Do Liability Settlements Require Medicare Set-asides? (2024)

Do Liability Settlements Require Medicare Set-asides? (1)

Personal injury and workers’ compensation cases that involve medical record retrieval and review focus on obtaining fair compensation for the injured person. Claimants who are Medicare beneficiaries already or expect to receive Medicare in the near future have to follow certain guidelines when it comes to their future medical payments. A Medicare set-aside may have to be established to avoid losing eligibility for the benefits. Medicare set-asides can be either WCMSA (Workers’ Compensation Medicare Set-aside Arrangement) or Liability Medicare set-aside (LMSA). These are more or less similar because both are financial arrangements that assign a portion of the plaintiff’s settlement amount to pay for future medical services associated with an injury, illness, or disease. A WCMSA can be established when you are going to receive money from a workers’ comp claim and an LMSA can be established when you are going to receive a personal injury settlement. In this blog, we will consider LMSA in some detail.

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What Are Medicare Set-asides?

Medicare set-asides (MSAs) are not mandatory, even in workers’ compensation cases. According to the MSP (Medicare Secondary Payer) Act, Medicare will not reimburse medical expenses where payment has been made under a workers’ compensation, liability insurance (including self-insurance), automobile, or a no-fault insurance plan. If a person is being compensated for future medical care as part of the settlement, Medicare should not be expected to pay a bill related to the settlement until that amount of compensation for future medicals paid is spent and exhausted on future medicals related to the settlement. In other words, a Medicare set-aside arrangement is made to ensure that Medicare is not billed in advance after the settlement of a case for future medical care for the injury related to the settlement.

Typically, any review of a Medicare set-aside arrangement by Medicare is voluntary. It is made mandatory only when the settling parties have made that a condition of the settlement arrangement. However, Medicare may not review all the MSA proposals it receives. There is an established review process for MSAs in workers’ comp (WC) cases, but for liability MSAs, Medicare does not yet have a formal review process. For workers’ compensation cases, if

  • The injured worker is a current Medicare beneficiary and the gross settlement amount exceeds $25,000; or
  • The injured worker is not yet enrolled with Medicare but has a “reasonable expectation” of Medicare enrolment within 30 months of settlement, and the gross settlement exceeds $250,000,

The parties concerned can request Medicare voluntarily to review an MSA. However, if a particular case does not meet these criteria, it does not mean that the parties can ignore the MSA concern. According to Medicare, “Claimants must still consider Medicare’s interests in all workers’ compensation cases and ensure that Medicare pays secondary to WC in such cases.”

The MSA obligation in a liability settlement is not as well-defined as in a WC settlement. In a WC settlement that doesn’t follow any fault standards, damages fall under three categories: indemnity, past medicals, and future medicals. Every WC settlement has a future cost of care damage allocation, and what is left to consider is whether there is a permanent burden shift to Medicare in the obligation to pay for future injury-related medical care. In a liability settlement on the other hand, there are concerns such as comparative fault, special damages, and other non-future medical damages that are present, which make it difficult to apply the usual MSA concepts.

It’s Best Not to Ignore MSA Requirement in Liability Cases

But can you choose to ignore the MSA requirement in a liability case just because there are no formal guidelines issued as yet? Most probably, no. CMS (Centers for Medicare and Medicaid Services) understands that many parties to liability settlements are not considering Medicare’s interests appropriately and can implement the recovery options they have at their disposal. Here are some things to note.

  • The MSP Act gives Medicare the authority to seek recovery for any conditional payments it has made after the case settlement from the responsible party, i.e. the injured person in most settlement agreements.
  • If the injured person has received compensation for future medical care as part of the settlement; has received medical treatment related to the settlement and instructs the medical provider to bill Medicare; and Medicare pays that bill in error, then Medicare can exercise its statutory right to seek recovery of the amount of the overpayment. By the same statute, Medicare can even recover double damages or twice the amount of overpayments. In addition, Medicare can also seek interest.
  • Medicare can refer such matters to the U.S. Department of Justice, which could then take steps to recover the amount using the FCA or the federal False Claims Act. Under this, the Department of Justice could even collect thrice the damages and also charge penalties of between $5,000 and $10,000 per false claim.

Since guidance from the CMS is lacking regarding the use of Medicare Set-asides in liability settlements, the onus is on the settling parties to seriously consider whether an MSA should be established as a part of settling a liability claim. Experts point out that a claimant voluntarily choosing to pursue a set-aside arrangement to protect his/her Medicare benefits can either:

  • Identify the appropriate allocation and educate the claimant to ensure that those proceeds are spent down on future injury-related care (for which Medicare would otherwise pay), or
  • Contact the appropriate Medicare regional officer, and share the fact pattern of the case to determine if he/she chooses to review and approve the allocation. The regional offices make these elections based on workload thresholds and are subject to change without notice.

As mentioned, at present there is no law that requires MSAs for any claim. Nevertheless, parties have to consider Medicare’s future interest at the time of settlement. It is best to take some measures to safeguard Medicare’s future interest. Some things to analyze are as follows:

  • Whether the claimant is currently on Medicare
  • Whether the claimant will become eligible for Medicare within the next 30 months
  • Whether any injury-related future care is planned
  • Whether Medicare would cover that planned care
  • Whether any specific future medical expenses have been allocated in the judgment or settlement
  • Whether the settlement is substantial and a portion of it could cover future medical expenses

Read our blog: Medical Record Review to Ensure Medicare Eligibility

As Robert L Sagrillo, chief compliance officer, NuQuest says, liability stakeholders must be aware of their legal obligations under the MSP Act and take steps to address those obligations when settling claims. As providers of medical review solutionsto personal injury attorneys, we understand that attorneys would provide the right advice to their clients in this regard. In fact, plaintiffs could benefit immensely from legal counsel when it comes to understanding whether their Medicare benefits would be adversely impacted in such cases. Attorneys may advise that an MSA or allocation be included in the settlement when the injured party is being compensated for future medical expenses.

Though it is not clear whether LMSAs will be addressed in future rulemaking process or by way of policy, MSP is bound to remain a constantly evolving and dynamic area of compliance. Attorneys handling personal injury cases may apply the workers’ compensation thresholds for LMSAs as well or consult professionals to determine the amount to be allocated to a set-aside account.

MOS (Managed Outsource Solutions) provides medical record review services for personal injury, workers’ compensation, social security disability, product liability and medical malpractice attorneys.

For more information about our medical record review services, CALL 1-800-670-2809 TODAY and speak to one of our senior solutions managers at any time convenient to you.


Do Liability Settlements Require Medicare Set-asides? (2024)


Do Liability Settlements Require Medicare Set-asides? ›

The central premise of the memo is that when settling a case involving a Medicare beneficiary, “Medicare's interests must be protected; however, CMS does not mandate a specific mechanism to protect those interests.” While she acknowledges that the law doesn't require a “set-aside” in any particular situation, she ...

What triggers a Medicare set aside? ›

The claimant has a reasonable expectation of Medicare enrollment within 30 months of the settlement date and the anticipated total settlement amount for future medical expenses and disability or lost wages over the life or duration of the settlement agreement is expected to be greater than $250,000.00.

What is a Medicare set aside analysis? ›

A Workers' Compensation Medicare Set-Aside Arrangement (WCMSA) is a financial agreement that allocates a portion of a workers' compensation settlement to pay for future medical services related to the workers' compensation injury, illness, or disease.

How does a Medicare set aside annuity work? ›

When a set aside is funded with a lump sum, as soon as the account is exhausted Medicare begins to pay for the injury related health care. However, when a set aside is funded with periodic payments via a structured settlement annuity it functions much like a yearly insurance deductible.

How is Medicare set aside calculated? ›

In a Workers' Compensation Medicare Set Aside (WCMSA) allocations are prepared on a case-by-case basis. In a WCMSA, only items and services related to the workers' compensation injury otherwise covered by Medicare are included.

What might trigger a Medicare post payment audit? ›

The most common trigger for a post-payment audit is provider profiling and data mining to identify aberrant billing practices and outliers. In addition, post-payment audits can also be triggered by complaints made by patients or employees about the practice.

What is an evidence based MSA? ›

EMBSAs are prepared based upon clinical guidelines and trends in medical research to project future Medicare covered expenses.

What is a set aside program and what is its purpose? ›

In United States agricultural policy, the set-aside program (still in use in some areas today) was a program under which farmers were required to set aside a certain percentage of their total planted acreage and devote this land to approved conservation uses (such as grasses, legumes, and small grain which is not ...

What is MSA and how does it work? ›

MSAs combine a high-deductible insurance plan with a medical savings account to pay for your health care costs. You're responsible for handling the money in your account, including deciding whether to pay for health care services using your account funds or other funds you have.

What is the purpose of a Medicare coverage analysis? ›

Medicare Coverage Analysis (MCA) is a uniform methodology of analyzing the items and services provided in a clinical research study, i.e., a comprehensive review of protocol documents that helps identify the appropriate payor (sponsor or third-party) for each study service, assessment of the protocol driven items and ...

How do you qualify for Medicare payback? ›

Only people who pay their Medicare premiums themselves can receive a Medicare Give Back benefit. People who have their premiums covered by Medicaid cannot enroll in a Give Back plan. Other than that regulation, the government has no eligibility requirements for Medicare Give Back enrollment.

Can I retire before Medicare kicks in? ›

You might retire a few years earlier than anticipated: Explore your health care options before you become eligible for Medicare at age 65. Health care options between retirement and Medicare coverage include COBRA, private insurance, the public marketplace, and a spouse's plan.

How are annuity payouts determined? ›

The company makes payments for as long as you live. The payment amount is mainly decided by life expectancy – the longer your life expectancy, the smaller the payment amount. There is no guarantee you'll get the total amount you accumulate. However, you're guaranteed the income for the rest of your life.

What happens to Medicare set-aside funds upon death? ›

In case of death, any unused funds in the Medicare Set-Aside account will be disbursed to a beneficiary(s) named in the settlement agreement after a waiting period of twelve months. During this period, providers, physicians, and other suppliers can submit their bills to Medicare for reimbursem*nt.

What income is used to calculate Medicare surcharge? ›

We use the most recent federal tax return the IRS provides to us. If you must pay higher premiums, we use a sliding scale to calculate the adjustments, based on your “modified adjusted gross income” (MAGI). Your MAGI is your total adjusted gross income and tax-exempt interest income.

What are the income breakpoints for Medicare? ›

You can sign up for Medicare no matter how much money you make. You'll pay more for Medicare if you're an individual who earns more than $97,000 or part of a couple who earns more than $194,000. You can usually pay less for Medicare if you earn less than $30,000.

What income level triggers higher Medicare premiums? ›

Medicare Part B premiums

But you will pay higher rates if you reported earnings of more than $97,000 on your individual 2021 tax return or more than $194,000 on a joint return. For instance, people who made $100,000 in 2021 will pay $230.80 per month for Medicare Part B in 2023.

What is Social Security set aside? ›

A Medicare Set-Aside is a trust or trust-like arrangement that is set up to hold settlement proceeds for future medical expenses. A specialized company evaluates your future medical needs, recommends an amount that should be set aside for future medical care, and the government approves the amount.

Does Medicare depend on assets? ›

On July 1st, 2022 the asset test to qualify for a Medicare Savings Program increased. These changes apply to the things you own, including bank accounts, cash, second homes and vehicles, and other financial resources. The new limit is $130,000 for one person and an additional $65,000 for each additional family member.

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