It’s that time of year when we gather for the holidays with family and friends. It’s also that time of year when we prepare our clients who are about to receive a significant check from the MCare Fund to navigate “the system” and complete their planning maneuvers. If you represent medical malpractice claimants and the MCare Fund is nothing more than negotiating the “second” check of your client’s settlement and closing your file, you may be missing some important planning options - ones that you and your client should be aware.
You may be asking: “What does the Medical Care Availability and Reduction of Error Fund (MCare) have to do with the Pennsylvania Medical Assistance (Medicaid or MA) Program?” The Answer? A Lot - for most of your disabled clients. Most of your disabled clients are accessing the MA program to pay for needed health care coverage, prescriptions - and the most expensive portion of almost every Life Care Plan - long term custodial care. And remember, this type of care is NOT covered by traditional insurance or Medicare. (So, if you’re thinking about a prior newsletter where we discussed Medicare Set Asides in Liability cases assuming that fund will cover it, this has nothing to do with that - and yes, it’s another part of the settlement planning process.). These days, a well thought out settlement plan must consider both Medicare and Medicaid factors and future eligibility for these vital programs.
Unfortunately, many plaintiffs are only informed about using a statutory Special Needs Trust to preserve Medicaid and other means tested government benefits. If you’ve only handled cases for plaintiffs under the age of 65, then you’ve probably never been forced to deal with the issue of how to protect as much of the settlement funds as possible while maintaining Medicaid eligibility. And here’s the point, this type of planning is not just for people over the age of 64. Another thought should be coming to mind: “Should I be looking at other options for my clients under age 65 than just a statutory Special Needs Trust?”. The answer is resoundingly “Yes!”
Here’s a common example: Client is informed of several settlement planning options in advance of mediation and decides that he/she does not want to put all his/her eggs in one basket (or Trust) so wants to accept a short-term Medicaid ineligibility period to gain a greater protection of the settlement funds without a payback to the State upon his death like a traditional Special Needs Trust. So, the Client engages in one of several asset preservation strategies commonly known as “half a loaf” gifting. This strategy allows a Medicaid recipient to accept settlement funds in cash, suspend Medicaid benefits for a period of time caused by a gift to a family member or trust to preserve those funds and then resume Medicaid benefits in the future. The major advantage of employing this strategy is that all of the Medicaid benefits accrued during this plan as well as all benefits in the future will not “come back on” the Medicaid recipient’s estate at death in the form of a pay back like a traditional Special Needs Trust.
So, how does the delayed payment under MCare help the disabled client trying to plan for asset preservation and future Medicaid eligibility? The Deficit Reduction Act of 2005 changed the way gifts are treated for future Medicaid eligibility. Without getting too technical, let’s just say that in order to “start” the penalty period running, the client must be “otherwise eligible” for Medicaid but for the large gift that was just made. Based upon that requirement, the client can gift a significant portion of his/her first disbursement from the settlement and then establish a penalty period while awaiting the second disbursement from the MCare Fund. Once again, this is technical stuff that gets worked out in various calculations presented to the local County Assistance Office once funds have been received, gifted and disclosed.
The important thing to remember is that if you have a Medical Malpractice case that will involve MCare funds, it is imperative to explain to your client how to utilize this “gift” from the government. We’ve discussed many times how important it is to have the settlement planning attorney get involved long before the mediation date. This technique is just another reminder that the client needs to be ready prior to mediation to decide how to handle both the initial payment and the MCare Fund payment in coordination with a well rounded settlement plan.
* Certified as an Elder Law Attorney by the National Elder Law Foundation under authorization of the Pennsylvania Supreme Court.