So, you received a settlement or judgment in your favor for your personal injury case. Congratulations! Now, it is time to think about how that can impact you and your family’s eligibility for certain government-sponsored benefit programs; specifically Medicaid.
Medicaid is a joint federal-state program that offers health coverage to eligible low-income individuals. “Low-income” for Medicaid-eligibility purposes means that you own under a certain amount of assets and income, and it’s an amount that varies from year to year.[1] So, what if you just received a check for your personal injury claim that tips you over that threshold? Thankfully, the Virginia Department of Social Services provides guidelines for those who otherwise meet all of the Medicaid non-financial and resource eligibility requirements, but whose countable income exceeds the medically needy income limit for their city or county.
According to Virginia law, an individual or family whose income and assets exceed the allowable limit will only qualify for Medicaid if they first do a Medicaid “spend down.” A Medicaid spend-down is a financial strategy used when the individual or family’s income is too high to qualify. Some of that income must be spent down to ensure eligibility, often by paying for health care and medical-related costs. Some examples of health care costs that you might put toward a Medicaid spend-down include:
- Medical bills
- Prescription medication
- Transportation services to get medical care
- Home improvements such as wheelchair ramps or chair lifts
- Medical expenses such as eyeglasses, hearing aids, or other supplies
Keep in mind, however, that any medical expenses paid by Medicaid or insurance are not deducted from the spend-down liability.
In addition to medical expenses, Virginia’s Department of Social Services provides additional exempt expenditures that can count towards your Medicaid spend-down. These include education expenses, personal hygiene expenses, paying off credit card debts, pre-paying burial arrangements, purchasing a home or paying a mortgage, or purchasing an automobile and associated registration and insurance.
In order to qualify for a spend down, you must promptly report all changes in income, resources, and living arrangements to your local Medicaid agency within ten days of receiving your personal injury proceeds. Failure to do so may constitute Medicaid fraud and could land you in hot water.
Resources will need to be evaluated to see if the individual or family’s countable resources are below the maximum resource limit for their household. If the individual or family’s countable resources are under the resource limit for their household, they are considered eligible for a spend down and will be sent a “Notice of Action,” which includes the spend-down liability limit amount, and the period of time covered by the spend down. This means that you may spend a specific amount of your new income on eligible purchases, medical services, and treatments within a certain time frame without forfeiting your income-based eligibility for Medicaid. The spend-down budget period may vary in length from one to six months.
In order to prove to the Department of Social Services that you spent the spend-down amount down to below the threshold limit, you must save all of your receipts incurred, beginning from the day you received your personal injury proceeds through the end of the spend-down period. Tracking every dollar is critically important; whether it’s buying cold medicine or staying at the hospital overnight, every receipt adds up and could make the difference between whether you qualify for Medicaid going forward or not.
[1] In 2020, individuals qualify for Medicaid in Virginia if they have less than $851/month in income and own $2,000 or less in assets. For married spouses who both apply or if only one spouse applies, their combined income is limited to $1,150/month and $3,000 in assets.
