: What Is It and What Are the Rules?
Supplemental Security Income (“SSI”) and Medicaid are needs-based programs. Many individuals receive SSI due to poverty and others receive SSI due to disability. In most states, disabled people who qualify for SSI, automatically become eligible for Medicaid, which is the joint federal and state program for medical-care coverage for the needy. Medicaid benefits can cover items like prescription medication, transportation, and home-based care.
Under certain circumstances, Medicaid will pay for either all or a portion of your injury related care when another party is responsible. If you are able to recover from the party responsible for your injury, you must repay Medicaid. In many states, acceptance of Medicaid benefits constitutes assignment to the state of the right to third party benefits. More simply stated, when a person receives Medicaid benefits from the state, the person agrees, by accepting those benefits, to reimburse the state for injury related care if the person recovers from the party that is responsible for the injury.
Medicaid generates a “lien” only where a Medicaid beneficiary’s injuries are associated with third-party liability. There is no similar “lien” in the case of maintaining SSI benefits. Thus, when a third party is liable, every state must provide for recovery of their medical assistance expenditures. This Medicaid lien always runs from the date of the injury and ends on the date of the settlement because that is the only period for which the third party is liable. Further, the Medicaid lien is limited to those injury-related medical expenses paid and does not include any payments Medicaid would have paid if the incident (giving rise to liability) had not occurred.
What Does “Needs-Based” Mean?
The term “Needs-Based” refers to fact that Medicaid is only available to people who are under certain income and/or asset thresholds. For example, in 2006, a single individual who qualifies for SSI can receive up to $603, and a married person up to $904, not including state additions to those benefits. And, a single person with income of more than $603 (or other amounts, depending on the state lived in) and countable assets of more than $2,000 may not be eligible for SSI and/or state Medicaid, depending on the circumstances. Married persons typically can own up to $3,000 in countable assets.
What are the Different Types of Medicaid Programs
Typical Medicaid recipients are children and their parents, the elderly, and people with disabilities. According to federal guidelines, the states must offer Medicaid eligibility to low-income pregnant women, low-income families with children, and SSI recipients. State also may choose to cover other groups of people under Medicaid. For instance, states may choose to have Medically Needy (MN) programs which allow people who do not meet the Medicaid income requirements to be eligible for Medicaid if their income minus their medical expenses falls below a certain limit. States also may allow Categorically Needy (CN) people to receive
Medicaid benefits. Categorically Needy people are working individuals with disabilities who do not qualify for Medicaid because their income exceeds the eligibility requirements. Furthermore, recipients of Medicaid can be “dual eligibles.” “Dual eligibles” are individuals who are eligible for Medicare Part A and/or Medicare Part B and for some form of Medicaid benefits.1
Finally, most if not all states have Waiver Programs, also called home- and community-based services (HCBS) waivers. For the most part, these programs were created to serve as an alternative to institution-based care. Waivers are generally used to enable states to provide community based health care, which is health care in the recipient’s own home or community, instead of institutional services. Waiver Programs typically allow receipts to have more income and assets (and still be eligible) than other Medicaid programs.
Are The Medicaid Lien Rules the Same In Every State?
It is important to evaluate the Medicaid agency’s right of recovery, recovery procedures and case law that affects the agency’s right of recovery. One state may require the Medicaid beneficiary to put the state on notice that there is a possible third party recovery. Another state may not require notice, but may still pursue the beneficiary. Additionally, if you have received Medicaid benefits in multiple states for the injury related care, you may be obligated to reimburse each state.
What Happens If I Ignore Medicaid’s Lien
The Medicaid recipient – and often the attorney as well - has aduty to cooperate in the Medicaid lien recovery process, with failure to cooperate resulting in denial of future benefits.
How Long Does in Normally Take to Resolve a Medicaid Lien?
In many states, Medicaid liens can be resolved rather quickly. Due to recent changes in the laws, in many states you cannot settle your personal injury case unless Medicaid consents to the settlement, and you first agree with Medicaid on the amount of the lien. Therefore, often these liens are resolved at the time of settlement. However, if you and your attorney are unable to reach an agreement with the state’s Medicaid agency regarding the amount of the lien, a court hearing may be necessary, resulting in some delay.
What Can I Do to Speed Up The Process?
Keep an accurate journal of all the medical treatment you receive that is related to your injury, including the name of the provider and the date and type of service. Typically, Medicaid has up to 90 days to process a medical expense claim. Oftentimes, this process takes longer because the medical care provider does not bill on a timely basis. Review your medical records and if there are discrepancies in billing, follow up with the medical care provider to ensure that it has billed on a timely and accurate basis. If you are still receiving care at the time of settlement, work with the medical care provider to determine the last injury-related medical expense that is to be submitted to Medicaid. This process can take a long time, but failing to follow these tips often results in a longer lien resolution process.
1 Id. at 122-129
Can I Challenge or Appeal Medicaid’s Lien?
As mentioned above, it may be necessary to involve the court if you and your attorney are unable to come to agreement with Medicaid about the amount of their lien at the time of settlement. A recent U.S. Supreme Court decision makes it clear that states do not have a priority right to your entire settlement – they can only be reimbursed from that portion of your settlement that represents payment by the third party (defendant) for your medical expenses (as opposed to payment for your lost wages, pain and suffering, and other non-medical losses.). Oftentimes, it is necessary to involve the court to determine what part of a settlement actually represented payment by the defendant for your medical losses. Some states will compromise their lien amount, based upon hardship or other criteria, without requiring court involvement.
Does Medicaid Have to Pay Any of The Attorney Fees and Costs Associated with My Settlement?
Under some state laws, attorneys’ fees and expenses are subtracted from the gross settlement that involves a Medicaid beneficiary.
What Can Be Done To Ensure the Most Favorable Result?
Your attorney and his or her firm dedicate their time to maximizing any settlement you may receive. However, the rules surrounding healthcare liens concern a different area of the law requiring a different focus. Both private and governmental healthcare liens constitute a complex field with potential impact on future health care coverage for you and your family.
The Garretson Law Firm’s dedicated staff has a sound knowledge of these developing laws and legal processes and can help resolve these matters in your best interest. The Garretson Firm’s experience helps to provide you with the best result, maximizing your recovery and protecting your health benefits.
What Does This All Mean to You, the Plaintiff?
As mentioned, you may have obligations to a governmental healthcare program or your employee health plan if it has paid for medical care resulting from your injuries. The Garretson Law Firm helps both you and your attorney to satisfy these obligations, to protect your healthcare coverage, and to resolve any lien in your best interests to help maximize your settlement.
What Can I Do to Protect my SSI and Medicaid Benefits after the Settlement?
As discussed above, “Needs-Based” government programs like SSI and Medicaid that provide you with monthly income or payments for medical services have strict financial eligibility limits. Without careful planning, a settlement award may cause you to lose your eligibility for those programs.
Certain items, such as your home, one automobile (if used for travel to and from the doctor’s or employment), a Special Needs Trust, and a limited amount of home furnishings and jewelry may not be counted as available resources for purposes of determining eligibility. In this regard, if you are currently receiving needs-based benefits, it may be wise for you to use their settlement
proceeds to purchase and/or be placed in “exempt” items within the same month that you receive their check.
A Special Needs Trust is a special type of trust that allows a disabled person to maintain financial eligibility for some “needs-based” public assistance benefits while preserving his or her settlement award (and/or other assets) in trust for supplemental needs. While not appropriate for everyone, the end result of establishing a Special Needs Trust is that qualified beneficiaries can receive certain “needs-based” public benefits that meet their essential needs (such as Medicaid, food stamps, and subsidized housing) while maintaining a supplemental fund that is available to meet their special or supplemental needs (which are not provided by public benefits).
Whether a private Special Needs Trust [(d)(4)(A)] or a public Pooled Trust [(d)(4)(C)], there are guidelines for using the money in the trust. It is generally best for an independent, third party trustee to use the trust funds to directly purchase from providers “supplemental” goods and services, rather than food, shelter, or clothing items that government programs are intended to cover. Despite this restriction, these trusts are rather flexible and can be used in a manner that greatly improves an injured person’s quality of life. The trustee can use the Special Needs Trust money for such supplemental goods and services.
In some cases, it does make sense for the trust to pay for basic items, such as housing costs. It is important to consider the effect of these expenditures on your benefits prior to making such payments, as they may cause a decrease in your SSI benefits or an increase in your Medicaid “spend-down” requirements.
Because these trusts best achieve needs-based benefit preservation goals where they are not changeable, clients generally cannot change their minds and take all their money out of the trust. If they recover and are no longer disabled, they may take steps to terminate the trust.
As an alternative to placing their proceeds in “exempt” items or in a traditional Special Needs Trust or Pooled Special Needs Trust, you (especially with small settlements) might consider spending down your settlement proceeds on existing debt (such as credit cards or utility bills). If you do not have such debt, perhaps you can call your utilities providers to see if you can pay, for instance, four or five months of your gas bill in advance. Again, you should accomplish this in the same month in which they receive your settlement check.
You should know, however, that there is a chance that you will lose at least one month of your SSI eligibility even if you use one of the strategies mentioned above because many Social Security case workers interpret the receipt of settlement proceeds to be the equivalent of receiving income in the month of settlement, which in turn, triggers a one month period of ineligibility, despite the “spending down” or transferring assets to a Special Needs Trust.
You should know that NOT disclosing the settlement to each government agency case worker within 10 days of the receipt of settlement proceeds can result in a loss of benefits, depending on the circumstances. All recipients of government benefits have a duty to notify the agency that is responsible for administering their program whenever there is a material change in their circumstances. Becoming a beneficiary of any trust is a material change in circumstances, and the individual must provide the agency with a copy of the trust document. Local legal counsel for the agency will review the trust to determine whether it meets all of the technical and legal requirements for being treated as a valid Special Needs Trust.
Also know that giving away these settlement proceeds to a family member can result in disqualification of your benefits or in the government seeking reimbursement for past benefits paid on their behalf.
Please note that these are just suggestions based upon some general rules regarding needs-based government benefits. These rules may or may not apply to the specific program benefits that your clients are receiving. If you have concerns about your eligibility, you should contact a qualified disability lawyer.
Conclusion
1)
Your attorney has taken all the above mentioned issues into account and has committed to securing the most favorable results for you. These efforts include having the resources with the appropriate skills to both evaluate your health care provider’s right of recovery and satisfy their interest in the most efficient and favorable fashion. By providing you with these materials, it is evident that your attorney is committed to making sure you are aware of the obligations associated with your health care plan. Please be aware the firm has a formalized means of addressing these issues and we ask that you do not duplicate the efforts as it could lead to significant delays.
2)
We trust you find this guide beneficial and that it provides you a peace of mind that your attorney has taken into consideration your best interest in both securing the best results in your settlement and your continued access to quality health care.
