Medicaid Home Care Whistleblower May Lose Coverage After Settlement

When Richard West, a 63-year-old veteran with muscular dystrophy, caught his home health care provider overbilling the state of New Jersey for services that it provided to Medicaid patients, he never expected that the state would reward him for his detective work by terminating his Medicaid benefits.

Mr. West, who needs a ventilator to breathe and uses a wheelchair to get around, qualified for Medicaid home care benefits in 2004. Under New Jersey's Medicaid rules, Mr. West must have less than $2,000 in countable assets in order to receive benefits. This wasnt a problem until Mr. West uncovered a massive scheme to defraud New Jersey and 40 other states of millions of dollars in Medicaid funds.

Mr. West noticed that some of his nurses never showed up for appointments, or showed up late. He began recording the nurses' comings and goings, and his time records were used as evidence against his home care provider, Maxim Health Services, when the Justice Department brought suit against the company for overbilling. Maxim settled the case for $150 million, making it the largest home health care fraud in history. Mr. West, as a key whistleblower, received $15 million. After paying taxes and legal fees of approximately $7 million, Mr. West still had a lot of money in the bank, and that's when the state filed a $900,000 lien against the settlement for past Medicaid benefits that it had provided to Mr. West. The state also terminated Mr. West's Medicaid benefits because he was well over the program's $2,000 asset limit. Mr. West is fighting the states efforts.

The case points out the importance of special needs planning. In Mr. West's case, he may have been able to assign the settlement benefits to a special needs trust that would have preserved his important medical benefits. But without proper planning, he is left paying privately for his health care, since the state's subsidized health care plan does not provide the nursing care he needs.

To read more about Mr. West's case from CNBC, click here.