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MEDICARE SET-ASIDE ARRANGEMENTS IN SPECIAL NEEDS TRUSTS

by Thomas D. Begley, Jr., CELA

 

Countable Asset for SSI and Medicaid

A question arises as to whether assets held in an MSA are countable for SSI and Medicaid purposes. This has been addressed by CMS in the WC context, but the same line of reasoning should apply to third party liability cases. CMS has stated that:[1]

Medicare Set-Aside Arrangements are not subject to any special treatment under Medicaid resource rules. These funds should be evaluated to determine whether they meet the legal definition of a resource for Supplement Security Income (SSI) and, therefore, Medicaid purposes, i.e., ‘cash or other assets that an individual owns and could convert to cash to be used for his or her support and maintenance.’ The funds must be in interest-bearing accounts. The funds may meet the SSI/Medicaid resource definitions.

There may be cases in which funds in a Medicare Set-Aside Arrangement are placed into trusts, possibly trusts that would satisfy the definition of “special needs trusts” under Section 1917 of the Social Security Act. In those cases, the funds might not be a countable resource, but that result would be solely on the basis of Medicaid, not Medicare, rules.

If the MSA funds are wrapped into a special needs trust, they would be considered inaccessible for SSI-related Medicaid and Food Stamp purposes. It is always good practice to have a professional trustee to administer a Self-Settled Special Needs Trust, because of the complexity of the issues involved. Most professional trustees will then retain the services of a professional custodian, such as MediVest Advisors, to administer the MSA subaccount. If the size of the MSA is significant, the cost can be sharply reduced by funding the MSA with a Structured Settlement. The average savings by utilizing a Structured Settlement, rather than a lump sum, is 46%.[2]

The Structured Settlement payment stream is paid directly to the special needs trust, and the trustee allocates the funds to the MSA subaccount.

 

[1] CMS Memorandum Questions and Answers, July 11, 2005, Q & A 13.

[2] Policy Clarifications—Food Stamp—Medicaid—SSI, PMS 13182340, PFS 13182540 (revised July 20, 2007).

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