The WCMSA and Medicaid in North Carolina

North Carolina’s Medicaid program was once again the subject of an interesting court decision issued by the North Carolina Court of Appeals.  It was last addressed in the U. S. Supreme Court decision in the Wos v EMA case (674 F.3d 290 (March 20, 2013). In Wos, the Supreme Court struck down North Carolina’s Medicaid recovery statute’s irrebuttable presumption of a one third Medicaid recovery from a beneficiary’s tort recovery since it conflicted with the Medicaid anti –lien provision. In the Williford v North Carolina Department of  Health and Human Services  case, 2016 N.C. App. LEXIS 1163 ( November 15, 2016) the Court was asked to consider whether Ms. Williford’s Workers’ Compensation Medicare Set Aside (WCMSA) account,  established in connection with her workers’ compensation claim settlement,  was a countable resource for assessing eligibility for Medicaid.

By way of background, Ms. Williford sustained a work related injury on November 25, 2005.   Between the time of the accident and the time of settlement, Ms. Williford turned 65 years of age and became eligible for Medicare benefits. She also received assistance with certain medical expenses under the Medicaid for the Aged program. Eligibility for the Medicaid program is based on low income thresholds.  Ms. Williford’s workers compensation settlement was finalized by the North Carolina Industrial Commission on April 19, 2011.  The terms of the settlement also included the sum of $46,484.12 to fund a WCMSA that would be used to pay for Ms. Williford’s future injury related Medicare covered treatment.  Ms. Williford’s Medicaid benefits were terminated subsequent to the settlement based on North Carolina’s Department of Health and Human Services (DHHS) determination that Ms. Williford no longer met the low income threshold due to her receipt of the WCMSA funds. Ms. Williford filed this appeal after losing in the DHHS administrative hearings and before the trial court.

The main issue in this case involves the characterization of the WMCSA funds for purposes of determining Ms. Williford’s ongoing eligibility for Medicaid benefits. In order to be eligible for Medicaid for the Aged benefits, an unmarried applicant who is over 65 years of age may have no more than $2000.00 in liquid assets.  The Appellate Court conducted a lengthy review of the language in the federal Social Security Act and in the North Carolina Administrative Code that sets out the Medicaid program rules. The Court found that in order for an asset to be a countable asset, it must be “legally available to the applicant without legal restriction on the applicant’s authority to use the resource for support and maintenance”.

According to the Court’s analysis , Ms. Williford’s WCMSA funds were not “legally available” to her  since the terms of the legally binding workers’ compensation settlement agreement strictly limited the use of the WCMSA funds to pay for future Medicare covered expenses. The agreement also set forth the exact manner in which the WCMSA funds must be self-administered as well as the consequences for failing to administer the account properly, ie Medicare would not make payment of injury related Medicare covered treatment until the funds were restored to the WCMSA account. If Ms. Williford breached the terms of the settlement agreement, Ms. Williford could be held in contempt of court for violating the terms of the agreement.

The Appellate Court rejected the Respondent DHHS’ argument that Ms. Williford’s actual access to the WCMSA funds was unrestricted noting that her improper use of the funds would violate the legally binding settlement agreement. Similarly, the Respondent’s argument that only a “resulting trust” would constitute a legally binding agreement was dismissed for lack of support. The Respondent’s characterization of the WCMSA as a type of Medical Health Savings Account funded by Medicare was also found to be without merit.

The Court held  that Ms. Williford’s WCMSA funds were not a countable resource in determining Medicaid eligibility since her use of the WCMSA funds was subject to legal restrictions based on a legally binding settlement agreement. The trial court decision to the contrary was reversed.

The Williford Court’s decision is at odds with the general practice of protecting WCMSA funds in a Special Needs Trust in order to preserve eligibility for income based benefits such as Medicaid. Since each State has its own Medicaid statutes, practitioners should be sure to review them as well as the jurisdiction’s pertinent case law in order to provide appropriate guidance. Since the settlement agreement in the Williford case included specific provisions pertaining to the proper administration of the WCMSA funds, it is unclear if a different conclusion would have been reached by the Court in their absence. We will continue to keep you advised of further developments.

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