A Guide for PI Attorneys MSAs, Government Benefits and More The - - PowerPoint PPT Presentation

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MSAs, Government Benefits and More

A Guide for PI Attorneys

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Main Federal Government Benefits Programs for People Who Are Disabled

• Supplemental Security Income (SSI)
• Medicaid
• Medicaid Waiver Programs
• Social Security Disability (SSD)
• Medicare
• Federally-Assisted Housing through HUD (Department of

Housing and Urban Development)

• Food Stamps

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Obtain Written Verification of Benefits

• Clients ofuen don’t really understand which benefits they are
• receiving. Sometimes their lawyers don’t either. Always get

written verification of the benefits involved.

• Most programs send out a letter, order or some other form to

provide notice of eligibility and the efgective date of coverage.

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A Primer on Public Benefits

Needs-Based Benefits Benefits Based on Entitlements Cash Assistance Medical Assistance Supplemental Security Income

SSD (Social Security Disability) CSB (Childhood Disability Benefits)

Medicaid Medicare

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Supplemental Security Income

• A means-based federal program that provides income

through a cash assistance grant to certain aged, blind and persons who have disabilities.

• Administered by the Social Security Administration (SSA).
• Law is found at 42 U.S.C. § 1381 et seq. Regulations are found

in Title 20 Part 416 of the Code of Federal Regulations (CFR).

• SSA Program Operating Manual System (POMS)- Although

not legally binding, POMS carries great weight as far as agency interpretation of the federal law.

• SSI sections of the POMS start with “SI.”
• See: http://www.ssa.gov/

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Purpose of SSI Payments

• The purpose of the SSI payment is to provide food and shelter

for the recipient.

• It is based on the federally defined poverty level with the

recipient receiving 75 percent.

• For 2016, the maximum federal SSI payment a recipient can

receive is $733 per month.

m 20 C.F.R. § 416.110

• For a couple, the maximum amount that can be received in

2016 is $1100 per month.

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Categorical Eligibility

• An applicant for SSI must be at least 65 years of age, blind or

disabled.

• A person is considered disabled:

m unable to engage in any substantial gainful activity; m by reason of any medically determinable physical or

mental impairment;

m which can be expected to result in death or which has

lasted or can be expected to last for a continuous period of not less than twelve months.

• A child under the age of eighteen (18) is considered disabled

if the child has medically determinable physical or mental impairment that results in “marked a severe functional limitations.”

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Financial Requirements

• As a general rule, anything of value received during the month

is considered income for the month received and a resource as of the first day of the following month.

• 20 C.F.R. §416.1102
• Important for settlement purposes

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Resources

• As a general rule, the countable resources of a single person

cannot exceed $2000 and the countable resources of a married couple cannot exceed $3000.

• Resources mean cash or other liquid assets or any real or

personal property that a person or his or her spouse own and can covert to cash for support or maintenance.

• If resources exceed $2,000 on the first day of a calendar

month, the beneficiary’s public benefits will be lost until the resources are reduced.

• See 20 C.F.R. §416.1205 (c)
• See 20 C.F.R. §416.1201 (a)

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Resources

Non-Countable Resources

• Family Home: If the beneficiary has an ownership interest and

it serves as his or her principal residence. Unlike Medicaid, there is no equity cap on the home.

• Personal Property: Items held for their intrinsic value are not

exempt.

• One automobile of any value
• Items related to the disability
• Life insurance policies with cash surrender value, if their total

face values amount to less than $1,500, and:

m All-term life insurance; m A burial plot, or other burial space, worth any amount; m Up to $1,500 set aside for burial expenses.

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Transfer of Resources

• Under the Foster Care Independence Act of 1999 (FCIA 99),

penalties were imposed for SSI purposes on transfers of assets.

• If an SSI recipient, or spouse of an SSI recipient, transfers or

disposes of assets for less than fair market value during a thirty- six (36) month look-back period, the individual is ineligible for benefits for a period of time.

• The exemptions to the imposition of the penalty are similar to

the Medicaid exemptions.

• See H.R. 1802, 106th Cong. (1st Sess 1999)
• See 42 U.S.C. §113182b(c)
• See 42 U.S.C. §113182b(c)

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Basics of SSI Eligibility Resources

• If an SSI beneficiary receives at least $1 of SSI, the beneficiary

then receives full scope free Medicaid automatically.

• 11 states have difgerent criteria for Medicaid eligibility

(Connecticut, Hawaii, Illinois, Indiana, Minnesota, Missouri, New Hampshire, North Dakota, Ohio, Oklahoma and Virginia)

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Social Security Disability Insurance (SSDI)

• Social Security Disability Insurance is a national program for

injured workers that have paid the requisite number of work credits into the Social Security System.

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Social Security Disability Insurance (SSDI)

• To meet the definition of disability benefits, recipient must

not be able to engage in any substantial gainful activity (SGA) because of a medically-determinable physical or mental impairment(s) that is expected to last longer than a year or end in death.

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Social Security Disability Insurance (SSDI)

• The monthly Substantial Gainful Activity (SGA) amount for

statutorily blind individuals for 2016 is $1,820.

• For non-blind individuals, the monthly SGA amount for 2016 is

$1130.

• See POMS DI 10501.015

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Social Security Disability Insurance (SSDI)

• SSDI has no income or resource limits. An SSDI recipient

could win the lottery and remain eligible.

• Income that is earned may cause ineligibility for benefits.

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How to Tell the Difgerence Between SSI and SSDI

• An SSI check is deposited on the 1st of the month
• An SSDI check is deposited on the 3rd of the month
• The maximum for SSI $733
• There is no maximum for SSDI

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Child Disability Benefits

• A disabled child may be eligible for Social Security Disability

Insurance if a parent is eligible and the child’s disability began before age 22.

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Medicare Eligibility

The person:

• is over the age of 65 and has paid FICA for 40 quarters
• is eligible for Railroad Retirement benefit
• is disabled, as determined under the Social Security Act for at

least 24 months (regardless of age)

• (children included) has end-stage renal disease (ESRD) and

requires dialysis treatment or kidney transplant or Lou Gehrig’s Disease

• is over the age of 65 and is ineligible for Social Security benefits

because he or she does not have the requisite amount of quarters, but elects to pay a monthly premium for Part A and also buy Part B

• has dependents (spouses, widows, widowers) at the age of 65

years old

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Medicare Eligibility

• Individuals who are receiving Social Security benefits cannot

waive their entitlement to Medicare Part A.

• In order to waive Part A, they must withdraw their Social

Security application and return any retirement or disability benefits they received.

• Because Part B is voluntary, an individual may always decline

Part B.

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Medicare Pays For:

• Diagnosis, treatment and rehabilitation
• Services must be medically reasonable and necessary to treat

an illness or injury - 42 C.F.R. 1395y(a)(1)(A)

• Care provided must be “skilled”
• The costs for custodial care are excluded, except for hospice

services) - 42 C.F.R. 1395y(a)(9)

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Medicare v. Medicaid

• Medicare: not tested by income or resources
• Medicaid: is tested by income or resources
• Medicare: entirely a federal program and benefits are paid

entirely from federal resources

• Medicaid: a shared state-federal program, paid part by

both entities and administered by state agencies with federal

• versight
• Both programs are overseen by the Centers for Medicare

and Medicaid Services (CMS), formerly known as the Health Care Financing Administration (HCFA), a component of United States Department of Health and Human Services (HHS).

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Medicaid

• Medicaid is a welfare program which pays medical bills for

the aged, blind and disabled. It is a medical payment program, not a medical insurance program.

• Medicaid was established in 1965 as an amendment to the

Social Security Act. It can be found in Title XIX of the Social Security Act and is found at 42 U.S.C. Section 1396 and 42 C.F.R. Parts, 430, 431 and 435.

• The federal government provides matching payments to the
• state. It is a federal program administered in cooperation

with the states. Although some provisions are delegated to state determination, state programs must meet requirements imposed by the federal government.

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Missouri Medicaid MO HealthNet

• Missouri is known as a Section 209(b) state—209b. States are allowed to

enforce more restrictive eligibility standards in some areas of the program so long as the requirements are no more restrictive than those in efgect in the state as of January 1, 1972.

• On August 28, 2007, with the passage of the Missouri Health Improvement

Act of 2007, SB 577, the Medicaid program in Missouri became known as “MO HealthNet”

• The state’s authorizing laws are codified at §§ 208.010 et seq. of the Revised

Missouri Statutes.

• MO HealthNet is administered by the Missouri Department of Social Services,

primarily through the Family Support Division (FSD).

• The state’s regulations that address long-term care are set forth at Mo. Code
• Regs. Ann. tit. 13, Division 40.
• Policies and procedures for determining MO HealthNet eligibility are published in

the FSD’s Income Maintenance Manual (IMM).

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Financial Eligibility

• A single person may not own “available resources” in excess of

$999.99.

• If married and living together in an institution, a couple may

not own available resources in excess of $1,999.99 in order for

• ne or both of them to be eligible for Medicaid.
• Spousal impoverishment rules apply to allow a well spouse

living in the community to retain available resources in excess

• f $1,999.99 for both vendor (nursing home benefits) and home

and community based waiver services.

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Income

• There is no income cap for Missouri Medicaid vendor benefits.
• As a practical matter, if the income exceeds the cost of care, no Medicaid

benefits will be paid. Income belongs to the person to whom it is paid.

• The Minimum Monthly Maintenance Needs Allowance (MMMNA) for the

community spouse is $1991.25 in 2016. If insufgicient, income received by the Medicaid applicant can be assigned to provide for the healthy spouse to meet the MMMNA.

• The Maximum Monthly Maintenance Needs Allowance is $2980.50.
• From the income, a personal needs allowance of $45 may be deducted.
• Like the SSI rules, income is not included as an available resource in the

month in which it is received. It converts to a resource in the next

• month. Important for settlement issues.

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Exempt Resources

Family home

• The home is generally considered an exempt resource. The home is

exempt when it is providing shelter to the applicant, the applicant’s spouse or dependent children. The applicant is only entitled to one home, defined as the applicant’s principle place of residence.

• The “Maximum Home Equity” amount is $552,000 for 2016. This is the

exempt equity value in the home for those individuals seeking vendor (nursing home) benefits or home and community-based waiver services.

• An exception is made when the home is providing shelter to the

participant’s spouse, a child under the age of twenty-one (21) or a child

• ver age twenty-one (21) who is blind or disabled.
• The definition of “home” generally includes adjoining land on which

the home is located.

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Exempt Resources

• For rural land, any adjoining acreage will be included in the exemption

regardless of whether roads separate difgerent tracts, so long as the property is treated, such as by farming it as one contiguous parcel.

• If there are other homes located on the property, they are not an

exempt resource and the value of the additional homes is a countable resource, although the value of the underlying property may remain exempt.

• If a participant has not occupied the home for over twenty-four (24)

months, it is no longer considered the principal place of residence and the homestead exemption no longer applies. There is an exception to the twenty-four (24) month rule: if the participant has been absent from the home for more than twenty-four (24) months, the “home” remains exempt if, within the first twenty-four (24) months of absence, the participant became a resident of a nursing home, residential care facility, state hospital or medical institution.

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Exempt Resources

Pre-Need Funeral Plans and Life Insurance

• Families may not have sufgicient resources at the time of death

to pay for the cost of burial.

• The Medicaid program exempts one irrevocable pre-need

funeral plan for each applicant and one for his or her spouse.

• The cash surrender value of any life insurance is considered

an available resource. If there is no irrevocable funeral plan, $1500 of the cash surrender value of any life insurance owned is exempt.

• It is possible to transfer ownership or irrevocably assign a

paid-up life insurance policy to funeral home to fund a pre- need plan.

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Exempt Resources

Personal Property

• Includes household goods, jewelry, farm surpluses, livestock, farm or

business machinery or equipment, automobiles and trucks and similar

• items. Whether personal property is exempt depends on how the

participant uses the personal property.

• The applicant is allowed to have one vehicle for transportation
• purposes. An additional vehicle will be deemed exempt if necessary to

meet the family’s extraordinary transportation needs.

• Livestock, farm surplus, or other equipment “used in the course of

business or employment” is exempt.

• Boats, campers, trailers, or recreational vehicles are considered

available resources and the fair market value must be established.

• Motorcycles are not exempt unless they are the participant’s only means
• f transportation.
• Furniture is an available resource unless it is being directly used by the

applicant or the applicant’s spouse or dependent children.

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Transfers and Penalties

• The current “look-back” period is 60 months or five years.
• The length of the penalty is directly related to the value of the

asset transferred. To determine the penalty, the value of the asset transferred is divided by the average monthly private pay rate for nursing homes on the date of the application.

• The average monthly private pay rate is called the penalty

divisor and is established by each state.

• The penalty divisor is $4,889 per month and $160.73 per day

for 2016.

• If all of the assets transferred that would otherwise result in a

penalty be imposed are returned, the penalty will no longer be imposed.

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Exempt Transfers

Transfer of a family home is exempt if:

• the participant’s child is under age 21 or blind or permanently

and totally disabled;

• the participant’s sibling, if that sibling has an equity interest in

the home and was residing for at least one year immediately prior to the participant’s date of institutionalization; or,

• the participant’s child who resided in the home for at least

two years immediately prior to the participant’s date of institutionalization if it is established that care provided by the child allowed the participant to remain in the home and not be placed in a nursing home.

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Exempt Transfers

Other assets may be transferred without penalty to:

• the participant’s spouse;
• the participant’s child who is blind or totally and permanently

disabled;

• or to a trust, including a Special Needs “(d)(4)(a) Trust

established for the benefit of an individual under age 65 and who is disabled as defined in 42 U.S.C. 1382c(a)(3)(A).

• Note that the requirement is that an individual be disabled, not

necessarily a child.

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Other Medicaid Programs

• Non-Vendor Medicaid has both income and resource limits and

excess income is “spent-down.” The participant must be:

m totally disabled as determined by the Missouri Family

Support Division;

m be blind; m be at least 65 years of age; or m receive SSI or SSDI.

• Single - $833.70; Married - $1128.37
• MO HealthNet for Disabled Children: Income of both parent

and child is used. The child must “spend-down” any excess. Resources and both parent and child are counted. The child must be

m under the age of 18; m disabled; or m receiving SSI.

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Other Medicaid Programs

• Missouri Children with Developmental Disabilities (the Sara Lopez

Waiver): The parents income and resources are not deemed to the

• child. Transfer penalties may cause ineligibility for 60 months. Provides

personal assistance services, case management, respite care, medical equipment, behavior therapy and transportation. The child must be:

m under the age of 18; and m disabled (developmental disability) and receive SSI.

• Missouri Autism Waiver: This waiver provides personal assistance,

home and out of home respite, transportation and medical equipment. The child must be:

m between the ages of 3-18; m meet the Medicaid financial eligibility requirements; m have a diagnosis of Autism Spectrum Disorder; m must meet a level of care; and m have no greater need for services of $22,000.

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Right to Recover Benefits Paid

Medicaid has a right to recover benefits paid when a Medicaid recipient receives compensation from a third-party for health services incurred due to personal injury, disability or disease. This right exists to prevent a double recovery by a Medicaid recipient who receives payment from both Medicaid and a third- party.

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Application Form Contains Assignment Language

In Missouri, the application form for Medicaid (MO HealthNet) benefits contains the following statement: “I/We UNDERSTAND that application for and acceptance of MO HealthNet constitutes an assignment of rights to the Department

• f Social Services, MO HealthNet Division for payment for

medical care from a third-party.” Authority: § 208.215.4 & .15 RSMo.

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Assignment

A MO HealthNet beneficiary is compelled by statute to make an “assignment” to the state of whatever is recovered, up to what is

• wed, when he or she applies for benefits.

This form states that if the assistance is due to an accident, the claimant must repay the agency for any benefits received. In practice, this “assignment” functions as notice to the plaintifg that MO HealthNet has a lien against the recovery.

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Duty to Report

The MO HealthNet application form also contains the following statement: “I/We UNDERSTAND that I/we must report any changes in circumstances within ten days of when they happen.”

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Duty to Report

The MO HealthNet application form also contains the following statement: “I/We UNDERSTAND that I/we must provide complete information regarding any health or accident insurance benefit available to any household member and I/we must report within 30 days any accident for which medical care is received.” Authority: § 208.215.3 & .16 RSMo.

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208.215 RSMo.

Section 208.215 RSMo. sets out certain lien rights that arise when one of the welfare recipients of the Missouri Department

• f Social Services recovers for personal injuries, disability or

disease of the recipient.

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208.215 RSMo.

Medicaid liens, by statute, do require notice and now may be reduced by a court under the Medicaid statute. See § 208.215.9 RSMo. Jones by Williams v. Missouri Dept. of Social Services, 966 S.W.2d 324 (Mo.App.1998) (lien reduced, even though it accrued before statute allowing reduction was efgective); Gravier v. Missouri Dept. of Social Services, 968 S.W.2d 149 (Mo.App.1998) (insufgicient evidence to justify reduction); American Family v. Fehling, 970 S.W.2d 844 (Mo.App.1998) (reduction pursuant to proper consideration of statutory factors).

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Anti-Lien Provisions

A Florida Court of Appeals rules that Medicaid’s anti-lien provision does not apply to a Medicaid lien imposed on a Medicaid recipient’s property afuer the recipient dies. Estate of Hernandez v. Agency for Health Care

• Admin. (Fla. Ct. App., 3rd Dist., No. 3D14-2115, Feb. 17, 2016).

Betsy Hernandez died of a rare condition. Her estate filed a wrongful death lawsuit against the hospital that treated her. The hospital agreed to settle the lawsuit for $700,000, and Medicaid placed a lien on the settlement to recoup medical expenses paid on Ms. Hernandez’s behalf.

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Anti-Lien Provisions

The Medicaid agency claimed it was entitled to $262,500 before any wrongful death apportionment. The estate argued that the agency sought money allocated to survivors and that under Arkansas Department of Health and Human Services, et al. v. Ahlborn (547 U.S. 268 (2006)), states cannot assert a lien on portions of a settlement not allocated to medical expenses. The trial court denied the estate’s motion for a hearing, and the estate appealed. The Florida Court of Appeals, 3rd District, afgirms, holding that “the Medicaid Act’s anti-lien provision does not apply to a Medicaid lien imposed against the property of a Medicaid recipient afuer her death.” The court holds that Ahlborn and Wos v. E.M.A (U.S., No. 12-98, March 20, 2013) do not apply because Medicaid’s anti-lien provision applies only to living Medicaid recipients.

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MO HealthNet Right of Reimbursement and Notice

The MO HealthNet Division requires any participant, even if a minor, an incapacitated person (acting through a guardian or conservator), someone filing a wrongful death case or the attorney, to promptly notify the MO HealthNet Division of any recovery from a third-party and shall immediately reimburse the Department of Social Services, MO HealthNet Division, or its contractor, from the proceeds of any settlement, judgment

• r other recovery in any action or claim initiated against any such third-

party. A case cannot be settled where the division has an interest without first giving the division notice and a reasonable opportunity to file and satisfy the claim or proceed with any action as otherwise permitted by law - § 208.215.6 RSMo

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MO HealthNet Lien

The Department of Social Services or MO HealthNet Division shall have a lien upon any moneys paid by anyone (insurance company, other person or business) to satisfy a judgment or settlement in any claim for medical expenses for which the Department or MO HealthNet Division made payment. This lien shall also be applicable to any moneys which may come into the possession of any attorney who is handling the claim for injuries. In each case, a lien notice shall be served by certified mail or registered mail upon the party

• r parties against whom the applicant or participant has a claim, demand or cause
• f action.

The lien shall claim the charge and describe the interest the Department or MO HealthNet Division has in the claim, demand or cause of action. The lien shall attach to any verdict or judgment entered and to any money or property which may be recovered on account of such claim, demand, cause of action or suit from and afuer the time of the service of the notice - § 208.215.8 RSMo.

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Determination of Right to Recovery

• The Department may file a petition by giving notice to all

injured persons to adjudicate its rights of the parties and enforce the charge.

• The court may approve the settlement of any claim, demand or

cause of action either before or afuer a verdict.

• The court may determine what portion of the recovery shall

be paid to the Department against the recovery. In making this determination the court shall conduct an evidentiary hearing - § 208.215.9 RSMo.

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Six Factors

• 1. Consideration for the total attorney fees and other costs in securing

the recovery and whether the Department should bear a proportionate share

• 2. The amount of the attorney’s fees and other costs incurred by the

participant incident to the recovery and paid by the participant up to the time of recovery and the amount of such fees and costs remaining unpaid at the time of recovery

• 3. The total medical expenses incurred for treatment of the injury to

the date of recovery and the amounts paid by the participant, insurance or the Department; the amount of such previously incurred expenses which remain unpaid and who is entitled to payment

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Six Factors

• 4. Whether the recovery represents less than substantially full

recompense for the injury and the hospital, doctor and other medical expenses incurred to the date of recovery for the care and treatment

• f the injury, so that reduction of the charge sought to be enforced

against the recovery would not likely result in a double recovery or unjust enrichment to the participant

• 5. The participant’s age, his/her dependents, the nature and

permanency of the participant’s injuries as they afgect not only the future employability and education of the participant but also the reasonably necessary and foreseeable future material, maintenance, medical rehabilitative and training needs of the participant, the cost

• f such reasonably necessary and foreseeable future needs, and the

resources available to meet such needs and pay such costs

• 6. The realistic ability of the participant to repay in whole or in part the

charge sought to be enforced against the recovery when judged in light

• f the factors enumerated above

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Not Required to Address All Six Factors

The Medicaid recipient requesting reduction of the lien under § 208.215.9 is not required to prove each statutory factor, nor does the trial court have to enter findings on each statutory

• factor. Gravier v. Missouri Dept. of Social Services, Div. of

Medical Services, 986 S.W. 2d 149 (Mo.App. 1998). The recipient must only provide sufgicient evidence to support exercise of the trial court’s discretion. Id.

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Burden of Proof

The burden of producing evidence sufgicient to support the exercise by the court of its discretion to reduce the amount of a proven charge sought to be enforced against the recovery shall rest with the party seeking such reduction. The computerized records of the MO HealthNet Division, certified by the director

• r his or her designee, shall be prima facie evidence of proof of

moneys expended and the amount of the debt due the state - § 208.215.10 RSMo.

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Reduction of Lien by Court

• The court may reduce and apportion the Department’s or

MO HealthNet Division’s lien proportionate to the recovery of the claimant.

• The court may consider the nature and extent of the

injury, economic and noneconomic loss, settlement ofgers, comparative negligence as it applies to the case at hand, hospital costs, physician costs, and all other appropriate costs.

• The Department or MO HealthNet Division shall pay its pro rata

share of the attorney’s fees based on the Department’s or MO HealthNet Division’s lien as it compares to the total settlement agreed upon - § 208.215.11 RSMo.

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Attorney’s Fees and Compromise

• MO HealthNet’s right to recover is secondary to the

attorney’s claim for fees regardless of whether an action based on participant’s claim has been filed in court.

• The state may enter into a compromise agreement with any

participant afuer consideration of the factors in Subsections 9 to 13 of the statute. § 208.215.12 RSMo.

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Attorney’s Fees Claim Expenses § 208.215.14 RSMo.

The debt due the state provided by this section is subordinate to the lien provided by Section 484.130 or Section 484.140, relating to an attorney’s lien and to the participant’s expenses of the claim against the third-party.

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Service

Brian Kinkade, Director Department of Social Services Broadway State Ofgice Building P.O. Box 1527 221 W. High Street Jefgerson City, MO 65102-1527 Telephone: (573) 751-4815

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Service

• Dr. Joseph John Parks III, Director

MO HealthNet Division P.O. Box 6500 615 Howerton Court Jefgerson City, MO 65102-6500 Telephone: (573) 751-3425

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Recovery Limited to Medical

The United States Supreme Court has repeatedly held that a Medicaid agency cannot be reimbursed from a plaintifg’s settlement in excess of the portion of the settlement that is compensation for past medical care paid by the state. Arkansas

• Dept. of Health & Human Services v. Ahlborn, 547 U.S. 268

(2006); Wos v. E.M.A., 133 S. Ct. 1391 (2013). This allowed many plaintifgs to obtain significant lien reductions by arguing only a small portion of his or her recovery was actually compensation for past medical care.

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Validity of § 208.215 RSMo.?

Wilhoite case (unreported) held that § 208.215 could not stand in light of Ahlborn because the statute failed to limit MO HealthNet’s recovery to the amount of damages recovered for medical. Lien reduction portion of § 208.215 protects due process rights

• f plaintifg.

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Bipartisan Budget Act of 2013

• Note: Section 202 of the Bipartisan Budget Act’s obscure

amendments to the Social Security Act allow a Medicaid agency to demand full reimbursement from any settlement even if medical expenses were not actually pled or recovered for and, regardless of any contributory negligence or other issues with recovery, preventing the client from being made whole.

• Would overturn Ahlborn & Wos cases.
• Was to be efgective October 2014, but later amended to delay

efgective date to 2017.

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Practice Tip

In light of the uncertainty of the final impact the Bipartisan Budget Act of 2013 will have on Medicaid liens, consider the following:

• In addition to a client’s current Medicaid status, also inquire about

the date of eligibility. It is unclear whether the new law will apply to settlements where the Medicaid beneficiary was Medicaid-eligible prior to settlement. This is an especially important future consideration when the client is a minor.

• Inform clients that Medicaid may be entitled to 100% reimbursement.
• Obtain the amount of any lien prior to releasing the tortfeasor.
• If a Medicaid lien (or any lien for that matter) is over-flowing into other

elements of damages, negotiate an agreement prior to releasing the tortfeasor (unless your client is willing to reimburse Medicaid in full).

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Success?

In many cases, losing MO HealthNet also has the efgect of cutting

• fg the client’s participation in programs in which first priority

must be given to persons who are eligible for MO HealthNet benefits.

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Success?

Frequently, the award will be exhausted quickly to pay for medical expenses and other services that otherwise would have been paid by Medicaid or other programs.

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Medicare Secondary Payer Act (MSP)

• Medicare was created in 1965
• Medicare Secondary Payer Act was created in 1980

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The Law

• 42 U.S.C. §1395y
• 42 C.F.R. §§ 411.20 et.seq.
• Medicare is a secondary payer

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Three Compliance Parts - Present, Past & Future

In every liability settlement involving a Medicare beneficiary, the parties, including any group health plan or liability insurer, now has three distinct obligations: 1) report the settlement to CMS (the present); 2) resolve any conditional payments (the past)and 3) provide for payment of future medical expenses as a term of the settlement, taking into consideration Medicare’s interests (the future). Each obligation carries its own penalty for failure to fulfill it.

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Medicare, Medicaid and SCHIP Extension Act of 2007

• Enforces Medicare’s basic right of recovery and to ensure that Medicare serves as a

secondary payer, whenever possible.

• Section 111: reporting requirements
• Only Non-Group Health Plan (NGHP) Plan insurers “are obligated to notify Medicare

about ‘settlements, judgments, awards or other payment from liability insurers (including self insurers), no fault insurers and workers’ compensation’ received by or on behalf of Medicare beneficiaries,” MMSEA Section 111 Mandatory Insurer Reporting, Quick Reference Guide, Version 1, January 19, 2012.

• The insurers are identified as “responsible reporting entities” (RREs), as are self

insureds.

• The RRE’s are to report information when the insurer assumes an ongoing

responsibility for medicals (ORM) or afuer paying the total payment obligation to the claimant (TPOC) in the form of a settlement, judgment, award or other payment.

• Simply stated, the trigger for reporting is the issuance of payment to the claimant or

satisfaction of medical expense.

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Conditional Payments

• Medicare has the right to recover any conditional

payment made against the settlement proceeds of a workers’ compensation or third-party liability case

• Sometimes referred to as a “super lien” because of the broad

power of CMS

• From the date of incident to the date of settlement

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Procurement Costs

• Medicare reduces its recovery automatically to take into

account the cost of procuring the judgment or settlement.

• The costs include attorney’s fees, expert witness fees and

court costs. In order to properly calculate this reduction, the claimant’s attorney must provide a copy of the fee agreement along with documentation of costs incurred during litigation. 42 C.F.R. 411.37.

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Medicare and Wrongful Death Cases

• See: Bradley v. Sebelius, 621 F.3d 1330 (11th Cir. 2010): A

child’s loss of parental companionship claim is a property right belonging to the child, not Medicare.

• See: Benson v. Sebelius, 2011 WL 1087254 (D.D.C.

2011): Plaintifg factored his mother’s medical claims into the settlement calculation. The conditional payments were recoverable by CMS.

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Medicare Advantage Plans (Part C) and the MSPA

Parra v. PacifiCare of Arizona, No. 11-16069, holding that a private insurer operating as a Medicare Advantage Organization Plan is not permitted to bring an action in federal court seeking reimbursement for $136,630.90 from a tort settlement secured by survivors of the deceased in a wrongful death action. The Court holds that the federal statute, 42 U.S.C. § 1395y(b) (3)(A), “was intended to allow private parties to vindicate wrongs

• ccasioned by the failure of primary plans to make payments.”

This statute does not authorize a suit for reimbursement against its insured (or survivors) for reimbursement.

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Medicare Advantage Plans

• Medicare Part A is hospital insurance
• Medicare Part B is medical insurance
• Medicare Part C covers Medicare Advantage Plans
• Medicare Part D covers prescription drug coverage
• Medicare Advantage Plans are also known as Medicare

Advantage Organizations, MAP’s, MAO’s or Part C

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Medicare Advantage Plans

• Medicare beneficiaries can enroll in a Medicare Advantage Plan and get all Part A

and B Medicare services (except hospice) plus additional coverage (i.e., vision, dental and sometimes prescription drug coverage) through private companies.

• Beneficiaries pay more for a Medicare Advantage Plan than for regular Medicare.
• Medicare pays companies a fixed amount for each beneficiary in the plan.
• The Medicare Advantage Plan Companies must follow Medicare’s rules regarding

payments for services, but can set charges for out-of-pocket costs and rules for how and where to receive services.

• Rules can change each year. Currently, 31% of the Medicare population is

enrolled in Medicare Advantage Plans.

• This number has more than tripled since 2004.
• There are various plans out there, including plans issued by BlueShield, Humana

and Oxford. The plans typically have a third-party administrator, such as Rawlings or Trover.

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Medicare Advantage Plans

• There is no way to get information about Medicare Advantage Plan, except

from the plaintifg.

• Inquiries to Medicare/CMS/RCBC will not reveal a Medicare Advantage Plan

lien.

• You can receive a letter from CMS/RCBS indicating no Medicare lien and/or not

a Medicare beneficiary and still have an existing Medicare Advantage Plan lien.

• In re: Avandia, 685 F.3d 353 (3d Cir. 2012), cert. denied, is the seminal case

which recognized that a MAP is granted the right to a private cause of action under the Medicare Secondary Payer Act (MSPA) for reimbursement of the conditional payments it has made. (Under the MSPA, Medicare refers its cases to the Dept. of Treasury).

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Medicare Advantage Plans

In the last couple of years, four federal cases have discussed the right of a Medical Advantage Plan to obtain double damages when it has not been reimbursed for conditional payments:

• Amie Collins v. Wellcare Plans, Inc., 73 F.Supp.3d 653 (E.D.La.

December 2014). Plaintifg in a motor vehicle accident settled with the tortfeasor and held in trust monies claimed by the MAP. She files a DJ action and the MAP counterclaimed. The Court held that the MAP had the right to a private cause of action to recover the conditional payment

• amount. The judge found that double damages were not warranted,

as the money claimed by the MAP was held in escrow. The Court also found that the plaintifg’s failure to respond to correspondence from the MAP tolled the 3 year statute of limitations, since MAP’s only information comes from the plaintifg beneficiary.

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Medicare Advantage Plans

• Humana Medical Plan v. Western Heritage Insurance Company

(2015 WL 1191208 (S.D.Fl. 2015). Case involved a slip and fall

• accident. Plaintifg settled the case for $115,000. Plaintifg represented

there was no Medicare lien, but the insurance company learned that plaintifg had a MAP. It wrote the settlement check to plaintifg, plaintifg’s attorney and Humana.

• Plaintifg objected, resulting in a hearing and a ruling by the state court for

the carrier to turn the proceeds over to plaintifg’s attorney, who was to keep some of it in escrow. Humana filed suit to recover payment.

• The Court followed in re: Avandia and granted the Medicare Advantage

Plan the right to proceed with private cause of action for double damages under the MSPA. Currently on Appeal to 11th.

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Medicare Advantage Plans

• MSP Claims 1, LLC v. Liberty Mutual Ins., 2015 US Dist. LEXIS

99188, (S.D.Fl. 2015). Plaintifg, a Medicare beneficiary through a MAP, was involved in a car accident. Liberty Mutual denied PIP coverage and plaintifg’s bills were paid by the MAP, which sought recovery of the conditional payment amount and double damages. The Court held that since the Florida PIP statute recognizes that the PIP carrier can assert that the claim was unrelated, not medically necessary or unreasonable, Liberty Mutual should not face double damages for contesting the payment of claims.

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Medicare Advantage Plans

• Cariten Health Plan, Inc. v. Mid-Century Insurance Company, 2015

WL 5449221 (E.D.Tenn. 2015). Cariten, a Medicare Advantage Plan (MAP), was granted the right to proceed with private cause of action for double damages against a no-fault carrier which refused to repay conditional payments made by Cariten. The Court found that under the Medicare Secondary Payer Act, a MAP is a secondary payer, and is entitled to a private right of action for failure to reimburse conditional payments made by the MAP.

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SMART Act History

• Known as the Strengthening Medicare And Repaying

Taxpayers (SMART) Act

• One of the co-sponsors, Rep. Tim Murphy (R-Pa.) indicated the

bill stemmed from a constituent who was in a car accident and had to wait years for a settlement on medical bills covered by Medicare

• The bill’s lead Democratic sponsor was Rep. Ron Kind (D-Wis.)
• The SMART Act was signed by President Obama on January 10,

2013

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SMART Act Purpose

• The SMART Act was passed as part of H.R. 1845 and attached
• nto a Medicare IVIG Access Bill;
• It reforms several aspects of the conditional payment and

MMSEA Section 111 processes

• The Amends Section 1862(b)(2)(B) of the Social Security

Act (42 U.S.C. 1395y(b)(2)(B))

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Efgective Date

• This process was supposed to go into efgect nine (9)

months afuer H.R. 1845 goes into efgect – or on October 10, 2013 (efgective date of H.R. 1845 is January 10, 2013).

• This section also provides that the Secretary create an

appeals process for conditional payments.

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Medicare Secondary Payer Statute

Medicare Set-Aside Arrangements

• See: Section 1862(b)(2)(A)(ii) of the Social Security, Act [42 USC 1395 y(b)

(2)] - precludes Medicare payment for services to the extent that payment has been made or can reasonably be expected to be made promptly under liability insurance.

• Medicare has the right to scrutinize any settlement of workers’ compensation

case or third-party liability case to determine if its right must be protected against a shifu to Medicare of any third-party’s liability as it relates to future medical care.

• Unless funds are set aside that will meet the participant’s future medical bills,

Medicare will not assume liability for future medical treatment when a third- party is responsible.

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Medicare Set-Aside

• The law does not require them; it’s merely a device to use to

comply with the law.

• No definition of “MSA” is in the MSP, its regulations or other law.
• MSA is an allocation of settlement proceeds among the

various damage components of a settled claim.

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Reference Guide for WCMSA

• Issued January, 2015
• CMS will review a proposed WCMSA amount when the

following workload review thresholds are met:

m The claimant is a Medicare beneficiary and the total

settlement amount is greater than $25,000.00; or

m The claimant has a reasonable expectation of Medicare

enrollment within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability/lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.00.

m This is not a safe harbor.

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CMS Reference Guide for WCMSA

• A claimant has a reasonable expectation of Medicare enrollment within 30

months if any of the following apply:

m The claimant has applied for Social Security Disability Benefits m The claimant has been denied Social Security Disability Benefits but

anticipates appealing that decision

m The claimant is in the process of appealing and/or re-filing for Social

Security Disability benefits

m The claimant is 62 years and 6 months old m The claimant has an End Stage Renal Disease (ESRD) condition but does

not yet qualify for Medicare based upon ESRD.

• If the threshold is met, a WCMSA can be submitted to CMS for approval.
• These thresholds are created based on CMS’ workload and are not intended to

indicate that claimants may settle below the threshold with impunity.

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Sally Stalcup Memo - 5/25/11

• Stalcup is the MSP Regional Coordinator-Dallas, Texas (pertains

to AR, OK, TX, NM, LA).

• “The Law requires that the Medicare Trust Funds be protected

from payment for future services whether it’s a Worker’s Compensation or liability case. There is no distinction in the law.”

• There is no formal process for review of liability cases.

Attorneys must decide based upon the facts of their case whether the Trust Fund must be protected.

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Sally Stalcup Memo - 5/25/11

• “The fact that a settlement/judgment/award does not specify

payment for future medical services does not mean that they are not funded.”

• “The fact that the agreement designates the entire amount for

pain and sufgering does not mean that future medicals are not funded.”

• “Set-aside is our method of choice and the agency feels it

provides the best protection for the program and Medicare beneficiary.”

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Charlotte Benson Guidance Memo – 9/30/11

• Benson is the Acting Director of the Financial Services Group of the Ofgice of

Financial Management in Baltimore, Maryland

• Where the beneficiary’s treating physician certifies in writing that treatment

for the alleged injury related to the liability “settlement” has been completed as

• f the date of the “settlement,” and future medical services for injury will not

be required, Medicare considers its interest, with respect to future medicals for that particular “settlement” satisfied.

• When there is such a certification, there is no need for the beneficiary to submit

the certification or a proposed LMSA for review. CMS will not provide the settling parties with confirmation that Medicare’s interest with respect to future medicals for that “settlement” has been satisfied.

• The beneficiary and/or their representative are encouraged to maintain the

physician’s certification.

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Medicare Secondary Payer and ‘Future Medicals’ Proposed Rule Making

• On May 3 of 2012, CMS submitted to the Ofgice of Management and

Budget advanced notice of proposed rulemaking (ANPRM) entitled “Medicare Secondary Payer and ‘Future Medicals’ (CMS-6047-ANPRM).

• Solicits comment on options to “clarify how beneficiaries can meet

their obligations to protect Medicare’s interest with respect to Medicare Secondary Payer (MSP) claims involving automobile and liability insurance (including self-insurance), no-fault insurance and workers’ compensation when future medical care is claimed or the settlement, judgment, award or other payment releases (or has the efgect of releasing) claims for future medical care.”

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Proposed Rule Making

The CMS proposed general rule states if an “individual or Medicare beneficiary” anticipates receiving Medicare covered services afuer the date of the settlement, then such person is required to satisfy Medicare’s interest with respect to “future medicals” using any one of several options.

• Option 1: The Medicare beneficiary pays for all future injury related expenses out of

the settlement proceeds until exhausted.

• Option 2: No MSA is required if individual is not expected to become a Medicare

beneficiary within 30 months of the settlement and the injury is not “chronic” as defined and the settlement amount is below a certain amount. Comments were solicited on what the threshold amount should be. This would be similar to the procedure employed in workers compensation cases.

• Option 3: No MSA is required if the treating physician certifies there are no future

injury-related expenses to be incurred.

• Option 4: A proposed MSA is submitted to CMS for approval.
• Option 5: The Medicare beneficiary participates in one of the CMS recovery
• ptions. This option to cover the smaller settlements.
• Option 6: The Medicare beneficiary makes an upfront payment.
• Option 7: The individual receives a compromise or waiver from CMS at the time of

the settlement.

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Proposed Rule Making

• The public comment period ended on August 14, 2012
• CMS initiated the MSA rulemaking on their own; no funding

by Congress

• This issue has taken a back-seat to the SMART Act

implementation requirements.

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Allocations

Medicare is not bound by the parties’ allocation of settlement funds. The court can determine whether future medical expenses are likely and the amount of the allocation necessary for a MSA. See, Big R Towing v. Benoit, No. 6:2010cv00538 (W.D. La 2010); 2011 WL 43219; Finke v. Hunter’s View, 2009 WL 6326944 (D.Minn.); Schexnayder v. Scottsdale, No. 6:2009cv01390, (W.D. La); 2011 WL 3273547

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Court Concludes Medicare Allocation Not Necessary

• Sipler v. Trans Am Trucking, Inc., US District Court – New Jersey
• Plaintifg involved in PI case and receives Medicare
• Court concludes that no Medicare allocation is necessary.
• The settlement in this case did not arise in the workers’ compensation

context and it does not indicate a particular amount to compensate

• Mr. Sipler for future medical expenses arising out of the accident.
• Tort cases involve non-economic damages and not determined by a

specific formula.

• To require personal injury settlements to specifically apportion future

medical expenses would prove burdensome to the settlement process and, in turn, discourage personal injury settlements.

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Court Involvement Into Medicare Future Interest

Court orders that despite Medicare not participating in allocation of future medical, conditional payments are ordered to be paid, future expenses will be set in interest-bearing account and based on third-party estimate of future expenses; once interest-bearing account is depleted by Medicaid charges then Medicare must pay even if related to suit. See: Frank v. Gateway Insurance Company, 2012 WL 868872, U.S.

• Dist. Ct., W.D. LA, Mar. 13, 2012.

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Aranki v. Burwell - Does it do away with the consideration

• f Medicare’s interests in

liability cases?

• Rachel Aranki filed a medical malpractice case in 2009. She was a Medicare recipient.
• Plaintifg, wanting to comply with Federal Law sought the input from CMS regarding

the necessity of an MSA.

• The state court judge enforced the agreement to settle and ordered Ms. Aranki to file a

declaratory judgment action in federal court on the LMSA issue.

• The United States District Court for the District of Arizona issued its order dismissing

the matter for lack of subject-matter jurisdiction.

• In the opinion, the Court stated that “no federal law or CMS regulation requires

the creation of a MSA in personal injury settlements to cover potential future medical expenses.”

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Aranki v. Burwell - Does it do away with the consideration

• f Medicare’s interests in

liability cases?

• The Court finds that there is no justiciable case or controversy ripe for review. As such,

the Court does not have subject matter jurisdiction to hear this case. This case is not ripe for review because no federal law mandates CMS to decide whether Plaintifg is required to create a MSA. That CMS has not responded to Plaintifg’s petitions on the issue, is not reason enough for this Court to step in and determine the propriety of its actions. There may be a day when CMS requires the creation of MSA’s in personal injury cases, but that day has not arrived.

• Case decided in October, 2015—took 6 years for this decision.
• In short—case does NOT do away with the consideration of Medicare’s interest

in liability cases.

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MSAs and Settlement Agreements

The settling parties asked the Court to determine whether a liability Medicare Set-aside Arrangement (“LMSA”) was required as part of settling the claim. The Court concluded, afuer reviewing the evidence, that the parties, in fact, did not have a settlement agreement as they did not agree to every essential term. See: Early v. Carnival Corporation, No. 12-20478-CIV- Goodman, (S.D. Fla. February 7, 2013)

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Types of Arrangements

• Self-Administered
• Custodial Accounts
• Special Needs Trust
• Pooled Trust

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Self-Administration

• Must complete annual attestation, interest reported, payment

records, eligible/covered items, related to MSA

• Minor cases (Rx or orthotics only)
• Understanding Medicare allowable items

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Professional Administration

• Allows for a licensed, insured and bonded insurance

professional to administer the funds similar to a workers’ compensation or group health plan

• Administrator is a custodian of an account, that is established
• n behalf of the claimant
• Completion of the annual attestation filed with CMS

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Funding

• Lump Sum
• Structured Settlements

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Protecting Other Means- Tested Benefits

An MSA does not protect other “means-tested benefits” and will impact ongoing eligibility. An MSA should be a sub-trust in a Special Needs Trust. Summary - Two Issues:

• Dealing with – RSMo. 208.215 - Medicaid Lien;
• Maintaining “means-tested benefits”

m Special Needs Trusts m Other options

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Why Use a SNT?

• A Special Needs Trust (SNT) is a legal tool that can be used in

many cases to preserve the client’s eligibility for needs- based public benefits

• Another benefit of using a SNT is that the state will routinely

defer its Medicaid lien until that client’s death

• Will protect benefits with MSA sub-trust

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What is a Special Needs Trust?

Generally, we are talking about a trust agreement that will, if properly drafued, render the trust assets legally unavailable to the beneficiary for public benefit purposes.

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What is the purpose of a Special Needs Trust?

Establish a trust which allows assets to be held and used for the benefit of a disabled person without those assets being counted as “available resources” (a.k.a. “countable resources”)

• f the disabled person. The SNT can also help protect the

beneficiary from exploitation and poor decision making.

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What is the purpose of a Special Needs Trust?

Special needs trusts, even of modest amounts, can greatly enhance the quality of life for beneficiaries with disabilities. SNTs provide not only for medical expenses and therapies not otherwise covered by public benefit programs, but also for recreational items and entertainment that increases the enjoyment of life.

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SNT Expenditures

General Rule:

• no food or shelter
• no cash or cash equivalent

These expenditures are treated as income to the beneficiary, so public benefits are afgected.

• See list – intended to be illustrative, not exhaustive.
• Make payments directly to vendors whenever possible.

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Two General Categories of SNTs

1) Self-settled (created with assets of the beneficiary) 2) Third-party trusts (created and funded by someone with no duty of support to the beneficiary) Today’s discussion will focus on self-settled SNTs. If someone

• ther than the beneficiary wants to put assets into trust for

benefit of beneficiary, that person should use a third-party SNT.

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Three Types of Self-Settled SNTs

1) Medicaid Payback Trust (“d4A”) 2) Qualified Income Trust (“Miller” trust) ofuen used in “income cap” states (“d4B”) 3) Pooled Trust (“d4C”) The terminology (d4A, etc.) comes from the federal enabling statute – 42 U.S.C. § 1396p(d)(4).

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Payback Trusts Codified in Federal Law

The Omnibus Budget Reconciliation Act of 1993 (OBRA ‘93) codified the use of self-settled SNTs, including the Medicaid “payback” trust, the income only trust, and the pooled trust for individuals with disabilities. 42 U.S.C. § 1396p(d)(4) governs self-settled trusts and created new planning opportunities for beneficiaries under age 65. Thus, the d4A, d4B and d4C references.

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General Rule - Trust Assets Available

The general rule is that assets transferred to a trust are deemed available to the settlor/beneficiary for Medicaid and SSI eligibility purposes up to the amount the trustee could distribute for the benefit of the settlor/beneficiary if the trustee exercised maximum discretion in settlor’s favor.

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SNT Exception

The exception to this rule is that assets in a self-settled special needs trust are NOT “available resources” to the beneficiary IF the trust complies with OBRA-93. In Missouri, in a personal injury context, this almost always means that we are talking about either a d4A Trust or a Pooled Trust (d4C).

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Requirements of a d4A SNT (also known as a “Payback” Trust)

• 1. The trust beneficiary must be disabled;
• 2. The trust must be irrevocable;
• 3. The trust must be established by the beneficiary’s
• A. Parent;
• B. Grandparent;
• C. Guardian; or
• D. a Court.
• 4. The beneficiary must be under age 65 when trust established and funded
• 5. Must include provision that the assets remaining when beneficiary dies will

first be used to “payback” the state up to an amount equal to the total amount of medical assistance paid.

• Same requirement applies if trust terminates while beneficiary living.

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Requirements of a d4C Pooled Trust

1) Some advantages over the d4A payback SNT 2) No age 65 limitation 3) Can be established by the beneficiary as well as a parent, grandparent, guardian or court 4) Professional trustee management 5) Must include “payback” provision to the State to the extent assets remaining at death of the beneficiary are not retained by the pooled trust

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Disabled

The trust beneficiary must meet the definition of “disabled” under the Social Security law – if receiving SSI or SSDI, this threshold has been met, but this requirement can be met without being eligible for SSI or SSDI (if ineligible for other reasons).

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Who Can Establish the SNT?

The trust must be established by the beneficiary’s

• A. Parent;
• B. Grandparent;
• C. Guardian; or
• D. a Court.

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What does it mean to “establish” a d4A Trust?

• 1. Must be one of the four authorized (parent, grandparent,

guardian or court)

• a. Draper fiasco
• 2. Must have:
• a. Legal authority to act on behalf of beneficiary so

beneficiary’s money is first into the trust; OR

• b. Settlor must put own money into trust first —

“Seed Trust”

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Guardian and Special Conservator

• 1. Guardian needs court authority to establish a d4A Trust
• 2. Special Conservator
• Authorized by § 475.092 RSMo.
• Use when do not need a guardian and do not have a parent or

grandparent

• Is a one-time transaction to establish and fund d4A Trust

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Court

Missouri’s statutory authority for court approval of a pay-back trust is in Section 475.092.2 RSMo.

• The trial division has same authority as probate division,

without appointing a conservator, as probate division under Section 511.030 RSMo. POMS SI 01120.203B.1.f

• Requires that court must order establishment of d4A Trust
• If court-established, Judge must establish, not merely

approve, a trust established by someone else

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Under the Age of 65

The beneficiary must be under age 65 when the trust is established and funded.

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Remaining Trust Assets

The assets remaining in SNT when beneficiary dies will first repay Medicaid. Also required if trust terminates while beneficiary living.

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Only One Trust Beneficiary

Trust cannot benefit anyone other than the beneficiary “Sole benefit” of beneficiary

• Added by Transmittal 64

POMS elaborates on sole benefit

• §SI 01120.203B.1.e and
• §S1 01120.201F.2

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Payback Medicaid

When...

• A. On death of beneficiary; and
• B. If trust terminates during beneficiary’s life

What...

• A. All remaining assets, up to amount state spent on

beneficiary

• B. All states that provided Medicaid benefits must be repaid
• C. If not enough trust assets, states are reimbursed

proportionately

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Payback Upon Termination of Trust

Upon termination of the trust, all other expenses prohibited until afuer payback 1) Taxes due from beneficiary’s estate other than from assets in the trust 2) Inheritance taxes 3) Debts owed to third-parties 4) Funeral expenses 5) Residual beneficiaries (other than pooled trust)

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Choosing a Trustee

• In short, there is no perfect choice.
• The beneficiary cannot be the trustee.
• The beneficiary cannot have the power to remove or

appoint the trustee.

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Choosing a Trustee

When choosing a trustee, key factors to consider include the cost

• f the available parties, relative investment experience and

flexibility and bureaucracy.

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Choosing a Trustee

Another key consideration should be the trustee’s knowledge of public benefits programs and their regulations, as well as the beneficiary’s special needs and circumstances.

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Choosing a Trustee

It ofuen makes sense to split the necessary trustee roles:

• bank or trust company handling investments and accounting
• family member or social worker taking care of planning for

the beneficiary and disbursements

• an elder law attorney advising on public benefits issues

This can be done through multiple trustees or a single trustee advised by individuals with the necessary knowledge and experience.

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When to Use a Pooled Trust

If the person who has a disability is 65 or older.

• Age 65 or older can create and fund a pooled trust, but transfer

penalties may apply. If there is no person or financial institution appropriate or willing to act as trustee.

• Perhaps there is not an appropriate person.
• Perhaps the amount of the trust estate is too small to interest a

corporate trustee.

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When to Use a Pooled Trust

When there is no parent or grandparent willing or able to establish the trust and it is not appropriate or feasible to go to court to accomplish this, the person who has a disability can establish his or her own pooled trust. When the cost of establishing a “stand-alone” d4A trust is excessive in light of the amount to be transferred to the trust.

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Pooled Trust Disadvantages

The choice of trustee is made solely by the nonprofit association administering the pooled trust. Some allow co- trustees. If the trustee is not doing a good job or is not responding to the beneficiary’s needs, there is usually no way to remove the trustee and replace with a more responsive trustee.

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Pooled Trust Disadvantages

The nonprofit association normally retains at least some of the funds remaining in the pooled trust account upon the death

• f the beneficiary, so there may be a conflict of interest that is

unacceptable. The remainder of the pooled trust account might not be paid to family members or others of the beneficiary’s choice, even if it exceeds the amount that would have been paid back to MO HealthNet -- some pooled trusts keep only a portion and distribute the “afuer-payback” balance to those beneficiaries; some keep it all. Good to know up front.

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Structured Settlements

Recognizing that clients ofuen may not be the best at managing their own funds, attorneys have ofuen encouraged them to “structure” their settlements so that they receive their funds in partial distributions over many years.

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Structured Settlements

A structured settlement can ensure a consistent and predictable stream of income to the injury victim for medical and living expenses. Structures also provide significant tax advantages because the payments are not taxed. Depending on client’s income and tax bracket, the structure may provide a better fixed-income return than is otherwise available for most investors.

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Structured Settlements

In cases where the settlement is small and no professional trustee and no appropriate family member or friend is available to serve as a volunteer trustee, a structured settlement can provide a good management tool. Additionally, annuities are further ways of avoiding probate. Annuities may name a remainder beneficiary to continue to receive payments for a guaranteed number of years.

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Structured Settlements

A structured settlement can have a devastating efgect on eligibility for public benefits. If public benefits are a concern, the annuity should be paid into a supplemental needs trust.

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Veterans Administration

U.S. Dept. of Veterans Afgairs v Boresi, No. SC 92541 (Mo. 2013); 2013 MO Lexis 25 (lexis.com), 2013 MO Lexis 25 (Lexis Advance) (April 30, 2013); allows the VA to intervene in a workers’ compensation case to recover their medical treatment costs from the injury. The court concluded that federal law was controlling and that 38 U.S.C. § 1729 allowed an unequivocal right to intervene in any action brought a veteran covered under a worker’s compensation law or plan. The Supremacy Clause trumped any state comp law. The Missouri comp law had no provision for intervention in these circumstances, and the civil rules for intervention under Rule 52.12 did not apply.

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Questions?

THE ELDER & DISABILITY ADVOCACY FIRM OF CHRISTINE A. ALSOP, LLC 6654 Chippewa Street, St. Louis, MO 63109 (314) 644-3200 | www.AlsopElderLaw.com

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