By Peter H.
Wayne IV and Charly Schell
Collateral Sources—Educate
Your Clients About Their Options
W
ith each passing day, we learn more about the
importance of Medicare and Medicaid and
their respective interests in personal injury
cases. Most recent discussions pertain to properly resolv-
ing a Medicare or Medicaid lien or protecting Medicare’s
interest in a client’s future cost of injury related care.1 While
it is imperative that we try to educate ourselves as much as
possible about these issues, this article is focused mainly
on raising an additional reason for better understanding
Medicare and Medicaid, as well as other collateral sources
that may be available to a client.
When attorneys hear the term collateral sources they
often think of the collateral source rule as defined in KRS
§411.188, as well as how this statute was found to be uncon-
stitutional in the 1995 case of O’Bryan v. Hedgespeth2 or the
more recent 2005 Supreme Court case of Baptist Healthcare
v. Miller3. Or, differently, an attorney may think of the col-
lateral source rule as defined by Black’s Law Dictionary:
If an injured person receives compensation for
his injuries from a source wholly independent of
the tortfeasor, the payment should not be deducted
from the damages [monetary compensation], which
he would otherwise collect from the tortfeasor. In
other words, a defendant tortfeasor may not benefit
from the fact that the plaintiff has received money
from other sources because of the defendant’s tort.4
That said, it is simply not enough to understand that the
Kentucky Supreme Court found that wrongdoers should not
be relieved of paying damages simply because the injured
party maintained health insurance.5 Instead, we must strive
to not only represent our clients to the best of our ability, but
also try and provide our clients with guidance and education
about the various government benefits and/or private health
insurance options (both of which fall under the category of
collateral sources) that may be available to them now or in
the future.
At times, plaintiff attorneys can become so focused on
36 The Advocate
the straight legal aspects of a case that they lose sight of
the long term planning issues that will directly affect his or
her client’s financial and healthcare future. Most attorneys
understand the impact of the collateral source rule and its
current ability to ensure that the jurors are unlikely to learn
of a client’s healthcare coverage, but they should also learn
that defendants are increasingly challenging this rule.
While the results to these challenges are often unfavor-
able for defendants, the end result is that defendants are mak-
ing it a priority to learn more and more about the important
details of a plaintiff’s available collateral sources, sometimes
even more than the attorney or the plaintiff him or herself
may even know. Not only are a plaintiff’s available collateral
sources invaluable to his or her future health and financial
welfare, but it is also vitally important that the injured party
and his or her family fully comprehend how this coverage will
affect the future costs associated with any future healthcare
needs. Rest assured that defendants will attempt to learn
as much as possible about a plaintiff’s collateral sources in
order to better understand the amount of money it will take
to secure a settlement and avoid further litigation. Plaintiffs
and their attorneys should place the same emphasis on ob-
taining this information. A settlement plan that does not fully
calculate how a collateral source will provide for an injured
party’s future needs is simply insufficient, not only for the
plaintiff, but also for his or her family as well.
A
n understanding of collateral sources can and
will be effective in articulating to the plaintiff
and his or her attorney when to decide between
proceeding to trial or agreeing to a settlement offer. Not be-
ing aware of a client’s available healthcare coverage options
make it extremely difficult to fully comprehend the impact of
a settlement offer. Becoming fully aware of a client’s options
cannot be learned quickly, as it takes weeks and a team of
experts to obtain, verify and evaluate the information about
a client’s future healthcare options. This is time well spent.
The ability to fully understand how certain settlement offers
can be used to protect a client’s future often just as important as securing the to the previously mentioned high de-
healthcare and financial needs cannot settlement money itself. mand for waiver program eligibility,
be overstated. the likelihood of becoming re-enrolled

It is imperative that attorneys
gather as much information about
their clients as possible at the begin-
ning of their representation. Attorneys
must determine whether their client is
receiving any Medicaid or other needs
based benefits.6 Failing to acknowledge
a client’s eligibility for a needs based
benefit could be devastating should
the client take receipt of a settlement
without fully evaluating the impact of
such receipt.
A
loss of needs based ben-
efits can be even more
traumatic if a beneficiary
were enrolled in a Medicaid Waiver
Program, such as the Acquired Brain
Injury (ABI) waiver.7 Waiver programs
are often in high demand due to the
level of in home care services that are
available through the program. Unfor-
tunately, there is never enough funding
available in a state’s budget for every
person or family in need of such care
to obtain access to it. Therefore, if a
on a particular program is small, and
losing eligibility for a waiver program
can be far more costly to an injured
party and his or her family than the
prospect of not receiving a settlement
in the first place. It is only to an at-
torney’s benefit that they partner with
settlement planning professionals,
special needs planning attorneys and
disability attorneys so they can help a
client fully understand the benefits of
using a special needs trust8 or other
settlement planning vehicle. It is also

M
ost needs based benefits person becomes eligible for a waiver important that a plaintiff and his or
possess an income and program, it is critical that this eligibility her family understand how a special
resource test that must not be jeopardized. Should the receipt needs trust can be funded through
be satisfied every month in order for the of settlement money be poorly planned, both a structured settlement and lump
benefit recipient to remain eligible for a client could risk becoming ineligible sum payment. The combination of a
said benefit. Should a beneficiary re- for a waiver program indefinitely. Due structure and lump sum payment will
ceive a settlement, there is a very strong
possibility that this receipt of settlement
money will cause the beneficiary to
exceed the amount of income that the
benefit recipient can receive during a
given month, which in turn will cause
this individual to become ineligible for
that benefit. For example, if a child is
injured and receiving Kentucky Insur-
ance for Children (KCHIP) and the
child receives a $100,000 settlement,
it highly likely that this child will lose
his or her eligibility for the benefit. This
loss of eligibility will force the child’s
parents to use the settlement money
to pay for his or her healthcare needs.
Furthermore, using settlement money
to pay for an injured party’s entire
healthcare costs will often leave a plain-
tiff and his or her family in dire financial
straits. Generally speaking, settlement
monies are not intended to pay for a
plaintiff’s future health care needs, but
rather to supplement the injured party’s
current healthcare coverage. Ensuring
that a client maintains eligibility for his
or her current healthcare coverage is

July/August 2010 37
help maximize the return on settlement
monies initially placed in the trust and
limit the management costs associated
with the administration of the special
needs trust itself.
A
client may be able to obtain
access and benefit from an
entitlement benefit such as
Medicare or Social Security Disability
(SSDI), in addition to needs based
benefits. Unlike needs based benefits,
one’s eligibility for an entitlement ben-
efit is not conditioned on the amount
of income they make or the number
of resources they own. In essence, the
Federal Government extends Medi-
care9 coverage and SSDI payments
to disabled10 individuals who are “in-
sured” under the Social Security Act
by virtue of their contributions to the
Social Security trust fund through the
Social Security tax on their earnings, as
well as to certain disabled dependents
of insured individuals.11 In order to be
eligible for SSDI payments, the benefi-
ciary must possess the required number
of work credits12 that correspond with
his or her age. While planning for how
a certain amount of settlement money
might affect a client’s eligibility for an
entitlement benefit, the knowledge that
a plaintiff is receiving such benefits, or
the ability to assist a client in becom-
ing eligible for such a benefit, will only
serve to help a client and provide the
opportunity for settlement monies to be
used to make his or her life more enjoy-
able. Instead of using settlement monies
to pay future medicals bills, the money
can be used to provide the plaintiff and/
or his or her family with better home
accessibility and educational opportu-
nities, among many other things.
While it is vitally important that
attorneys understand a client’s benefits
to properly evaluate how those benefits
are affected, it is also just as important
that attorneys fully understand how the
38 The Advocate
benefits work in conjunction with one
another and how their corresponding
eligibility standards operate. Helping a
client receive a settlement or judgment
is truly the reward and driving force
behind representing plaintiffs, but being
able to help a client receive a settlement
and obtain healthcare coverage through
Medicaid, Medicare and/or additional
income via SSI or SSDI makes an at-
torney’s impact on a client’s life all that
much more powerful and everlasting.
Verifying a client’s collateral sources
often assists a client, family member
or spouse to focus on an injured party’s
needs and helps to eliminate some of
the stress associated with ensuring that
there is enough money to simply pay for
future healthcare costs.
I
n conclusion, it is critical that
an attorney and his or her cli-
ent be aware of the impact of
all available collateral sources. By part-
News and Notes
Attorney David E.
Davidson joined
the Strauss & Troy
law firm. He will be
located in the North-
ern Kentucky of-
fice and concentrate
his practice in the areas of civil
litigation, family law and criminal
defense. Mr. Davidson is admitted
to practice in Kentucky and Ohio.
He is past President and former
member of the Board of Directors
of the Northern Kentucky Bar As-
sociation.
On June 12, 2010, WILLIAM F.
McMURRY was elected President
of the American Board of Profes-
nering or associating with settlement
planning professionals, special needs
planning attorneys, disability attor-
neys, life care planners and nurses that
understand full comprehensive health
and financial planning, an attorney will
make him or herself a better and more
complete legal counselor and client
representative. Further, the processes
and services offered by special needs
and settlement planning professionals
will not only serve to better educate a
client about settlement options, but also
such services will provide the means by
which to implement a settlement plan
that maximizes each and every dollar
offered as part of a settlement. Ulti-
mately, when an attorney turns to his
or her client and asks if a set amount of
money is enough or if he or she would
like to continue with litigation, they will
possess a more complete understanding
of their settlement options and be able
to evaluate the costs and benefits asso-
sional Liability Attor-
neys (ABPLA.org ) at
the Annual Meeting of
the ABPLA in Atlanta,
Georgia. He succeeds
former Presidents,
Tommy Malone, Har-
vey Wachsman MD, JD, and Phillip
H. Corboy. The ABPLA, founded
in 1972, is the only organization in
the US accredited by the American
Bar Association to “Board Certify”
specialists in the fields of medical
malpractice and legal malpractice.
The ABPLA is comprised of awyers
from around the country on both
sides of the Bar. Mr. McMurry is
Board Certified in both medical and
legal malpractice.
ciated with such a decision. Protecting
our clients’ interests is the most impor-
tant aspect to representing plaintiffs,
but don’t limit this to just the interests
involved in the litigation itself, rather
expand your practice to fully protect
all of your client’s future lifetime needs.
10 The law defines disability as the inabil-
ity to engage in any substantial gainful
activity (SGA) by reason of any medi-
cally determinable physical or mental
impairment(s) which can be expected
to result in death or which has lasted or
can be expected to last for a continuous
period of not less than 12 months. See
http://www.ssa.gov/disability/profession-
als/bluebook/general-info.htm.
11 See http://www.ssa.gov/disability/profes-
sionals/bluebook/general-info.htm.
12 A work credit equals four months worth
of employment in which the beneficiary
paid social security taxes. See http://
www.ssa.gov/pubs/10072.html.

­ Peter Wayne serves as Kentucky-

—
licensed settlement planning consultant
for FORGE Consulting and also as the
company’s general counsel. He may be
reached at pwayne@FORGEconsulting.
com or (502) 595-8600.

— Charly Schell is a Principal of

FORGE Consulting. He may be reached
at cschell@FORGEconsulting.com or
(502) 595-8600.
_______________

1 42 U.S.C. 1395(y)(b)(2); See 42 CFR

Part 411.
2 892 S.W.2d 571.
3 Baptist Healthcare v. Miller, 177 S.W.3d
676 (2005).
4 Black’s Law Dictionary (2003).
5 177 S.W.3d 676, 683 (2005) — The
wrongdoer should not receive a benefit
by being relieved of payment for dam-
ages because the injured party had the
foresight to obtain insurance. Second,
as between the injured party and the
tortfeasor, any so-called windfall by al-
lowing a double recovery should accrue
to the less culpable injured party rather
than relieving the tortfeasor of full re-
sponsibility for his wrongdoing. Third,
unless the tortfeasor is required to pay
the full extent of the damages caused,
the deterrent purposes of tort liability
will be undermined.
6 Some examples of needs based benefits
are Social Security income, Medicaid,
food stamps and Section 8 housing
vouchers.
7 http://chfs.ky.gov/dms/Acquired+
Brain+Injury.htm.
8 42 USC §1396p(d)(4).
9 One can become eligible for Medicare
coverage by reaching the age of 65 or
remaining eligible for SSDI benefits for
a period of two years. See www.ssa.gov.

July/August 2010 39