Success at the mediation table doesn’t always mean a claimant’s financial worries are over. In many cases, that money needs to last the rest of their days. After paying attorney’s fees and liens, the funds that remain may have to cover profound medical expenses over a lifetime:
Another reason to protect your client with a careful plan: Healthcare is getting more expensive all the time. The Centers for Medicare and Medicaid Services (CMS) projects that from 2018 to 2027, the price of healthcare goods and services will grow faster than ever, and that healthcare spending will increase at an average rate of 5.5% per year.
When your team develops a solid plan at the time of settlement, the client isn’t left in a vulnerable financial state. Here are two ways your settlement consultant can work to protect your client’s long-term medical and financial needs:
No. 1: Educate Clients on Financial Pitfalls
Clearly we want clients to grasp the dangers of taking a cash lump sum and quickly exhausting it. But there are other obstacles to avoid:
Loss of Needs-Based Government Benefits Eligibility: Claimants who receive needs-based government benefits will likely lose those benefits if they accept a lump sum cash settlement. In most states, assets totaling as little as $2,000 ($3,000 if the claimant is married) are considered substantial enough for a claimant to be ineligible for Medicaid (Medi-Cal in California), SSI, and CHIP.
Medicare Non-Compliance: Although Medicare is an entitlement benefit, claimants who receive Medicare benefits have additional responsibilities when it comes to the cost of their future medical care. Medicare Secondary Payer provisions encourage Medicare-eligible claimants to reserve a portion of their settlement proceeds to cover future medical care, in what is referred to as a “Medicare Set-Aside.” In the past, the legal community has paid close attention to future medical expenses in workers’ compensation cases. However, an MSA industry leader reported a recent case in which Medicare sought reimbursement for future medicals in a liability settlement.
No. 2: Create Strategies for Long-Term Income
Several solutions are available to help your clients provide for their long-term medical and financial needs:
Special Needs Trusts: Disabled claimants under the age of 65 may meet the criteria for a special needs trust (“SNT”; also known as a (d)(4)(a) trust). Settlement proceeds placed in an SNT are not considered countable assets when determining government benefit eligibility. The claimant can then continue receiving needs-based benefits while supplementing their needs with approved distributions from the SNT.
Spend-Down: In certain states, “spending down” the settlement proceeds may allow an injured claimant to maintain needs-based benefits, including Medicaid. Proper spend-downs have many stipulations related to the timing of purchases, what constitutes an allowable expense, and whether or not needs-based benefits will be suspended for the month in which the settlement proceeds are received. Claimants who are considering a spend-down should always consult with their caseworker or agency representative before receiving the settlement proceeds.
ABLE Accounts: Individuals who became disabled before the age of 26 may be eligible for an ABLE (Achieving a Better Life Experience) account, a tax-advantaged savings account. Funds held within an ABLE account can cover qualified disability expenses, including healthcare for the disabled individual. While annual and lifetime funding limits for an ABLE account vary by state, ABLE account funds are exempt from asset tests for needs-based government benefits, provided the funds do not exceed $100,000.
Professional MSA Administration: While some claimants choose to administer their own Medicare Set-Aside accounts, many prefer to use a professional administration firm. After settlement, the administrator handles all of the claimant’s medical concerns related to pharmacies and doctors, and automatically files all reporting for Medicare Set-Aside accounts to the CMS, allowing the claimant to treat freely. CMS highly recommends the use of professional administration to make sure the funds are extended as long as possible through discounts.
Some administrators also offer subject matter expertise and consultation on federal and state benefits for beneficiaries of worker’s compensation and liability settlements. Certain programs even offer transparent pricing into the real-time cost of prescriptions and treatment, providing the injured party visibility into the actual pricing of these services. Traci: Can we say more about these programs, and maybe provide a link? This seems like valuable practical information to me.
Contact Kaas Settlement Consulting Today
Traci Kaas is a Certified Structured Settlement Consultant and a Certified Medicare Secondary Payment Professional. Beyond her technical expertise, she is dedicated to the wellbeing and long-term security of her clients. For more information, contact Traci Kaas at Kaas Settlement Consulting at (800) 354-2258 or by emailing firstname.lastname@example.org.