North Carolina Court of Appeals: WCMSA Not a Resource as it Relates to Medicaid Eligibility
Heather Sanderson
December 5, 2016

According to the Court of Appeals of North Carolina, a WCMSA was not considered a “countable resource” for purposes of determining a claimant’s Medicaid eligibility, Williford v. North Carolina Department of Health and Human Services, 2016 N.C. App. LEXIS 1163 (November 15, 2016).

The basic facts of the case involve a 68-year-old widow (Ms. Williford), who suffered a work injury in 2005. Ms. Williford became eligible for Medicare in 2009 when she turned 65. In April 2011, Ms. Williford and her employer engaged in mediation and reached an agreement resolving the contested issues as it related to her workers’ compensation claim. The North Carolina Industrial Commission entered an order which incorporated the parties’ settlement agreement. The terms of the settlement agreement included a provision awarding Ms. Williford a lump sum for workers’ compensation disability payments and attorneys’ fees. Additionally, the agreement provided that Ms. Williford’s employer would contribute $46, 484.12 to fund a Workers’ Compensation Medicare Set-Aside (WCMSA).

When Ms. Williford reached 65 years of age, she also applied for and received assistance with her medical expenses through Medicaid. Therefore, Ms. Williford became a “dual-eligible”- she was enrolled in both Medicaid and Medicare. However, in December 2013, a local hearing officer for the Sampson County Department of Social Services (DSS) issued a decision terminating Ms. Williford’s eligibility for Medicaid, on the grounds that the funds in her WCMSA, which were then approximately $46,630, were a “countable resource” which made her ineligible for Medicaid. The rule is that a Medicaid applicant who is single and is over 65 years old may have no more than $2000 in liquid assets, such as bank accounts.

Ms. Williford appealed the decision of the local hearing officer to DHHS. In June 2014, DHHS issued a “tentative decision” concluding that Ms. Williford’s WCMSA was a countable resource, and affirmed the decision by DSS to terminate Ms. Williford’s Medicaid benefits. DHHS issued its final decision in July 2014, in which it affirmed the tentative decision. Subsequently, Ms. Williford filed a petition for judicial review, and in August 2015 the trial court conducted a hearing on the matter. In February 2016, the trial court entered an order denying Ms. Williford’s petition for judicial relief and affirming DHHS’s ruling that the funds in Ms. Williford’s WCMSA were a countable resource for purposes of determining her eligibility for Medicaid. Ms. Williford then appealed to this Court from the trial court’s order.

Prior to diving in to the parties’ arguments, the Court of Appeals reviewed the legal principles behind eligibility for Medicaid, and also considered the Medicare Secondary Payer Act (MSP) and the purpose behind WCMSAs. Ms. Williford argued to the Court that the funds in her WCMSA are not a countable resource for purposes of determining her eligibility for Medicaid, because her use of the funds for her support and maintenance is subject to “legal restrictions” pursuant to a “legally binding agreement.” The Court agreed that the Commission’s order, which directed Ms. Williford to solely use her WCMSA for future medical expenses that would otherwise be covered by Medicare, is a legally binding agreement.

Furthermore, the Court found, if Ms. Williford used her WCMSA funds for any other purpose, Medicare will not pay for treatment for her compensable injury until she replaces the funds and then depletes them in accordance with the WCMSA. Futhermore, Ms. Williford could be held in contempt of court for violating the terms of the Commission’s order which incorporated the WCMSA.

Commentary: The Court’s decision here is interesting and to date, we have not seen an appellate decision address this issue. It’s easy to see both sides of the argument here. On one hand, the Court made the right decision in that it saw the true intent and purpose behind the WCMSA, which is that it is strictly meant for the purposes of paying for her medical expenses so that the burden of her future care was not shifted to Medicare.

On the other hand, the Court’s decision seems inconsistent with generally accepted practices around eligibility for Medicaid by other jurisdictions. A WCMSA is not a trust, and in fact is a liquid asset of a claimant. Ms. Williford could technically use her WCMSA money for any purpose at all- she could buy a boat- and there would be no civil or criminal repercussion to her other than Medicare denying her coverage. Because her WCMSA is not being professionally administered, her employer nor the Commission would know what she is doing with that money, since it would be in her own private self-administered bank account. Therefore, the possibly of a contempt hearing would be remote and not a factor in this author’s opinion to not include this as a countable asset.

Also, to that end, she now also has Medicaid to pay for her medical expenses, so she may not be properly incentivized to ensure that her Medicare coverage would continue once her WCMSA depletes. Furthermore, upon Ms. Williford’s death, if any WCMSA funds remain, they would revert to her estate (after payment of any remaining medical expenses) and her heirs would receive the remaining WCMSA money to use for any purpose, which also points to the fact that the WCMSA should have been considered an asset.   The simplest solution would have been to set the WCMSA up as a special needs trust, consistent with Medicaid statutory provisions to insulate it from being a countable asset.  A special needs trust would be managed and ensure appropriate protections are in place regarding these funds.

The take-away in the end is that cases with claimants that have dual eligibility for both Medicaid and Medicare are potentially problematic and it is important to engage the appropriate resources to avoid any adverse issues such as this case presented.  Because Medicaid is a significant part of the U.S. Budget, we can expect the States to become more aggressive on such issues to reduce payment responsibility.  A better practice is to take advantage of Medicaid laws to help insulate a WCMSA from being treated as a countable resource.


Heather Schwartz Sanderson, Esq., MSCC, CHPE, CLMP, CMSP

Chief Legal Officer

Franco Signor LLC