Medicare is health insurance provided by the Federal government. Medicare acts as a defined secondary payer in the context of workers compensation. The intent of Congress is to reduce federal spending and to protect Medicare’s financial integrity by expanding its recovery rights. Requiring Medicare Set-Aside accounts as a part of settlements is one method used to protect Medicare financially.
A Medicare Set-Aside (MSA) is an account that is created in the settlement of an individual’s workers compensation or liability claim that is used to pay for future medical expenses that are:
When settling a workers’ compensation claim, a MSA is necessary if the future medical aspect of the claim is being settled and one (1) of the following exists:
An individual is eligible to receive Medicare benefits for certain medical and hospital expenses if they meet one of the following criteria:
A person can reasonably expect to become a Medicare beneficiary within thirty (30) months if at the time of the settlement of their workers compensation case, they:
The MSA amount is formulated by consideration and analysis of the following:
Several methods can be utilized to fund a set-aside. Specifically, a MSA can be funded via a lump sum payment, a structured settlement annuity, or a combination of both. Structured settlements are a great tool to fund a MSA because the cost of an annuity provides an additional savings to either the insurer or employer. If the set-aside is exhausted between annuity payments, Medicare will step in and pay for qualified medical expenses until the release of the next annuity payment.
A MSA can be self-administered by the injured worker, a custodian or a guardian. A MSA can also be administered by a third-party administrator. The account must be an interest-bearing account and the administrator of the account should only allow distribution for those medical expenses related to the work injury that would otherwise be covered by Medicare, thereby preventing a financial burden shift to Medicare after settlement. The administrator will also have to provide CMS with an annual accounting of the expenditures from the account. If there is a questionable expense, the administrator of the account should obtain approval from CMS before paying for the questionable expense.