Protecting Your Medicaid Eligibility After a Settlement

Almost every article on this subject says "the Medicaid limit is $2,000." That is true for some Florida programmes and wrong for others, and the difference matters if you are close to the line.

For SSI-related Medicaid and for Institutional Care Program (ICP) long-term-care coverage, the countable-asset limit is $2,000 for a single applicant. Those programmes also carry an income cap, $2,982 per month in 2026.

For MEDS-AD (Medicaid for the Aged and Disabled) and for the Medically Needy programme, the asset limit is $5,000 for an individual under the Florida Administrative Code. Many settlement claimants are in exactly these programmes rather than in institutional care.

Before anyone tells you what your settlement will do to your benefits, they should be able to tell you which programme you are enrolled in. If they cannot, that is the first question to resolve.

Medicaid is needs-based, so eligibility depends on staying under those limits. A settlement paid into your own name is a countable asset from the moment it arrives.

Even a modest settlement pushes you far over the limit, and coverage can be suspended starting the following month. For someone who depends on Medicaid for home health aides, prescriptions, therapy, durable medical equipment or long-term care, that loss is frequently worth far more over a lifetime than the settlement itself. This is the central irony of an unplanned settlement: the money meant to pay for your care can suspend the coverage that was paying for it.

It is also worth understanding the sequence. Receiving the money is treated as income in the month you receive it, and as a countable resource from the following month onward if you still hold it. That gap is short, and it is why planning has to happen before the cheque is written.

The solution is to keep the settlement out of your direct ownership by holding it in a properly structured trust. For an injured person under 65 who meets the Social Security definition of disability, that is usually a first-party special needs trust under 42 U.S.C. §1396p(d)(4)(A).

Because the money is held by the trust rather than owned by you, it is not counted against the asset limit, so eligibility is preserved. The trust then pays for the many things Medicaid does not cover, while Medicaid continues covering what it covers.

Two features of a (d)(4)(A) trust are worth knowing up front. It must be established for the sole benefit of the beneficiary while they are under 65. And on the beneficiary's death, the state must be repaid from what remains, up to the total medical assistance Medicaid paid on their behalf. That payback requirement is federal law, not a choice your trustee makes, and any adviser who does not mention it is not giving you the full picture.

Since the Special Needs Trust Fairness Act of 2016, a competent adult can establish their own (d)(4)(A) trust. Before that, it had to be created by a parent, grandparent, guardian or court, a restriction that produced a great deal of unnecessary expense.

Where a settlement is smaller, or the beneficiary is over 65, a pooled trust under §1396p(d)(4)(C), administered by a non-profit association, is often the better structure.

Protecting future eligibility is only half of the problem. Florida Medicaid also has a statutory claim against your settlement for medical care it already paid for as a result of your injury. In Florida this operates under Fla. Stat. §409.910, which creates an automatic lien on third-party recoveries.

This is not optional and it does not go away by ignoring it. The claim has to be identified, verified and resolved as part of the settlement. Resolving it late, or distributing funds before it is resolved, creates real exposure.

How much the state can take has been litigated to the Supreme Court. In Gallardo v. Marstiller (2022), the Court held that the Medicaid Act permits a state to seek reimbursement from settlement amounts allocated to future medical care, not only from the portion representing care already paid for. That decision arose from a Florida case, so it applies directly here, and it made careful allocation of settlement proceeds considerably more important than it had been.

The practical consequence is that how a settlement is allocated between categories, past medicals, future medicals, pain and suffering, lost wages, is not a formality. It affects what the state can recover, and it is decided at settlement, not afterwards.

Not everything counts toward the asset limit. Florida exempts certain assets, including a primary residence within an equity limit and one vehicle, among others. But a cash settlement sitting in your own name is fully countable, which is exactly why direct payment is so dangerous for a benefits recipient.

Do not try to solve this by giving the money away. Florida long-term-care Medicaid applies a five-year look-back to certain transfers, and transferring assets for less than fair market value can trigger a penalty period during which you are ineligible. Gifting money to a family member "to hold" is one of the most common and most damaging mistakes made after a settlement.

Do not assume a spouse's account, a joint account, or an informal arrangement solves it either. Countability depends on ownership and access, not on intention.

The best time to plan is before the settlement is finalised, while allocation, lien resolution and trust funding can still be coordinated. The second best time is immediately, before the month turns.

If the funds have already been paid to you, the situation is more difficult but usually not hopeless. Depending on the amount, your age, and which programme you are in, options may include funding a first-party special needs trust or a pooled trust, or a lawful spend-down on exempt items. Which of these is appropriate is a legal question specific to your case, and it is time-sensitive, so it should be put in front of a Florida elder law attorney quickly rather than researched at leisure.