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medicare set-asides

An MSA (or Medicare Set-Aside Account) is required because Medicare maintains an interest in the costs associated with a Medicare beneficiary’s injury related medical care and this interest may need to be protected depending on the terms of the settlement. Federal law requires all parties to "consider Medicare’s interests" in third party settlements. Under Section 1862(b)(2) of the Social Security Act (42 U.S.C. §1395y(b)(2)), payment may not be made under Medicare for covered items or services to the extent that payment has been made, or can reasonably be expected to be made promptly, under a liability insurance policy or plan (including a self-insured plan).

This means that Medicare could deny paying for a client's future medical care should he or she fail to properly consider and protect its interest in his or her settlement. One way to consider and protect Medicare is by following their guidelines as set forth by CMS (the Center for Medicare and Medicaid Services), which most often entails the establishment of an MSA. Medicare’s ability to ensure that their interests are properly protected is not limited to just the Medicare beneficiary, but rather to anyone that receives any portion of a 3rd party payment either directly or indirectly (42 CFR §411.24). Below are descriptions of the types of MSAs and how they are used in individual situations.

Medicare Set-Asides & Liability Settlements

Unfortunately, there is nothing definitive from CMS on whether a Medicare Set-Aside ("MSA")A Medicare Set-Aside is money that is allocated from the settlement to protect Medicare’s interest in an injured plaintiff’s future cost of injury related care. The intent is to prevent the burden shift of responsibility for this care from the liability insurance plan or policy to Medicare. If the insurance plan or policy pays money for future injury related care then Medicare wants for that money to be exhausted on that injury related before bearing responsibility for those injury related medical expenses. is needed to account for future medical expenses in the case of a liability settlement. While there is clear guidance from the CMS on the issue of whether or not to establish an MSA in a worker’s compensation case, there is no such guidance on the liability side of the law. Currently, there are twelve (12) memoranda from CMS about the use of MSAs in worker’s compensation cases and zero (0) memoranda about the use of MSAs in liability cases. The law clearly exists to expand the scope of MSAs to include liability settlements—should CMS choose to publish such guidance—as it establishes that a claimant must "consider" Medicare and that the consideration must be "appropriate".

Due to the lack of guidance on the issue of MSAs in liability cases, the legal community is left to chart its own course of action, and so far, the results are not pretty. Assuming the plaintiff is a Medicare beneficiary, and knowing that Medicare is prohibited from paying for medical care or services to the extent that payment has been made, or can reasonably be expected to be made promptly, the question that must be answered is whether the terms of settlement contemplate or specifically allocate monies to the plaintiff’s future cost of injury related care.

The answer is simple: an MSA is appropriate when a verdict sheet possesses a line item for future medical expense or—albeit rare—a settlement release contains a definitive allocation for future medical treatment, such as a surgery, in an effort to ensure that the defendant avoids any future liability for that specific line item expense or future medical care.

Forge's Rule of Thumb in Liability Cases
An MSA may be necessary in a liability case when:

  • The claimant is a current Medicare beneficiary or will be within the next 30 months. If you are 62.5 years old, or you are applying for or receiving Social Security disability benefits ("SSDI"), then you possess a reasonable expectation of being on Medicare within the next 30 months and satisfy the CMS definition of those individuals who need to consider the two steps below.
  • There is going to be a permanent shift to Medicare of the burden for paying for the Medicare beneficiary’s future injury-related medical expenses resulting from the underlying tort.
  • The settlement contemplates future injury-related expenditures and this contemplation should be in the form of a definitive allocation to future meds as opposed to a general release for all future meds going forward.

Please call Forge if you would like additional information about when an MSA is necessary in your next liability case.

Workers Compensation Medicare Set-Asides

If a claimant is on Medicare (or likely to be within 30 months) and set to receive a workers compensation settlement in which future medical costs are associated, he or she will need to establish a Medicare Set-Aside (MSA) to protect their future Medicare eligibility.April 22, 2003 CMS Memo Questions #2 PDF File Medicare’s interest in a settlement is both for the conditional payments already made on behalf of a beneficiary, and for protection against being responsible for an injured party’s future cost of care, otherwise known as a MSA, when there is a settlement for the injury. However, there is a lot of confusion about how MSAs work and when they are necessary in both workers compensation and liability cases.

All parties must consider and satisfy Medicare's interests in third party settlements where Medicare conditionally paid for injury-related care. Under Section 1862(b)(2) of the Social Security Act (42 U.S.C. §1395y(b)(2)), payment may not be made under Medicare for covered items or services to the extent that payment has been made, or can reasonably be expected to be made promptly, under a liability insurance policy or plan (including a self-insured plan)42 U.S.C. §1395y(b)(2), amended by Pub. L. No. 109-171, 120 Stat. 4 (2006).

In light of 42 USC §1395(y)(b)(1) and 42 CFR §§411.43 - 46, the regulations that further define how that statute is to be applied, it is clear that the liability for medical expenses incurred due to work-related injuries should not be shifted to Medicare from the responsible party or workers compensation carrier. In 2001, CMS began releasing memoranda that formalized the procedures for how Medicare’s interest should be properly protected in workers compensation cases In these memoranda CMS opined that the recommended method to protect Medicare's interests is a Medicare Set-Aside arrangement, which allocates a portion of a workers compensation settlement for future medical expenses.

Contact Forge on any case and they will help determine if an MSA needs to be established. Forge ensures that the claimant and attorney are in compliance with Medicare’s requirements to protect Medicare eligibility. The claimant and attorney should be aware of different qualified funding methods for an MSA, if one is mandatory.

By using a structured settlement or a properly designed annuity stream to fund an MSA in place of a lump sum payment, a claimant could save a substantial portion of his or her net settlement money. An MSA funded with an annuity can free up other settlement money to be used in other ways that benefit the injured party.

If you would hire an expert to testify in trial to win a case, why not hire an expert to handle your settlement and ensure that your client maximizes their recovery? Call Forge today, toll-free, at 866-68-FORGE (866-683-6743).

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