Unbeknownst to many, if you are on Medicare at the time of a personal injury settlement – or you anticipate that you will be going on Medicare within 30 months from the day of the settlement – you may be required to set aside a portion of your financial recovery for the payment of injury-related medical expenses. This is called either a “Medicare Set-Aside” or a “Future Set-Aside,” and it is a highly contentious areas of personal injury law, with strong advocacy both for and against the practice.
Medicare set-asides have been in use for years, with the Administrator of the Medicare program, the federal Centers for Medicare and Medicaid Services (previously known as the “Health Care Financing Administration”) being tasked with administering the accounts. Some believe that Medicare set-asides (MSAs) originated with the passage of the federal Medicare Second Payer Act and the federal regulations promulgated in support of it, but there is disagreement in the legal community.
The MSPA requires Medicare to be the secondary payer “in any case where care can be paid for under any liability insurance policy.” This suggests that Medicare will be the second source of funds, only paying after primary care insurance has already paid their share. It doesn’t, however, mention the use of personal injury settlement funds to pay for injury-related expenses prior to Medicare funds being used.
The Medicare Second Payer Act does not expressly require the use of MSAs in settled tort cases, nor do the relevant federal regulations – found in the Code of Federal Regulations at 42 CFR Part 411, Subpart D – provide guidance about personal injury claims. The CFR provisions do, however, require MSAs to secure future Medicare eligibility for claimants who have been awarded state or federal Workers’ Compensation benefits.
More about MSA accounts
Once the decision has been made that an MSA is appropriate, the account must be funded and administered. Usually, a financial expert familiar with the concepts of medical payout allocations makes a recommendation about both how much money should be placed into an MSA and how it should be funded.
MSAs can be funded with a lump sum payment or with a structured settlement that automatically pays a certain amount into the account on a regular basis. Administration of the accounts involves paying injury-related medical bills for the person for whom the account was created until such time when the fund is depleted, after which time Medicare will begin picking up the proverbial tab for all medical bills, both for expenses related to the injury and those not.
It is important to note that medical expenses for a personal injury claimant enrolled in the Medicaid program are not handled with the use of MSAs, and must be instead be funded with a special needs trust or other method.
Still have questions?
If you still have questions about MSAs, you are not alone. This area of the law is still evolving, and it can be hard to find any solid guidance in federal or state statutes and regulations. Are you unsure whether an MSA is necessary for your personal injury matter? A personal injury attorney experienced in working with MSAs can help you determine if an MSA is appropriate for your case, and what it will mean for you both now and in the future.