Medicaid FAQs

Will a Medicaid beneficiary lose Medicaid benefits by receiving settlement proceeds?


Medicaid is an asset and income-based service; therefore, receipt of settlement proceeds may disqualify the beneficiary from the Medicaid program. Utilizing qualified spend down procedures or placing net proceeds into an approved vehicle such as a Special Needs Trust may help to preserve those Medicaid benefits.

Can an Attorney hold settlement proceeds in trust to help the client preserve Medicaid benefits?

No. The settlement proceeds will be under Constructive Receipt and the proceeds will be recognizable to the beneficiary for income/entitlement purposes and will disqualify the beneficiary for Medicaid based on exceeding the asset/income thresholds. 

What is Medicaid Estate Recovery?

Medicaid will seek recovery from the estate of deceased Medicaid recipients who are age 55 or older and in a nursing facility or enrolled in a Home and Community Based Services Waiver Program at the time of death. Recovery will be made from any real or personal property in the estate of the recipient up to the value of payments made by Medicaid for nursing facility, hospital and drug services. Estate recovery will not apply to recipients who have a surviving spouse or dependent or disabled child. 

Can a State Medicaid Agency have a Medicaid Estate Recovery lien and an Injury related/Tort Lien?

Yes. Third party liability becomes a factor to be addressed every time there is a tort claim and settlement (i.e. personal injury, motor vehicle accident, slip and fall, product liability, workers compensation, etc.). Medicaid Estate Recovery is a separate reimbursement obligation. Upon application for Medicaid benefits, Medicaid beneficiaries accept assistance/ have the state pay for their medical care, but in exchange, agree to a claim being placed against the estate of a beneficiary decedent for Medicaid assistance provided after the age of 55 or for long-term nursing care. Medicaid Estate Recovery is a factor for every Medicaid beneficiary, regardless of the existence or absence of a tort settlement. 

Do Medicaid Managed Care Plans have the same recovery rights as the State Medicaid Agency?

The contract language between the State Medicaid agency and the Managed Care Organization (MCO) dictates the terms and conditions under which the MCO assumes Third Party Liability (TPL) responsibility. Generally, TPL administration and performance activities that are the responsibility of the MCO will be set by the state and should be accompanied by state oversight. The Managed Care Plans will have the same recovery right pursuant to the State Medicaid Agency recovery statute.

State Medicaid programs may contract with MCOs to provide health care to Medicaid beneficiaries, and may delegate responsibility and authority to the MCOs to perform third party discovery and recovery activities. The Medicaid program may authorize the MCO to use a contractor to complete these activities.

When TPL responsibilities are delegated to an MCO, third parties are required to treat the MCO as if it were the State Medicaid agency.

Will the State Medicaid Agency reduce its lien for attorney’s fees and procurement expenses?

Every Medicaid Agency has its own statutory requirement for Third Party Recovery. Some agencies have statutory language providing for a reduction to its lien for procurement expenses, some allow for procurement expenses to be taken out of the settlement as a priority to the State Agency lien and others have a formula in place for how their reimbursement lien is calculated out of the settlement proceeds.