If you have been in an accident and have received medical treatment as a result, you could sue the party responsible for the accident and receive compensation. Hiring a personal injury lawyer costs nothing because they only get paid out of what they win for you.
If you are covered by a government health program like Medicare or Medicaid, receive treatment, and then receive a personal injury payout, you owe these programs a part of your payout as reimbursement for what they spent on you.
How much of your recovery or settlement can they take?
Federal regulations state that Medicare and Medicaid need to be reimbursed from personal injury settlements, but there are rules that allow them to recover only what is fair — typically, they can take no more than 50% of what remains of your settlement after you’ve paid litigation costs and your attorney’s fees. For example, if Medicare spends $250,000 on your treatment, and the settlement you receive from your personal injury lawsuit is $500,000, you might pay $250,000 toward litigation costs and attorney fees, and be left with $250,000. Medicare could take no more than $125,000 out of it. You would get to keep at least $125,000, tax-free.
How does Medicare even know about your compensation?
Some people wonder if Medicare will ever know that they received compensation if they don’t tell them. It’s true that there is no automatic system in place that informs Medicare about any compensation that you receive. But when you receive treatment under Medicare for anything that might possibly come from an accident, Medicare does send you a letter asking you if negligence by someone else was responsible. If you answer truthfully, Medicare will be in touch with you about recovering money out of any compensation that you receive. If you don’t answer truthfully, it could be a criminal offense, and you might even lose Medicare eligibility.
If you’re on Medicaid, there are other considerations
Medicare is the government health insurance program that covers those who are over a certain age. Medicaid, on the other hand, is primarily intended for people of any age who are on a very low income and own very little by way of assets.
A problem arises when you receive compensation in a personal injury lawsuit. Like Medicare, Medicaid seeks to recover the money it spends on treating your injuries, out of your compensation, but there is another problem. While Medicaid may not count a house, a car, life insurance, or wedding rings as assets, personal injury compensation is an asset that counts. When you receive compensation, this money, which now counts as an asset, could make Medicaid consider you well off to a degree that would make you ineligible for benefits. To continue to receive Medicaid benefits, you would have to do one of the following things, usually with the help of a lawyer:
• Ask to structure the settlement or compensation in such a way as to only receive a small fraction each year. This way, your assets don’t exceed the Medicaid threshold.
• Spend the money on assets that Medicaid considers exempt: a house, a small savings account, or an automobile.
• Put the money in a special needs trust, and name someone you trust as a trustee. A lawyer would ask for a couple of thousand dollars to set this up.
It’s important to consider the consequences of receiving a personal injury payout when you are on Medicare or Medicaid. The insights provided here may help you understand the nature of the challenges you face; a lawyer, however, can provide you with more specific advice for your situation.