Michigan accident settlement and disability

Getting injured in a crash is difficult enough, but if you were already disabled before the crash, you may have to worry about how this affects your long-term benefits.

Before accepting any money, check both your ongoing eligibility and any obligation to repay crash-related medical bills.

Which benefits do you receive?

You could receive benefits from more than one program, which can each be affected differently by a settlement. Start by checking the names on your benefit letters to know what you have. Read the Michigan Legal Center guide to who pays first after a Michigan crash: auto or health insurance.

How do SSI and SSDI treat a settlement?

The key difference is whether the program limits your income and savings. Supplemental Security Income (SSI) helps eligible people with limited income and resources. Social Security Disability Insurance (SSDI) is based on an insured worker's earnings record. According to the Social Security Administration's program comparison, the SSDI payment amount won’t be affected by other unearned income and resources.

SSI benefits can be affected in two instances:

When you receive the money, countable settlement proceeds are unearned income for the month received. They can reduce SSI or make you ineligible for that month.
When you keep the money, funds remaining the next month can count as a resource, meaning an asset you own. That can affect later eligibility.

Social Security's settlement rules do not necessarily count every dollar of the gross settlement. Essential medical or legal expenses and certain other exclusions can change the amount counted.

SSI generally limits countable resources to $2,000 for one person or $3,000 for a couple, measured at the beginning of the month. Some property is excluded. Those resource limits are not a safe settlement amount. Money can affect SSI as income even when your savings stay below the limit.

If you receive both SSI and SSDI, the SSDI rule does not protect your SSI payment. Check both benefit notices before agreeing to how settlement funds will be paid.

Can I lose Medicaid after a car accident settlement?

Yes, depending on the facts of the case and your eligibility category. Michigan's Medicaid asset rules distinguish categories that consider assets from those that don’t. Ask the Michigan Department of Health and Human Services (MDHHS) to identify your category from your eligibility notice.

Many Medicaid categories use modified adjusted gross income (MAGI), a tax-based way of measuring income. Under the federal MAGI rules, these categories have no asset test. Keeping settlement money in the bank does not, by itself, disqualify you under an asset limit. A lump sum that counts as income is generally counted only in the month received.

First, though, someone must determine what counts as income. Compensation for physical injuries might be excluded from taxable income, while other parts of a settlement may be taxable. The IRS explains these distinctions between taxable and nontaxable settlement payments. A tax exclusion may matter for MAGI Medicaid, but it does not establish that SSI will disregard the same money.

Medicaid categories tied to age or disability, and coverage for long-term care, can use different financial rules.

Repayment is a separate question. If Medicaid paid for care related to the crash, MDHHS may seek reimbursement from the recovery even if you remain eligible. Michigan's Medicaid subrogation process requires notice when a lawsuit is filed. Your lawyer should address that notice and the repayment claim before funds are distributed. If you have a Medicaid managed care plan, your lawyer should notify it too and check its separate recovery claim, as MDHHS explains.

How can a settlement affect Medicare?

Receiving a settlement generally doesn’t end Medicare coverage. Medicare eligibility depends on the applicable age, disability or qualifying medical condition, rather than a general limit on cash savings.

Medicare might ask for repayment of payments it made for accident care when someone else turns out to be responsible. The Centers for Medicare & Medicaid Services explains this recovery process for accident-related payments. If a Medicare Advantage or prescription drug plan paid for crash-related care, your lawyer should also contact that plan about any repayment claim. Federal rules authorize recovery by Medicare Advantage plans, which provide Medicare benefits through private insurers, and Part D plans, which cover prescription drugs.

Before signing the release, also ask how future crash-related treatment will be paid for after settlement.

Keeping Medicare does not necessarily mean keeping every program that helps pay for it:

Medicare Savings Programs help eligible people with premiums and sometimes other Medicare costs. They have their own income and resource rules, including state-specific treatment. Review your Michigan eligibility separately under the Medicare Savings Program rules.
Extra Help assists with Medicare Part D prescription costs. Its eligibility and renewal need separate attention. Do not assume settlement money ends it immediately. Medicare says Extra Help continues through December 31 once you qualify for the year, even if income changes during that year.

Taxable settlement amounts could also affect higher-income Part B (medical insurance) or Part D premiums. Social Security generally uses tax-return information from two years earlier for these income-related premium adjustments. The entire settlement is not necessarily taxable income, and an adjustment may occur later rather than when the check arrives.

What should you do before accepting a settlement?

Tell your injury lawyer about every benefit before you sign a settlement agreement. They may need to review your benefit award letters, renewal letters, health plan cards, proposed settlement papers and any repayment notices. Include programs that help with premiums or prescriptions, even if you think of them as part of Medicare.

Ask for a review of three things:

what you may owe back
whether payment could change eligibility
whether the payment arrangement needs benefits-planning advice

Resolve these questions while there is still time to review the proposed terms.

When must you report a settlement?

For SSI, report changes as soon as possible and no later than 10 days after the end of the month in which the change occurred. Follow Social Security's reporting requirements when your income or resources change.

Michigan Medicaid has its own change-reporting rules. Report a required income change within 10 days of receiving the first payment reflecting it. Other reportable changes, including asset changes, must be reported within 10 days after you become aware of them. Confirm which requirements apply to your Medicaid category. Do not assume that reporting to one agency completes every program's requirements.

If you have Medicare, you or your lawyer must report a pending liability or no-fault claim to the Benefits Coordination & Recovery Center. Report the settlement too.

What planning options could protect your benefits?

A properly established special needs trust or pooled trust may help in some situations. These arrangements hold and manage money under specific rules for a person with a disability. The SSI trust exceptions have detailed requirements involving age, disability, who establishes and funds the trust and what happens to money remaining after death. SSI and Medicaid treatment both need review before the trust is funded. Choosing monthly settlement payments instead of a lump sum also needs review. Payment timing alone does not resolve the income and resource questions.

Do not give settlement money to family simply to get it out of your name. Giving away resources or selling them for less than their value can itself cause SSI ineligibility under Social Security's transfer rules. Get advice before transferring money or choosing a plan intended to preserve benefits.

If you are approaching a Michigan car accident settlement, bring your benefit letters and settlement papers to Michigan Legal Center. Michigan Legal Center can review repayment issues in the injury claim and coordinate any additional benefits-planning advice needed to help you avoid unexpected repayment demands or benefit problems.