Personal Injury Settlements and Medicaid in Florida

If you rely on Medicaid for your healthcare and have been injured because of someone else's negligence, you face a difficult tension. You deserve full compensation for your injuries, but a sudden lump-sum recovery can quietly end the benefits you and your family depend on. Florida law offers several lawful ways to protect both your settlement and your coverage, but none of them work without planning. This guide walks through how Florida Medicaid treats personal injury settlements, what the state can claim back, what the U.S. Supreme Court recently changed, and how an experienced lawyer can help you keep more of what is rightfully yours.

How Florida Medicaid Eligibility Works

Medicaid is a needs-based program, which means it is reserved for people with limited income and limited assets. Florida administers Medicaid through the Agency for Health Care Administration (AHCA), with eligibility for most SSI-related and long-term care programs determined by the Florida Department of Children and Families. For 2026, a single applicant can hold no more than $2,000 in countable assets to qualify for Statewide Medicaid Managed Care Long-Term Care and most SSI-related Medicaid programs, while income for those programs is capped at roughly $2,982 per month.

Countable assets include cash, bank accounts, stocks, bonds, second properties, and most other resources that can be converted into cash. Florida exempts a primary residence (up to a 2026 equity cap of $752,000 for single applicants), one vehicle, household goods, and certain burial funds. The Social Security Administration uses the same $2,000 limit for Supplemental Security Income (SSI), and many Floridians qualify for Medicaid automatically because they receive SSI. One day above the asset limit can be enough to lose eligibility, which is why an unplanned injury settlement is so dangerous.

Why a Personal Injury Settlement Can Cost You Medicaid

The IRS treats most personal injury settlements as tax-free, but Medicaid does not. When settlement funds hit your account, they count toward your asset limit just like any other cash, and they may also be treated as income in the month received. Even a very modest settlement can easily put you above the asset limit and jeopardize your Medicaid eligibility unless something is done to shelter it.

Timing matters in ways most people never anticipate. SSI checks countable assets on the first of every month, so a check arriving on January 28 leaves only days to plan before the program reviews your balance on February 1. Other Medicaid programs only require eligibility on one day of each month, which gives more breathing room but still demands prompt action. Florida law also requires Medicaid recipients to report any change in circumstances, including the filing of a personal injury claim and any resulting recovery. Failing to report a settlement can mean repayment demands, loss of benefits, or fraud allegations. Transparency and planning matter from the start. Our guide to the Florida personal injury claims process walks through what to expect at each stage.

Florida's Medicaid Lien Statute and AHCA Recovery

In addition to threatening future eligibility, Medicaid has a separate right to be paid back from your settlement for the medical care it covered. Under Florida Statute 409.910, AHCA holds an automatic lien on the recipient's tort recovery that attaches the moment Medicaid first treats a covered injury, and it has priority over almost every other claim against the funds. The statute also requires Medicaid applicants and recipients to assign their right to recover medical-payment damages from third parties over to the state.

The Statutory Formula

When a settlement does not allocate the recovery between categories of damages, section 409.910(11)(f) supplies a default formula. After 25 percent is deducted for attorney's fees and the taxable costs of the case are subtracted, half of the remaining recovery is paid to AHCA up to the total amount Medicaid spent on covered care. In a typical contingency-fee case, that math comes out to roughly 37.5 percent of the gross settlement going to AHCA in the worst-case scenario, although your lawyer can fight to reduce that share by allocating more of the recovery to non-medical damages or by petitioning the state under section 409.910(17)(b) using clear and convincing evidence.

The lien is also long-lived. Once recorded, it lasts seven years and can be renewed for another seven, and any settlement that "impairs" the lien can expose the parties to additional liability. Ignoring it, in other words, is not an option.

The Gallardo v. Marstiller Decision and Florida Settlements

For decades, plaintiffs argued that Medicaid could only collect from the portion of a settlement representing past medical expenses, the bills Medicaid had actually paid. That changed in 2022 when the U.S. Supreme Court decided Gallardo v. Marstiller, a Florida case involving a teenager left permanently disabled after a school-bus accident. Florida Medicaid had spent more than $862,000 on her care and tried to recover from her $800,000 settlement, even though only about $35,000 was specifically allocated to past medical expenses.

In a 7-2 opinion authored by Justice Thomas, the Court held that the federal Medicaid Act lets states reimburse themselves from settlement funds allocated to both past and future medical care. Justice Sotomayor's dissent warned that the result would force more injury victims back onto Medicaid by stripping settlement money meant to fund future treatment.

The practical effect for Florida claimants is significant. AHCA can now apply its statutory formula to a much larger pool of "medical" damages, which means cases involving life-care plans, traumatic brain injuries, and other catastrophic injuries are particularly exposed. Careful damages allocation, expert valuation of non-economic damages, and post-settlement administrative challenges matter more than ever.

Strategies to Protect Your Medicaid Benefits After a Settlement

Losing your benefits is not inevitable. With the right planning, most Medicaid recipients can keep both their settlement value and their coverage. The four most common tools in Florida are summarized below.

Special Needs Trust

A first-party (or "d4A") special needs trust, authorized by 42 U.S.C. § 1396p(d)(4)(A), is the gold standard. If the settlement is paid directly into a properly drafted trust for a disabled beneficiary under age 65, the funds do not count toward the $2,000 asset limit and can pay for items Medicaid does not cover, such as therapy, adaptive equipment, or home modifications. Any money left in the trust at the beneficiary's death must first repay Medicaid for benefits paid during their lifetime.

Pooled Special Needs Trust

For older beneficiaries or smaller recoveries, a pooled trust managed by a nonprofit organization under section 1396p(d)(4)(C) is often the more cost-effective option. Funds are pooled for investment purposes but kept in separate sub-accounts for each beneficiary.

Structured Settlement

Instead of a lump sum, a structured settlement pays out periodic payments over time. Because the recipient never holds a large amount at once, the structure can be designed to keep monthly income at or below program limits.

Spend-Down

If the settlement is small relative to legitimate needs, the recipient can simply "spend down" the funds in the same calendar month they are received on exempt categories such as paying off debt, making accessibility modifications to a home, prepaying funeral expenses, or buying a primary vehicle. The Social Security Administration's SSI Spotlight on Resources explains how the agency evaluates assets each month.

Each of these tools has strict requirements and deadlines. Putting one in place after the check has already been cashed is far harder than setting it up before the funds disburse.

Why the Right Personal Injury Lawyer Matters

Medicaid issues sit at a difficult intersection of personal injury, public benefits, and elder law. A general practitioner who fails to spot the lien before settlement, or who allocates damages without considering the Gallardo fallout, can cost a client tens of thousands of dollars and the safety net of public coverage. That is why we coordinate early with elder law and trust counsel when a client is on Medicaid, SSI, or other needs-based programs. We allocate damages thoughtfully, negotiate AHCA's share where possible, and time the disbursement so a special needs trust or other protective structure is in place before any money changes hands.

At Douglas R. Beam, P.A., our team has spent nearly four decades fighting for catastrophically injured Floridians and their families. Whether your case involves a car accident, a traumatic brain injury, or wrongful death, the goal is the same: maximize what you keep and protect everything you need to recover. If you are on Medicaid or SSI and have been injured, please contact us for a free, confidential consultation before you settle.

Sources

• Florida Statute § 409.910 — Responsibility for payments on behalf of Medicaid-eligible persons when other parties are liable
• United States Supreme Court — Gallardo v. Marstiller
• Cornell Legal Information Institute — 42 U.S.C. § 1396p: Liens, adjustments and recoveries, and transfers of assets
• Social Security Administration — SSI Spotlight on Resources
• Elder Needs Law — Important Changes to Florida Medicaid in 2026

This article provides general information and is not a substitute for legal advice. Laws can change, and the details of your situation matter. For personalized guidance, please contact a qualified Florida personal injury attorney.