The Use of Trusts by Medicaid and Supplemental Security Income Recipients Receiving Third Party Liability Settlements and Awards

This final audit report points out how trusts are used to shelter assets and prevent Medicaid from being reimbursed medical costs of recipients receiving third party liability settlements and awards. Thirty-six State agencies disclosed that trusts were used by Medicaid and Supplemental Security Income (SSI) recipients to shelter assets. The agencies also reported that the use of these trusts was growing. Although we were unable to determine the financial impact of these trusts on Medicaid nationally, the impact on Medicaid of just 25 such trusts in California was significant--$3 million in unrecovered program costs. We recommended that the Health Care Financing Administration propose legislative amendments to address this issue. The HCFA agreed that current law contains certain loopholes and that it could recommend to the Congress provisions to close such loopholes in the legislation.