Part 1: Ethical Issues at Settlement – Protecting the Injury Victim Client
Posted date in Settlement PlanningSuffering even a moderate personal physical injury can create difficult challenges both financially and emotionally for even the strongest among us. However, what happens when someone suffers a serious or catastrophic personal physical injury? Do they get the proper counseling regarding the form of the settlement so as to protect their current assets, preserve public benefits and safeguard the physical injury recovery? Will the recovery be sufficient to pay for all of the victim’s future medical needs without public assistance? Can they recover physically? Can they recover emotionally? All of these issues can be very difficult to face for someone that is seriously injured. Personal injury practitioners who represent disabled clients should be aware of their obligations to advise these clients properly and also understand the hurdles faced by the injury population in terms of recovery both financially as well as physically. This blog series addresses the issues of major importance when dealing with the form of settlement for a personal injury matter involving a disabled client.
Public Assistance Primer
Because most of a lawyer’s malpractice exposure at settlement is related to public benefit preservation, I think it is important to understand the basics of these benefits. Ethically, a lawyer must be able to explain these matters to the extent that client is informed sufficiently to make educated decisions. There are two primary public benefit programs that are available to those that are injured and disabled. The first is the Medicaid program and the intertwined Supplemental Security Income benefit (“SSI”). The second is the Medicare program and the related Social Security Disability Income/Retirement benefit (“SSDI”). Both programs can be adversely impacted by an injury victim’s receipt of a personal injury recovery. Understanding the basics of these programs and their differences is imperative to protecting the client’s eligibility for these benefits.
Medicare and Social Security Disability Income (hereinafter SSDI) benefits are an entitlement and are not income or asset sensitive. Clients who meet Social Security’s definition of disability and have paid in enough quarters into the system can receive disability benefits without regard to their financial situation.[1] The SSDI benefit program is funded by the workforce’s contribution into FICA (social security) or self-employment taxes. Workers earn credits based on their work history and a worker must have enough credits to get SSDI benefits should they become disabled. Medicare is a federal health insurance program. Medicare entitlement commences at age sixty-five or two years after becoming disabled under Social Security’s definition of disability.[2] Medicare coverage is available again without regard to the injury victim’s financial situation. Accordingly a Special Needs Trust is not necessary to protect eligibility for these benefits. However, the MSP may necessitate the use of a Medicare Set Aside discussed in greater detail below.
Medicaid and Supplemental Security Income (hereinafter SSI) are income and asset sensitive public benefits that require special planning to preserve. In many states, one dollar of SSI benefits automatically provides Medicaid coverage. This is very important, as it is imperative in most situations to preserve some level of SSI benefits if Medicaid coverage is needed in the future. SSI is a cash assistance program administered by the Social Security Administration. It provides financial assistance to needy aged, blind, or disabled individuals. To receive SSI, the individual must be aged (sixty-five or older), blind or disabled[3] and be a U.S. citizen. The recipient must also meet the financial eligibility requirements.[4] Medicaid provides basic health care coverage for those who cannot afford it. It is a state and federally funded program run differently in each state. Eligibility requirements and services available vary by state. Medicaid can be used to supplement Medicare coverage if the client is eligible for both programs[5]. For example, Medicaid can pay for prescription drugs as well as Medicare co-payments or deductibles. Because Medicaid and SSI are income and asset sensitive, creation of a special needs trust may be necessary which is discussed in greater detail in a later part of this series of posts.
[1] While most often we deal with someone who has a disability, Social Security Disability also provides death benefits. Additionally, a child who became disabled before age 22 and has remained continuously disabled since age 18 may receive disability benefits based on the work history of a disabled, deceased or retired parent as long as the child is disabled and unmarried.
[2] SSDI beneficiaries receive Part A Medicare benefits which covers inpatient hospital services, home health and hospice benefits. Part B benefits cover physician’s charges and SSDI beneficiaries may obtain coverage by paying a monthly premium. Part D provides coverage for most prescription drugs but it is a complicated system with a large co-pay called the donut hole.
[3] Disability is defined the same way as for Social Security Disability benefits which is that the disability must prevent any gainful activity (e.g. employment), last longer than 12 months, or be expected to result in death. If someone receives disability benefits from Social Security they automatically qualify as being disabled for purposes of SSI eligibility.
[4] An individual can only receive up to $552.00 per month ($829.00 for couples) and no more than $2,000 in countable resources.
[5] This is commonly referred to as “dual eligibility”. For those that are dual eligible, Medicaid will pay Medicare premiums, co-payments and deductibles within prescribed limits. There are two different programs. First, is Qualified Medicare Beneficiaries (“QMB”). The QMB program pays for the recipients Medicare premiums (Parts A and B), Medicare deductibles and Medicare coinsurance within the prescribed limits. QMB recipients also automatically qualify for extra help with the Medicare Part D prescription drug plan costs. The income and asset caps are higher than the normal SSI/Medicaid qualification limits. Second is Special Low-Income Medicare Beneficiary (“SLMB”). The SLMB program pays for Medicare premiums for Part B Medicare benefits. SLMB recipients automatically qualify for extra help with Medicare Part D prescription drug plan costs. Again, the income and asset caps are higher than the normal SSI/Medicaid qualification limits.