In November of 2021, California’s Department of Health Care Services released its policy on how Medicare Set Aside (MSA) accounts affect Medi-Cal eligibility. See Letter No .: 12-26 The letter states the following:
“If an applicant/beneficiary is being determined for Modified Adjusted Gross Income (MAGI) Medi-Cal, the MSA funds are not counted as they are not considered taxable income. However, the interest earned on MSA funds retained in an account is taxable income and would be counted in the MAGI eligibility determination as per the “Interest Income” category in the MAGI Income and Deduction Types Chart.”
While this Policy Letter specifically exempts the original MSA deposit from the calculation for Medi-Cal eligibility, it is equally explicit that any interest accrued from the account will be counted as MAGI. Because Section 17.2 of CMS’ WCMSA Reference Guide states that the applicant “must put the total WCMSA amount…into an interest-bearing account”, interest on a long term and/or large MSA—especially when combined with other assets–could be significant enough to jeopardize eligibility.
So, what is the best way to ensure that interest on an MSA account does not endanger an Applicant’s Medi-Cal eligibility now and in the future? Structures!
Why? Under Section 5.2 of the WCMSA Reference Guide, structures are an approved alternative to depositing an MSA in an interest-bearing account. Structures harness the power of an internal rate of return over time but do not pay any interest whatsoever. In addition, we can ensure that the structures’ terms are Medi-Cal compliant (irrevocable, non-assignable, equal payments, no balloon payments, actuarially sound, etc.). While legislation introduced in February may impact some eligibility guidelines AB-2813, structures remain a strong, viable way to meet the new policy in the Letter, state and federal guidelines, and the proposed changes too.
Structuring an MSA to ensure that interest payments do not impede Medi-Cal eligibility is not just for those who meet impoverishment guidelines. Medi-Cal is also critical to anyone who may need to finance long-term custodial care in a skilled nursing facility during their lifetime. With the cost of long-term care estimated to be 232% of the annual median income of California households, Medi-Cal eligibility can become quite important to any Applicant and their families.
Safeguarding their clients’ Medi-Cal eligibility is just one aspect of why structuring MSAs is a great idea. As our previous posts have detailed, there are other compelling reasons for structuring your settlement (10 Structured Advantages). Ensuring that funds last for the applicant’s life expectancy, creating a “replenishing MSA” for any funding shortfalls, and insulation from creditors are just a few. Beyond Medi-Cal eligibility, structures can significantly improve an Applicant’s post-settlement quality of life!
For more information or if you would like to discuss a specific claim, please do not hesitate to reach out to anyone on our team at info@chronovo.com or to me directly at zleonard@chronovo.com or on my cell at 415-298-7872.
