Say you or a loved one with special needs just won a multi-million-dollar lawsuit award or settlement. While the case was pending, Medicaid was paying the medical bills. By setting up a special needs trust, you can preserve the beneficiary's eligibility for Medicaid and other government benefits. However, many newly “wealthy” clients ask what the value is of staying on Medicaid. After all, shouldn’t millions of dollars be sufficient to pay for health care? Wouldn’t it be nice to forget about income and asset limits? Why do we need a special needs trust?
There are a number of reasons why this is typically not a good idea, and staying on Medicaid is the far better choice.
First, without health insurance, the person with special needs may not be able to get any treatment at all. Medical providers – such as doctors, hospitals, laboratories – typically want to bill some type of insurer and the individual may not be able to obtain coverage for the services they need. Medicaid solves this health care access problem (as long as the provider accepts Medicaid, of course).
Second, even the best private health insurance does not provide the full range of home and community based services that Medicaid often provides. Moreover, Medicaid can provide residential services that you'll never find covered in standard private insurance policies.
Third with Medicaid, you will not be paying the provider’s regular “fee-for-service” rate but rather the state’s far lower pre-negotiated rates for services. In addition, according to federal law, the provider can’t bill the patient for the difference between what Medicaid pays and what the provider charges, called “balance billing”.
The following illustrates an example of an actual case for the total cost of all services rendered to a Medicaid beneficiary over a two-and-a-half-year period:
Providers billed: $1,034,079.35
Medicaid paid: $ 129,524.04
You can see that with these kinds of costs, even a large award could be quickly consumed by non-Medicaid medical bills.
Finally, Medicaid’s bill doesn’t come due until the beneficiary dies, which could be 40 or 50 years down the road, and there is no interest on this Medicaid debt. On the contrary, inflation should reduce the size of the debt in real dollar terms, and Medicaid is repaid only if there are funds remaining at the time of death.
These are four major reasons why special needs planners recommend establishing a special needs trust to preserve Medicaid in most cases, even after a seemingly large award or settlement.
At Pierro, Connor & Associates, we frequently work with individuals and their personal injury lawyers to establish special needs trusts to manage awards or settlements for the beneficiary and protect his or her benefits.
If you are receiving or anticipate receiving a lawsuit award or settlement and want to preserve or obtain benefits, please contact our firm today for a free consultation.