Attorney Resource: Protecting Medicaid Eligibility
DELAWARE COUNTY BAR ASSOCIATION
2023 BENCH BAR CONFERENCE
The need to protect a clients’ right to State/Commonwealth funded Medicaid/Medical Assistance benefits applies in many fields of law. Many recipients of this type of medical coverage qualify on the basis of ‘low income/low assets’. A lump sum payment or a stream of money may disqualify Your Client from ongoing coverage for necessary medical treatment, because they no longer meet the law’s definition of ‘low income/low assets’.
It may also expose the client, another insurer, or the lawyer, to liability – including the possibility of reimbursing Medical Assistance for any payments that should not have been their responsibility to pay, or legal malpractice (if counsel knew or should have known) that there is an issue involved. Even if not experienced in the manner to address the issue – identifying the issue is a necessary first step.
The new found money may come from a lawsuit settlement or verdict (including personal injury, workers’ compensation, medical malpractice, elder abuse, ADA or Civil Rights claim), an inheritance, lottery – or any other source. A stream of money may come from a job obtained after they initially qualified for such benefits, a raise that elevates their weekly paycheck over the threshold, or some other type of ‘benefit’ such as workers’ compensation, Short or Long Term Disability benefits, Social Security or even an incorrectly formed trust.
While this presentation relies on a Workers’ Compensation claim as the example, the issue could arise in almost any field of law. Possessing the knowledge to AT LEAST be able to identify the issue applies to virtually all Lawyers. Your client’s sudden influx of money may have consequences beyond the reason for which you were retained – and may have direct or indirect impact on your advice, strategy – and the legal duty owed to your client.
Understanding the consequences to your client, other entities involved – and possibly even for counsel – may impress upon you the significance of identifying the issue and the need to take action.
Medicaid has an ABSOLUTE LIEN for any bills they pay which should have been/should still be the responsibility of workers’ compensation (or some other insurer). The lien can not be avoided by creative language to the detriment of Medicaid’s lien.
For any defense counsel: Ask yourself: “How absolute is a workers’ compensation insurer’s subrogation lien regarding personal injury settlements?”
This lien is no different. In fact, as a lien of the Commonwealth of PA (the entity that wrote the Law, pays the medical bills, and then defines their own right to subrogation) – it is possibly ‘more absolute’.
Omitting Medicaid at paragraph 13 (and/or failure to report claimant’s receipt of weekly wage loss and medical benefits to Medical Assistance) may subject the claimant, insurer (and possibly counsel) to a variety of consequences; failure to notify a private health insurer, STD/LTD plan, Sickness & Accident plan etc. may have similar consequences. This presentation is focused on Medicaid.
- The claimant may become disqualified for Medical Assistance benefits;
- One or more entities may be personally liable to satisfy any past and future lien;
- One or more entities may be liable for fraudulently concealing the other benefit plan’s rights;
- Counsel may be liable for Legal Malpractice by failing to inform their client of the possible loss of coverage and/or obligation to pay the lien personally.
The issue becomes particularly significant where:
- Medicaid (or another plan) has actually paid for treatment that should have been paid by workers’ compensation, and the government actively pursues repayment of their lien; or
- Claimant (or a family member) has a serious health issue unrelated to the work injury which requires ongoing medical treatment (cardiac issues, diabetes, blood pressure etc.).
- Should Medicaid/private insurer assert a credit against future payments – who will cover the future treatment needs?
- Should claimant lose Medicaid/Medical Assistance (or their private health insurance) – who will cover the future treatment needs?
- If Medicaid/private insurer pursues their right to subrogation, might the entire value of the settlement be consumed by repayment?
- Might a client trying to save their coverage ‘blame’ counsel for their failure to disclose the issue?
- Might an investigation reveal the advice/absence of advice of counsel was contributory?
- Might ‘extreme’ cases – involving substantial medical payments, or evidence of willful intent to conceal the issue – result in civil or criminal sanctions? And if so – against which entities?
Why Workers’ Compensation?
Workers’ Compensation presents a great example to illustrate the duties of counsel and the process involved, because EVERY workers’ compensation settlement is required to be Approved by a Workers’ Compensation Judge (WCJ), based on two elements:
- A settlement form called a Compromise & Release Agreement, created by the Commonwealth of Pennsylvania, Department of Labor & Industry; and
- The WCJ’s duty to ensure the claimant understands the full legal significance of the settlement they are entering, and its impact on their rights and options. Every Compromise & Release Agreement [C&R] expressly identifies the issue in clear, unambiguous language. Paragraph 13 of EVERY C&R Agreement states [emphasis added]:
- List the benefits received by, or available to the employee, e.g. Social Security (disability or retirement) private health insurance Medicare, Medicaid, etc.
Many/most C&R Agreements include specific terms and even precautionary language regarding Social Security and Medicare, but disregard ‘other’ benefits.
Perhaps this is due to Paragraph 14 specifically requiring an explanation of the manner of protecting Medicare’s interest – but no paragraph dedicated to Medicaid (or ‘other’ benefits).
It may also be due to the Federal government’s efforts to pursue and protect their lien, the frequency of CLE seminars explaining the consequences, or even the money that vendors can make administering Medicare Set Aside funds.
Whatever the reason, Medicaid’s interest and the possible consequences are largely disregarded – by ignorance of the issue, ‘hoping’ it just doesn’t come up, or an intentional design to avoid it.
C&R Approval Hearing
“Full Legal Significance”
As above, every workers’ compensation settlement must be approved by a WC Judge, based on a Formal Decision finding that claimant’s rights and options have been explained, and claimant understands the full legal significance of entering the settlement.
Paragraph 13 MUST identify all other benefits received or available to the claimant.
The difference between Medicaid vs. Medicare should be explained to claimant, to ensure the issue is identified correctly, and that claimant understands the impact of settlement on their right to these different types of benefits.
- What does (or should) happen if paragraph 13 is blank, states Not Applicable, or identifies only Social Security and/or Medicare – but not other benefit types?
- MUST counsel or the WCJ ask claimant on the Record whether they have received, or have available each type of benefit stated in para. 13: (e.g. Social Security disability or retirement, private health insurance, Medicare, Medicaid, etc.)?
- MUST the C&R Agreement or Record reflect that counsel has specifically explained the risks involving those other benefits (ie losing the benefits; being liable to repay the lien – past and future; potential fraud if there is willful concealment of the settlement)?
- Can a WCJ find that claimant “understands” their rights, and what ‘other benefits’ they may be losing, jeopardizing, or risking by entering a settlement – if this issue is not addressed? [ie. The FULL legal significance of the settlement – on all rights].
- SHOULD the Record include evidence that any other benefit plan has been placed on Notice of the settlement?
Note: several facts are omitted at this point, to demonstrate the significance of their absence.
Claimant is approved for SSD and SSI after High School for a learning disability. (1995)
He is not capable of handling his financial affairs, so a parent is named the benefit trustee.
He is covered by Medicare and Medicaid (for bills and co-payments not covered by Medicare).
He has tried to find work several times, each for very short durations.
In 2005 – 10 years after the SSD/SSI award – he tries his 5th job, at a salary that would exceed the limits permitted by one or more ‘benefit sources’.
During the first week, he suffers a disabling injury, but his WC claim is denied.
He continues to receive SSD/SSI/Medicare/Medicaid during litigation of a Claim Petition.
He wins the claim in 2007, and is awarded weekly wage loss benefits at a rate of $500.00/week, retroactive to the date of injury in 2005.
After the attorney fee is deducted, claimant receives a lump-sum payment of $35,000.00 for the back due benefits, and ongoing weekly benefits.
Claimant receive his wage loss benefits from the award in 2007 through settlement in 2023.
In 2023 the parties negotiate an agreement to resolve the claim for $125,000.00.
Claimant is entitled to $100,000.00 after deduction of the 20% counsel fee.
The WC Insurer has an option to keep medical benefits open, or fund a Medicare Set-Aside.
Opting to fund the MSA – it will be professionally administered.
AT THIS POINT: Claimant asks his lawyer about future treatment for his work injury – and mentions that he also has diabetes and MS which require ongoing medical treatment.
Counsel inquires how this treatment was covered to this point, and claimant advises (for the first time) that he has had Medicare and Medicaid since 1995.
Counsel asks whether those benefits stopped when he went to work.
Claimant does not know, because all benefits were handled by his mother from 1995 to 2023.
Counsel now identifies A LOT more questions that need to be asked!
[Involving receipt of Social Security and Workers Compensation at the same time; whether Medicare or Medicaid paid any bills during the period his claim was denied etc.]
The focus here, however, is protecting Medicaid eligibility.
Protecting Medicaid/Medical Assistance Eligibility
Medicaid/Medical Assistance is health insurance provided by the Commonwealth of PA. Many recipients qualify based on low income/low assets. Some people may have both types of coverage concurrently. Medicare typically pays the bulk of medical bills. Medicaid pays co-payments, or a non-paid balance. Eligibility for each type of coverage is different.
This coverage might be essential to some people. As above, the claimant (or an eligible family member) may have a critical need for treatment for a non-work-related condition.
Receipt of a lump sum settlement (or back-due benefits; or even weekly wage loss benefits) may exceed the low income/low asset threshold, disqualifying the individual (or their family) from coverage, which in turn may effect their ability to obtain necessary treatment.
- When and how did claimant qualify for Medicaid/Medical Assistance?
- Has claimant’s work status or basis of eligibility changed since their original enrollment?
- Was Medicaid ever informed of a change in eligibility?
- Did Medicaid pay any medical bills for treatment of the work-related injury?
- What are the steps and consequences based on where claimant directs his settlement be sent?
- If sent directly to claimant?
- If sent to an annuity administered by his parent?
- If placed in a Special Needs Trust?
- What are the costs and procedures to set-up and administer a S.N.T.?
- Can the costs be negotiated?
There may be several options to protect/maintain eligibility.
One method is a Special Needs Trust
In short, every workers compensation claim includes two parts: lost wages, and medical bills. Settlement may therefore require TWO funds:
- the amount representing future wage loss/indemnity benefits, and
- the amount representing future medical treatment for the work related injury.
[If there is a specific loss claim, those amount should be specifically allocated as such].
A Medicare Set-Aside is usually professionally administered, using the funds demanded by Medicare as payment for medical treatment (for the work injury). Once exhausted, Medicare will assume coverage.
A Special Needs Trust handles the funds representing wage loss/indemnity benefits – satisfying claimant’s ongoing eligibility for Medicaid coverage, by preventing the claimant from receiving assets in excess of the qualifying limits.
Both funds must ‘technically’ be within the SNT – but can be administered by each vendor separately.
There are three Core Rules for a S.N.T.
- All funds must be applied for claimant’s direct benefit.
- There must be a paper trail for every amount spent (ie receipts for EVERYTHING).
- NO CASH to claimant. Funds are paid via debit card or directly to entity owed money.
- Use it or lose it. Upon recipients death, and balance must be used to reimburse Medicaid for any bills paid.
- Careful what you buy. Some items purchased may be viewed as “assets”, jeopardizing ongoing eligibility.
Ie. buying 2022-2023 Phillies and Eagles player cards may be ok as a hobby.
Buying High Value player cards (Mickey Mantle, Sonny Jurgensen) may be seen an investment
Special Needs Trust Costs
Typically there will be a cost to set-up the Trust, and ongoing, monthly costs for Administration fees. Many defendants will not agree to settle the case, but then keep their file “open” for an unknown period of time, to pay administration costs.
Negotiate 3-5 years of anticipated fees so claimant actually receives the full value of their share of the settlement.
A counsel fee should not be requested on the amount representing “costs”.
In this example, $7,000.00-15,000.00 [NOT SUBJECT TO COUNSEL FEE] is added to the trust.
All monthly fees are then paid by the trust – and the defendant gets to close their file.
Protecting Rights of Other Benefit Sources
Private Health Insurance
Pursuant to the Affordable Care Act, a private health insurer may not deny coverage for pre-existing conditions. However, such insurers may have a right to be notified of other benefits
- In order to establish a proper premium rate to reflect their exposure, and
- To identify a possible source of/right to subrogation
Applying the Workers’ Compensation claim example, the right to subrogation is set forth at Section 319 of the Act. Where a private health insurer pays medical bills that should have been paid by workers’ compensation, that insurer may seek reimbursement in the full amount they paid (not the WC Rates).
If a private insurer fails to properly protect their right (after proper and timely Notice), a private insurer does waive their right to subrogation. See Independence Blue Cross v. WCAB (Frankford Hospital), 820 A.2d 868 (Pa. Cmwlth. 2003).
- Can an insurer seek subrogation from any/all entity involved in a settlement which jeopardizes their ability to seek subrogation? [claimant, WC insurer, counsel]
- Can the right to subrogation extend beyond the date of settlement, where the parties ‘conspire’ to transfer liability from workers’ compensation to that insurer without that insurer’s consent?
Short/Long Term Disability benefits
Section 204 of the WC Act states very specific benefits entitling the WC insurer to a credit against WC wage loss benefits: Unemployment, Age Related Social Security, and Pension/severance to the extent funded by the employer.
Section 204 of the Act does NOT create a credit for workers’ compensation insurers for STD/LTD contrary to a somewhat common perception.
The foregoing sentence fragment (…to the extent funded) applies specifically – and solely to severance and pension plans – NOT STD/LTD.
Why? Because Section 319 of the Act and the terms of these policies provide the STD/LTD plan a right of subrogation if claimant is awarded WC benefits. Claimant can not be awarded a lesser amount of WC benefits, and from that lower amount, then be required to pay back the STD/LTD carrier.
- This is not an issue of “double dipping” – but an issue of which insurer has the right.
- The parties may not conspire to avoid the rights of a benefit plan that is not informed of, nor a party to the WC claim or settlement process.
- Such plans should/must be NOTIFIED of their potential right to subrogation.
- Does IBC vs. WCAB (Frankford Hospital) apply here (ie. Can this benefit plan waive their rights?)
Most parties do include standard, cautionary language for SSDI benefits at paragraph 13.
Is there a difference between SSDI/SSI/Age-Related/survivors benefits?
Do the parties ever follow through to ensure the SSA is provided a copy of the Decision Approving the C&R?
Whose responsibility is it to notify the SSA of the settlement?
Medicare (Health Insurance Provided by the Federal Government)
Most parties do seek approval from the Center for Medicare Services (CMS) for a Medicare Set-Aside (MSA) when applicable.
This fund operates like a trust, paying medical bills for the medical conditions listed in the CMS Approval.
The Medicare Secondary Payer Act requires
- The funds be used to pay only for treatment that Medicare would cover directly;
- Paid only at the rate Medicare would pay for that treatment;
- Annual statements proving the amount paid, and the treatment paid for – in compliance with the above rules.
Some counsel are satisfied that Medicare provided “a number”, without investigating whether the plan (a) includes ALL of the work injuries and/or (b) covers the specific treatment needed.
Counsel should thoroughly review the CMS Proposal and Approval letters.
What may be overlooked (especially in cases with complex injuries) is the specific diagnoses, the difference between a symptom and a diagnosis, the types of treatment modalities listed compared to what is currently provided, and what the doctors may suggest ‘next’; and the type and dose of medications outlined in the proposal.
When in doubt, have claimant’s treatment provider review the Proposal AND the Approval – before seeking the Judge’s Approval.
- What happens if claimant needs treatment for an injury “allegedly” suffered at the time of the work incident, but is not included in the CMS proposal/Approval?
- If claimant requires a type of treatment Medicare does not cover, who pays those bills?
- Might claimant have co-payments for treatment?
- How can those payments be “covered?
- Bringing us to Medicaid/Medical Assistance
Protective Steps (General):
At the earliest opportunity (presumably during initial intake) Counsel should:
Step 1. Question claimant about ANY/ALL types of benefits received or available.
Step 2. Identify the possible issues involving those benefits, and the issue retained for.
Step 3. DOCUMENT your client’s duties, the extent/limits of your representation, and your ‘advice’ (even if the advice is to seek counsel for ‘other issues’).
Step 4. (If applicable) Provide written Notice to ‘other benefit’ sources of their possible rights/duties.
Step 5. Schedule client interview with Secured Funding (or another counsel/vendor knowledgeable in the requirements to protect client’s eligibility).