How a lump sum payment affects your Medicaid eligibility and coverage depends on your Medicaid eligibility category. There are two Medicaid eligibility categories: Modified Adjusted Gross Income (MAGI) and non-MAGI.

MAGI Medicaid

MAGI Medicaid is available to adults ages 19 to 64 who do not have Medicare, children under the age of 19, pregnant women, parents and caretaker relatives (even if they have Medicare), and certified disabled individuals who do not have Medicare.

In order to qualify for MAGI Medicaid, your monthly household income must be less than the monthly income limits set by the State. But MAGI Medicaid does not have resource or asset limits. This means cash savings, bank accounts, property, and other assets you own are not taken into account when determining whether you are eligible for MAGI Medicaid.

Under MAGI Medicaid, lump sum payments count as income in the month received if the federal income tax rules would treat the payment as income. You will need to know the source of the lump sum to determine whether the payment is counted as income. For example, under federal income tax rules, lottery winnings are counted as income but inheritances are not.

If you have MAGI Medicaid, a lump sum payment is unlikely to affect your coverage immediately. Under MAGI Medicaid, even if the lump sum payment will push your income above the monthly income limit, your Medicaid coverage will continue until the end of your 12-month authorization period. If you receive a payment that puts your income above the monthly limit in your recertification month or towards the end of your 12-month authorization period, you will likely be
determined ineligible for Medicaid when you recertify. However, if your income is below the income limit in the following month or after, you can reapply.

Because there are no resource or asset limits in MAGI Medicaid, you can save the money into the following months and your Medicaid coverage will not be affected unless the interest you receive from the payment will push your monthly income over the Medicaid limit.

Non-MAGI Medicaid
Non-MAGI Medicaid is available to adults aged 65 years and older, Medicare recipients, and recipients of SSI, TANF, and foster care. In order to qualify for non-MAGI Medicaid, your monthly household income must be less than the monthly income limits set by the State. Your resources, such as cash savings, bank accounts, property and other assets you own, must also be less than the resource limits set by the State.

Under non-MAGI Medicaid, a lump sum payment counts as income in the month received. Unlike MAGI recipients, non-MAGI Medicaid recipients do have a resource/asset test. If you save the lump sum in whole or in part into the next month, it is counted as a resource for that month along with your existing resources.

If the lump sum payment pushes your income above the monthly income limit, you will be ineligible for that month only. You can be held liable to repay Medicaid for the cost of any services you receive during that month.

If you save any of the lump sum payment into the months after you received it, and it pushes your resources above the Medicaid resource limit, you can be held liable to repay Medicaid for services you receive in all the months you are over the resource limit. To minimize the amount of money you may have to repay to Medicaid, you should transfer* or spend the money in the same month that you receive the payment. This limits your ineligibility to one month. If you delay until the next month or later, you are potentially liable to repay Medicaid for the cost of services you receive for two or more months.

NOTE: Currently, because of special rules relating to the end of the COVID Public Health Emergency, the Medicaid program is not looking at resources/assets for people who already have Medicaid. This means that the lump sum could still make you ineligible in the month that you receive it, but it won’t make you ineligible for additional months. Medicaid will likely start looking at resources/assets again for people who already have Medicaid in mid-2025. You should still report your lump sum, as noted below, but it is unlikely that you will be asked to pay back for one month of ineligibility. There is still a resource/asset test for people in the non-MAGI category who are newly applying for Medicaid.

*Please note, if you transfer the money in order to qualify for Medicaid, you may face a penalty if you need Medicaid to pay for nursing home care anytime in next five years after the transfer. Therefore, it is best to contact a lawyer if you plan on transferring any of your lump sum payment.

Yes. If you are a MAGI Medicaid recipient, you are required to report lump sum payments to the New York State of Health (NYSOH) even though you will likely maintain your Medicaid through your 12-month authorization period. If you are a non MAGI Medicaid recipient, you are required to report lump sum awards to the New York City Human Resources Administration (HRA) in the month you receive it and HRA will recalculate your Medicaid eligibility.

If you do not report the lump sum payment in the month it is received, and it is later discovered that you continued to receive Medicaid benefits after the payment made you ineligible, you can be required to repay Medicaid for the cost of services you received in the months in which you were ineligible.

In limited circumstances, you may be able to keep Medicaid even if a lump sum payment pushes you over the Medicaid income and/or resource limits.

Medicaid Excess Income Program

If you have non-MAGI Medicaid, you may be able to keep Medicaid through the “excess income” or “spend-down” program. If a lump sum payment disqualifies you from full Medicaid, HRA will send you a notice if you qualify for Medicaid through the excess income program. If you qualify for the program, to activate your Medicaid each month, you must either pay Medicaid or accumulate medical bills equal to the amount your income exceeds the Medicaid income limit.

Medicaid Buy-in for Working People with Disabilities (MBIWPD) Program

If you are 64 years or younger, have a disability determination, and you are working, you may be able to maintain Medicaid coverage through the Medicaid Buy-In for Working People with Disabilities (MBI-WPD) program, which has higher income and resource limits. If you think you may qualify, HRA can help you apply.

Supplemental Needs Trust

If you have a disability, you may be able to keep your Medicaid coverage by enrolling in a Supplemental Needs Trust (SNT). Depositing your excess income/resources in the trust will legally shield it from Medicaid. Medicaid cannot count anything you place in the trust when determining your Medicaid eligibility. You can use the funds in the trust in any way that directly benefits you, but you cannot ask for any of the money in the form of cash. Note, SNTs are not free, they may have an initial enrollment fee and a number of other maintenance fees. For more information on SNTs and Medicaid, visit NY Health Access.

Yes, you have many options for health insurance coverage in New York.

Child Health Plus
Children under the age of 19 who are not eligible for Medicaid and have no other health insurance may qualify for free or affordable health coverage through Child Health Plus depending on family income. Monthly premiums range from $0 to $60 depending on family income and household size. Child Health Plus covers doctor visits including wellchild visits, inpatient and outpatient hospital care, prescription drugs, preventive and routine vision care, speech and hearing services, and more. You can enroll through the New York State of Health online or over the phone at 855-355-5777.

Essential Plan
The Essential Plan is a health insurance program for New Yorkers who do not qualify for Medicaid or Child Health Plus but who cannot afford full premium coverage. Monthly premiums range from $0 to $46 per month based on your income. The Essential Plan covers doctor visits including specialists, tests ordered by your doctor, prescription drugs, inpatient and outpatient care at a hospital, and more. You can enroll through the New York State of Health online or over the phone at 855-355-5777.

Qualified Health Plans (QHPs) through the New York State of Health
If you do not qualify for any of the public health insurance options, you can enroll in a Qualified Health Plan (QHP). All QHPs cover doctor visits, inpatient hospital care, maternity and newborn care, mental health and substance use disorder services, prescription drugs, preventive services, and more. Depending on your income, you may qualify for tax credits to help you pay for your coverage. You can enroll through the New York State of Health online or over the phone at 855-355-5777.

Medicare Savings Programs
If you currently have or qualify for Medicare, you can get assistance in paying some or all of your Medicare premiums, deductibles, copayments, and coinsurance through the Medicare Savings Programs. HRA can help you apply and will determine whether you qualify for one of the Programs based on your income.

HRA is allowed to apply liens against personal injury-related settlements. A lien is a hold or claim on all or some of your settlement money. If you received a settlement to help you pay for a physical injury, HRA will issue a lien to recover any of the money Medicaid paid to treat that injury. A Medicaid lien can never make you responsible to pay back more money than you received in a settlement.

If you receive a lien notice, you should contact the attorney who handled the lawsuit named in the notice and ask them to contact HRA on your behalf. If you are currently negotiating a personal injury-related settlement and you had Medicaid at the time of the injury, ask your attorney to address the issue of a possible Medicaid lien.

The information in this document has been prepared by The Legal Aid Society for informational purposes only and is not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. You should not act upon any information without retaining professional legal counsel.