Reversionary Medical Care Trusts
by: Thomas D. Begley, Jr.
Actions brought under the Federal Tort Claims Act often result in a Reversionary Medical Care Trust. It is the policy of the United States Attorney that whenever the recovery includes future medical care related to the negligence, a reversionary medical care trust must be established. Medical bills are paid from the trust and on the death of the injured plaintiff beneficiary the assets remaining in the trust revert to the United States government. The U.S. Attorney always takes the position that assets in the trust are unavailable to reimburse the State Medicaid Agency, but this is sometimes negotiable. Typically, there is a gatekeeper administrator in addition to the trustee, although this is negotiable.
The reversionary medical care trust is usually proposed as a condition of settlement by the U.S. Attorney. Frequently, this happens at mediation. Alternatively, the trial court can impose an RMCT after trial in judgment.
The Elder and Disability Law Attorney may be called upon to draft or edit the trust, advise the Personal Injury Attorney, and/or negotiate with the Department of Justice (DOJ) concerning some of the aspects of the trust.
Typically, there is a structured settlement annuity owned by the United States government that pays into the trust from which medical bills are paid. The structured settlement is usually for the lifetime of the injured party and generally does not contain a guarantee period.
Term of Years
On some occasions, the trust is for a term of years rather than the lifetime of the beneficiary. For example, the trust may be established to fund future surgery. The settlement agreement might state that the plaintiff must have the surgery within five years. The trust would be for a term of five years and if the plaintiff did not undergo the surgery, the trust assets would revert to the United State government.
The reversionary medical care trust proposed by the DOJ contains a number of prohibited disbursements, but these are negotiable. Prohibited disbursements include:
- Paying family member caregivers
- Services that are not medically necessary
- Purchase a home
- Home modifications
- Personal comfort that is not “medically necessary”
- In-home attendant care
- Training in ADLs
- Medical care unrelated to the litigation
- Rehabilitation, Recreation and Speech Therapy
- Purchase of personal property
- Burial expenses
Interaction with Medicaid
The reversionary medical care trust does not provide for Medicaid reimbursement. For Medicaid eligibility purposes, the assets in reversionary medical care trusts are countable assets even if distributions are severely restricted. This creates a problem if the plaintiff needs medical care not covered by the reversionary medical care trust, because lack of Medicaid eligibility will prevent Medicaid from paying for the care. In settling the case, the fact that it may be impossible to access Medicaid must be taken into consideration in determining damages.