How Much Will Medicaid Take from My Settlement?
If you have received or are expecting to receive a settlement from a personal injury lawsuit, a workers’ compensation claim, or an inheritance, you may be wondering how it will affect your Medicaid eligibility and coverage.
Medicaid is a health insurance program for low-income individuals and families, funded by federal and state governments.
Depending on your state and your Medicaid category, your settlement may be considered as income or as a resource and may impact your ability to qualify for or keep your Medicaid benefits.
In addition, Medicaid may have the right to recover some or all of the costs of the medical services it paid for you from your settlement.
In this article, we will explain how much Medicaid will take from your settlement, and what you can do to protect your rights and interests.
How Does Medicaid Consider Settlement Funds for Eligibility Purposes?
This depends on whether you belong to the MAGI or non-MAGI Medicaid category.
MAGI stands for Modified Adjusted Gross Income, and it is the method used to determine income eligibility for most Medicaid applicants, such as children, pregnant women, parents, and adults without Medicare.
Non-MAGI Medicaid is for those who are aged 65 or older, have Medicare, or receive SSI, TANF, or foster care.
If you have MAGI Medicaid, your settlement funds will only count as income in the month you receive them, if they are taxable under federal income tax rules.
For example, lottery winnings and punitive damages are taxable, but inheritances and compensatory damages are not.
If your settlement income puts you over the monthly income limit for Medicaid, you will not lose your coverage immediately.
You will keep your Medicaid benefits until the end of your 12-month authorization period unless your income changes significantly.
However, you may lose your eligibility when you recertify, unless your income drops below the limit again.
MAGI Medicaid has no resource or asset limits, so you can save your settlement money in the following months without affecting your eligibility.
However, the interest you earn from your settlement may count as income and may affect your eligibility if it puts you over the income limit.
If you have non-MAGI Medicaid, your settlement funds will count as income in the month you receive them, regardless of their source or taxability.
If your settlement income puts you over the monthly income limit for Medicaid, you will lose your eligibility for that month.
However, you may regain your eligibility in the following month, if your income drops below the limit again.
Non-MAGI Medicaid also has resource or asset limits, varying by state and program.
Your settlement funds will count as a resource in the month after you receive them, and in any subsequent month that you still have them.
If your resources exceed the limit for Medicaid, you will lose your eligibility until you spend your resources below the limit.
How Does Medicaid Recover Costs from Your Settlement?
This depends on whether your state has a Medicaid lien or estate recovery program, and whether your settlement is related to your medical expenses or not.
A Medicaid lien is a legal claim that Medicaid has on your settlement, to recover the costs of the medical services it paid for you.
Medicaid can only place a lien on your settlement if it is related to your medical expenses, such as a personal injury lawsuit or a workers’ compensation claim.
Medicaid cannot place a lien on your settlement if it is unrelated to your medical expenses, such as an inheritance or a divorce settlement.
The amount of the lien depends on the total amount of medical expenses that Medicaid paid for you, and the amount of your settlement.
Medicaid cannot take more than the amount of your settlement or more than the amount allocated to medical expenses in your settlement agreement.
It must also share the lien with other parties who have a legal claim on your settlement, such as your attorney, your health insurance, or your Medicare.
You can challenge or reduce the amount of the lien, by negotiating with Medicaid or by requesting a hearing.
You can also protect some or all of your settlement from the lien, by placing it in a functional needs trust or a pooled trust.
These are legal arrangements that allow you to use your settlement for your benefit, without affecting your Medicaid eligibility or lien.
Medicaid Estate Recovery
Medicaid estate recovery is a program that allows Medicaid to recover the costs of the medical services it paid for you from your estate, after your death.
Your estate is the property and assets that you leave behind when you die, such as your home, your bank accounts, your car, and your personal belongings.
Medicaid can only recover from your estate if you received Medicaid benefits after the age of 55, or if you were permanently institutionalized, such as in a nursing home.
The amount of the recovery depends on the total amount of medical expenses that Medicaid paid for you and the value of your estate.
Medicaid cannot take more than the value of your estate or more than the amount allowed by state law.
Medicaid must also respect the rights of your surviving spouse, your minor children, your disabled children, and your heirs.
You can avoid or limit the amount of the recovery, by planning and taking steps to protect your estate, such as transferring your property, creating a life estate, or purchasing long-term care insurance.
You can also request a waiver or a hardship exemption from the recovery if it would cause undue hardship to you or your family.
Medicaid is a valuable health insurance program for low-income individuals and families, but it can also affect your settlement from a lawsuit, a claim, or an inheritance.
Depending on your state and your Medicaid category, your settlement may impact your eligibility and coverage, and Medicaid may have the right to recover some or all of the costs of the medical services it paid for you from your settlement or your estate.
To protect your rights and interests, you should consult with an experienced attorney who can advise you on how much Medicaid will take from your settlement, and what you can do to minimize or prevent it.
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Diana is an accomplished insurance professional, holding a Bachelor of Science in Business Administration (Risk Management and Insurance) from the University of Central Missouri.
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