MY CLIENT RECEIVED A PERSONAL INJURY SETTLEMENT, HE IS ON MEDICAID, DOES HE NEED A SPECIAL NEEDS TRUST?
by: Begley Law Group
Pathways to Medicaid
by Thomas D. Begley, Jr., Esquire, CELA
An extremely important source of funding for medical needs for persons with disabilities is Medicaid. When a person is receiving Medicaid, the first question is whether a Special Needs Trust (SNT) is required. There are a number of pathways to Medicaid. If the individual’s Medicaid is means-tested, then an SNT is required. If not, an SNT is not required. The answer to whether the individual needs an SNT depends on the Medicaid program involved. The first step is to obtain a copy of the client’s medical card(s).
SSI/Medicaid provides basic medical services such as doctors, hospitals, prescription drugs (basic medical services), but no long-term care (LTC). Generally, an individual receiving SSI also receives Medicaid. The applicant for SSI must be at least 65 years of age, blind or disabled.
There is an income test. The maximum federal SSI benefit is $750 per month in 2018. After a $20 disregard, unearned income reduces the SSI payment dollar-for-dollar. This means if the individual’s outside unearned income more than $769 per month, he or she would not be eligible for SSI. For earned income there is an $85 disregard and then one-half of the earned income reduces SSI dollar-for-dollar. Income of the parent is deemed to a child under age 18.
There is an asset limit of $2,000 for an SSI recipient.
There is a transfer of asset penalty for SSI. The lookback period for SSI is three years. The penalty for a transfer of assets during the lookback period is calculated by dividing the uncompensated value of the transferred assets by the amount of the maximum benefit payable, including any state supplement. (Note: The divisor is the amount payable, not the amount actually paid.) The maximum penalty is effectively three years.
If the plaintiff’s Medicaid is linked to SSI, an SNT would be required.
It is important to remember that, because of parental deeming of income and assets, an individual may not be currently receiving SSI, but may become eligible for SSI at age 18. In those cases, the individual will also receive Medicaid at age 18, so it is important to look ahead. In those cases, an SNT would be required.
New Jersey provides basic medical services for low-income individuals without a disability test. Long-term care is not covered. Financial eligibility is based on income and assets. The income limit is the same as the federal poverty level (FPL). In 2018, 100% of the FPL is $1,012 per month. There is an asset test of $2,000. There is no transfer of asset penalty. An SNT would be required for a personal injury recovery in order to maintain financial eligibility.
New Jersey Family Care
In New Jersey the Affordable Care Act (ACA) is known as “New Jersey Family Care.” It is also frequently called “Obamacare.” The ACA provides basic medical services. There is no disability test. Financial eligibility is up to 138% of FPL at the state’s option, which is $1,397 in 2018. There is no asset limit. There is no transfer of asset penalty. An SNT is not required to maintain eligibility under the Affordable Care Act, if a personal injury settlement is received.
NOTE: A Settlement Protection Trust should be considered for management reasons.
Community Resources for People with Disabilities (CRPD)
This program is also called the “Katie Beckett Waiver” and provides basic medical services and LTC services. There is a disability test. The disability test is stricter under CRPD—the test is whether or not the person will need to be institutionalized if they did not receive the benefit to get care at home. Income is limited to 300% of FPL, which in 2018 is $2,250. There is an asset limit of $2,000 for the individual with disabilities. However, there is no deeming of the parents’ income or assets to the child. There is a transfer of asset penalty. The state LTC divisor is used to calculate the penalty. An SNT would be required to maintain eligibility for a personal injury recovery.
New Jersey Workability
New Jersey Workability provides basic medical services. The individual must be between the ages of 16 and 64. The individual applicant must be disabled, but able to work. Disability must be determined by Social Security or the Disability Review Team at the New Jersey Division of Medical Assistance and Health Care. The individual must work full time or be self-employed and have proof of employment. For 2018, the income and asset limits are as follows:
- The individual must have an earned income of no more than $62,750 per year (no more than $84,350 per year, if an eligible couple—both with permanent disability, both working), have unearned income (pensions, child support, interest, etc.) less than $1,012 per month (less than $1,372 for eligible couples). Social Security Disability benefits and/or Railroad Retirement benefits are disregarded.
- There is an asset limit of $20,000 in liquid assets or less than $30,000 if an eligible couple. There would be a transfer of asset penalty, if assets are gifted. Retirement assets, such as IRAs and 401(k)s are disregarded. The value of a home, vehicle, and personal effects are disregarded.
An SNT would be required in order to maintain eligibility, if there is a personal injury recovery.
Nursing Home Services
Nursing home services include basic medical services plus nursing home services. Generally, the individual must be institutionalized in a nursing home. Generally, the individual receiving the personal injury settlement must be disabled. New Jersey has an income limit of 300% of FPL. In New Jersey, the individual can establish an Irrevocable Qualified Income Trust, also known as a Miller Trust, and direct any excess income into that trust to become income eligible. In 2018, this is $2,250 per month. There is an asset limit of $2,000. There is a Medicaid transfer of asset penalty calculated by dividing the uncompensated value of the amount transferred by a state divisor. An SNT must be required to maintain this benefit, if there is a personal injury recovery.
Managed Long-Term Care Services & Supports
Managed Long-Term Care Services & Supports (MLTSS) provides basic medical services plus LTC including assisted living and home care. There is a disability test. Generally, the income limit is the same as nursing home services. The asset limit is $2,000. There is a transfer of asset penalty, and the penalty is calculated by dividing the uncompensated value of the amount transferred by a state divisor. An SNT is required to maintain this benefit, if there is a personal injury recovery.
Children’s Health Insurance Program (CHIP)
Basic medical services for children under age 19. There is no disability test. Income limit depends on family size and is generally up to 355% of FPL. There is no asset limit. There is no transfer of asset penalty. An SNT is not required. However, a Settlement Protection Trust should be considered for management purposes.