Negotiating a Medicaid Payback Lien/Request on Special Needs Trust

If a lien has been placed on the assets or distributions of special needs trust under the Medicaid estate recoery program, the Law Offices of Albert Goodwin can help you in negotiating the clawback amount.

What are Special Needs Trusts?

Special needs trusts, also known as supplemental needs trusts, often include a provision requiring payback to Medicaid by the New York Human Resources Administration or Department of Social Services (HRA or DSS). The trust document for for self-settled or first-party trusts contains mandatory language requiring reimbursement to Medicaid. This payback clause ensures compliance with federal and state Medicaid laws. With this, Medicaid agencies are entitled to recover funds spent on the beneficiary's care.

Self-settled special needs trusts are frequently used in personal injury or medical malpractice cases. Examples include birth injury lawsuits involving cerebral palsy or other neurological conditions, where the injury happened during labor, delivery, or shortly after birth, and a settlement was reached with the hospital, doctor, or insurance company. Self-settled special needs trusts also arise when a child is injured due to an accident like a car crash or playground incident, or due to medical negligence such as misdiagnosis and surgical errors, and thereafter qualifies for Medicaid because of the injury and financial need.

In these cases, a portion of the settlement proceeds is allocated to fund the special needs trust, with the trust assets supplementing care and support for the beneficiary while maintaining their eligibility for Medicaid and other benefits. Upon the person's death, Medicaid seeks reimbursement from the trust, using the trust assets to repay Medicaid for medical expenses, which is limited to the total Medicaid assistance provided. Any remaining assets are then distributed according to the terms of the trust.

Self-settled Special Needs Trusts

As previously mentioned, self-settled special needs trusts require a payback provision. An example of such a provision is as follows:

The trust terminates upon the beneficiary's death, with no further distributions made to or for the benefit of the beneficiary. The trustee is required to notify Medicaid of the beneficiary's death promptly and must provide a final accounting of trust assets and expenditures. The state(s) that provided Medicaid assistance to the beneficiary are to be reimbursed from the remaining trust assets, including principal and income. This reimbursement includes any cash, investments, or property held in the trust and is made from the total remaining value of the trust.

With this provision, Medicaid agencies are entitled to full reimbursement for all expenses, covering all Medicaid-funded services, including medical care, equipment, waiver programs, and long-term care services. The payback must be consistent with both federal Medicaid statutes and state regulations, and the trustee is responsible for ensuring compliance with all applicable laws. Specifically, the trust must provide that the state will receive all amounts remaining in the trust upon the beneficiary's death, up to an amount equal to the total medical assistance paid on behalf of the individual under the state Medicaid plan. Reimbursement is made to the appropriate Social Services District, which may involve multiple agencies if the beneficiary received services in different states or counties. After satisfying the Medicaid payback, any remaining principal and income are distributed to the beneficiary's estate according to the beneficiary's will or state intestacy laws. Beneficiaries of the estate may include family members, friends, or charities, and the estate assets are subject to any outstanding debts, taxes, or administrative expenses.

Negotiating with Medicaid to Reduce the Clawback Amount

Medicaid's initial lien or payback request may be higher than legally required. Medicaid agencies often seek reimbursement for all expenses incurred. However, some medical expenses may be unrelated. A Medicaid attorney like us can review Medicaid's claims and identify non-reimbursable expenses.

Negotiation strategies to reduce the payback amount include challenging the inclusion of certain medical expenses. Proposing a compromise or settlement amount, such as offering a lump sum payment to Medicaid in exchange for a reduced lien or negotiating a percentage reduction of the total payback amount, can lead to a mutually agreeable resolution.

Potential outcomes of successful negotiations include a reduced Medicaid lien or payback amount, where Medicaid agrees to accept a lower reimbursement sum, allowing more trust assets to remain available for the beneficiary's ongoing needs. With a lower settlement, more assets can pass to the beneficiary's estate, and more funds may be available for distribution to remainder beneficiaries.

Should you need assistance in negotiating a Medicaid payback lien in a SNT, you can call the Law Offices of Albert Goodwin at 212-233-1233 or send us an email at [[email protected].

We represent Medicaid clients throughout the state of New York, including all five boroughs of New York City (Manhattan, Brooklyn, Queens, The Bronx, and Staten Island), Long Island, and Upstate New York.