Last updated on October 31st, 2025 at 11:27 am
When injured due to someone else’s negligence, a personal injury settlement can provide much-needed compensation for medical expenses, lost wages, and pain and suffering. However, if you rely on Medicaid or Medicare for healthcare, it’s crucial to understand how a settlement may affect your benefits. These programs have legal rights to reimbursement, and failing to properly handle your personal injury settlement could lead to unexpected financial and legal consequences. Here’s what you need to know about Medicaid and personal injury settlements.
Understanding Medicaid and Medicare’s Right to Reimbursement
Medicaid and Medicare are government programs that cover medical expenses for eligible individuals. If either program has paid for medical care related to your injury, they have a legal right to be reimbursed from any settlement or award you receive. This process, known as a “lien,” ensures that taxpayer-funded programs do not cover costs that the at-fault party should pay.
If you fail to notify the Centers for Medicare & Medicaid Services (CMS) about your settlement, you could be held responsible for repaying those funds later. In some cases, this could jeopardize your access to future benefits.
How a Settlement Could Affect Your Medicaid Eligibility
Personal injury settlements can impact eligibility for Medicaid and, in some cases, Medicare. Medicaid is a needs-based program, meaning recipients must stay below certain income and asset limits. A lump-sum settlement could push you above those limits, resulting in a loss of coverage.
Fortunately, there are legal strategies to protect your benefits while still accessing your settlement funds. For example:
- Special Needs Trusts (SNTs): You can use settlement funds for approved expenses without counting against Medicaid eligibility.
- Medicare or Medicaid Set-Aside Trusts (MSAs): If you need future medical care related to your injury, an MSA ensures those costs are covered while preserving your right to benefits.
While these trusts aren’t explicitly designed to preserve a Medicaid recipient’s personal injury settlement, they can effectively store funds won in a settlement or successful judgment against a negligent party. However, though it may protect eligibility for Medicaid and a personal injury settlement’s resulting award, there’s a downside. Such trusts also prevent successful plaintiffs from accessing the full amount of personal injury settlements, which may not be suitable for some litigants.
Protecting Recipients of Medicaid and Personal Injury Settlements
The best thing to do when weighing whether to make a personal injury claim is to consult with an experienced attorney. An experienced attorney can help by:
- Ensuring that Medicaid and Medicare receive the legally required notice of your claim
- Negotiating with CMS to reduce liens and eliminate unrelated medical costs from repayment obligations
- Advising on the best strategies to protect your eligibility while maximizing your settlement.
Contact the Personal Injury Attorneys at Garmey Law
At Garmey Law, our legal team has the expertise to help you handle these challenges and secure the compensation you deserve without jeopardizing your healthcare coverage. To learn more about how Medicaid and personal injury settlements can affect each other, contact Garmey Law’s legal team today.