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A Primer on Medicare Set Aside Self-Administration

By B. Josh Pettingill, MBA, MS, MSCC

Synergy receives numerous calls every week regarding what is required to properly self-administer an MSA.  The purpose of this article is to provide some guidance to attorneys regarding self-administered Medicare set aside (MSA) accounts. In administering MSAs, funds may only be used to pay for future Medicare covered, injury related medical expenses of the plaintiff. The Center for Medicare and Medicaid Services’ (CMS) guidelines indicate that the set aside funds should be placed in an interest-bearing account and may be either professionally administered or self-administered (Reference: 10/15/04, Memo Q 2).

The MSA “administration process” begins as soon as the attorney releases the settlement proceeds to the plaintiff. The plaintiff has the option of funding the MSA with a single lump sum out of the settlement proceeds or with future periodic payments using a structured settlement annuity (Ref: 7/23/2001 CMS Memo). When a set aside is funded with a lump sum, Medicare begins to pay for injury related health care as soon as the account is totally exhausted.

With an annuity funded MSA, there are two components of the set aside. The first component is the “seed money” which is used to cover the first 1-2 years’ worth of qualified medical expenses. The second component is future periodic payments from the annuity.  One year from the anniversary date of the settlement, the annuity payments will start to pay into the set aside account. When the funds are temporarily exhausted in any given year, Medicare begins paying for treatment related to the injuries. During this time of temporary exhaustion, the plaintiff will be responsible for any co-payments and deductibles.  If the funds are not all spent in a given year the remainder is carried over to the next year.  With annuity funding it functions much like a yearly insurance deductible. The MSA report should indicate the breakdown of the seed money, annuity payments and timeframe of the payments. The duration of the annuity payments are based on the life expectancy of the individual.

We recommend that attorneys issue separate checks from their trust account to fund a lump sum MSA, one for the MSA amount and one for the balance of the settlement proceeds. . The check should be written to the plaintiff with the subject referencing: John Doe Medicare set aside Account or John Doe MSA Account. To take it a step further, some attorneys actually request the defendant issue a separate check to seed or fully fund the MSA account. If the MSA is being funded with a structured settlement, the annuity will also be funded by the defendant with the seed being included in the cash paid at settlement.

Prior to releasing any settlement monies, attorneys should also have the plaintiff sign a separate document indicating they understand what their obligations are for self-administering the MSA account. Synergy offers an MSA consultation which includes a separate waiver for the plaintiff to sign indicating they understand the MSA obligations and are willing or not willing to create a set aside account. Attorneys do not have to hire an expert to advise and prepare such a document but it is the prudent way to ensure all parties are protected.

After settlement and establishing an MSA, Medicare may refuse to pay for any medical expenses related to the injury until the amount set aside for future medical expenses is properly exhausted. Consequently, there are certain steps that should be followed in administering the MSA account:

1.         Initial Set Aside Account Funding – The Medicare set aside Account will initially be funded by either a lump sum or via seed money with future annual payments from an annuity. We recommend a checking account be used to hold the funds for reasons I will explain below. It is not the responsibility of the attorney to oversee or assist in the process of establishing a self-administered MSA account. The plaintiff is responsible for opening the account. This account must be a segregated account and not comingled with any other non-MSA funds.

Note: If the MSA is being funded with an annuity, then a direct deposit form should be completed and sent back to the life insurance company issuing the annuity. This will ensure the annuity payments go directly to the MSA account and are not mailed directly to the plaintiff.

2.         Set aside Account – The Medicare set aside funds must be placed in an interest-bearing account checking or savings account. All interest earned on the Medicare set aside account has to be used solely for medical expenses from the accicdent/incident that would otherwise be covered by Medicare.

3.         Distribution of the set aside Account Funds – The funds in the Medicare set aside account must be used solely for legitimate medical expenses incurred for those medical needs related to or resulting from the injuries suffered, which would otherwise be reimbursable or paid for by Medicare. Funds in the Medicare set aside Account may not be used to pay for non-Medicare covered medical services. For a list of services not covered by Medicare, a copy of the booklet, “Medicare & You” can be obtained from the local Social Security office or by using the following link:

The best gauge for determining what is covered by Medicare is the Medicare set aside analysis that was completed by the independent company or MSA specialist. If there are any questions concerning what Medicare covers, the plaintiff can also call l-800-MEDICARE.

The plaintiff may also use the MSA account to pay for the following costs that are directly related to the MSA account: document copying charges, mailing fees/postage fees, any banking fees related to the account and income tax on interest income from the set aside account (Ref: WCMA Reference Guide 2013).

4.         Reimbursement to Medicare – In the event CMS determines that Medicare has paid benefits prior to the depletion of funds in the Medicare set aside account, CMS, or its designated fiscal intermediary or carrier, shall have the right to seek and receive reimbursement of any such conditional payments or overpayments from the Medicare set aside Account to the extent that there are funds remaining in the account at that time. This situation can potentially arise if the medical providers bill Medicare for treatment related to the accident after the case has resolved but prior to the settlement funds being dispersed.

5.         Accounting Records – The administrator must maintain accurate records of the distributions and expenditures from the Medicare set aside account. The records should indicate the date of service, the diagnosis, the service received, who received payment and the date of the payment. The plaintiff may also want to keep a receipt or other evidence of each and every payment made from the Medicare set aside Account.  Using a debit card from a segregated account is an easy way to keep accurate accounting.  Anytime the injury victim goes to treat with a provider, they simply use the debit card to pay for the qualified medical expense. If the account balance ever gets down to zero, all they need to do is print out and mail the bank statement to Medicare with their receipts.

6.         Annual & Final Accountings – The plaintiff shall submit a final accounting ledger within 60 days of the MSA funds being depleted. The annual and final accounting will include evidence of every payment made from the Medicare set aside account. For liability MSAs, the accounting only has to be done upon the account balance reaching zero. In worker’s compensation cases, there are annual reporting requirements. The purpose of these account filings is for Medicare to confirm the MSA funds have been spent appropriately.

Once an MSA account has been completely exhausted and assuming the funds have been spent properly, the plaintiff has met their obligation to protect Medicare’s interests. They can then start to submit bills to Medicare again. At that time, the plaintiff should send a final attestation to Medicare as proof the funds were spent appropriately. The current address for sending final accounting on MSA accounts is:

Medicare Secondary Payer Recovery Contractor

Attention: MSP-Medicare Set Aside Reconciliation (NGHP)

P.O. Box 138832

Oklahoma City, OK   73113

7.         Delivery of Notices & Accountings – For worker’s compensation cases, the annual self-attestation should continue through depletion of the account. It is important that the administrator understands and complies with this requirement. The self-attestation letter must be signed and forwarded to CMS’ Medicare contractor no later than 30 days after the end of each year (beginning one year from establishment of the MSA account).

8.         Distributions Following Death of Beneficiary – In the event that the beneficiary dies before the funds in the Medicare set aside account are depleted, the MSA account should remain open for 180 days from the date of death to enable any outstanding bills for medical expenses incurred as a result of the incident that would otherwise be covered by Medicare to be paid. After the 180 days has elapsed, any funds remaining in the Medicare set aside account are payable to the claimant’s estate or proper payment subject to the appropriate State probate laws.

9.         Misappropriated Set Aside Account Funds – If the final accounting reveals that funds in the account were used to pay for items other than qualified medical expenses related to the accident, CMS may withhold Medicare coverage until the misappropriated amount is replenished and spent on injury related Medicare covered services. For example, if the plaintiff purchased a hot tub with funds from their MSA account, they would have to replenish their account with an amount equal to what was improperly used and then spend that money on injury related Medicare services before Medicare would cover future injury related treatment.

10.       Billing Rates – The MSA allocation is either prepared based on the usual and customary fee schedule or on the state’s worker’s compensation fee schedule, depending on the type of case. In the real world, doctors have the freedom to charge whatever rates they desire. It is important that the plaintiff attempt to negotiate with their providers for the lowest possible cost. This is easier said than done. With an MSA, the plaintiff essentially becomes a private payer for all Medicare covered treatment related to the accident until exhaustion. The MSA will not enjoy paying Medicare rates.

It should be noted that all of the above referenced guidelines come directly from the CMS memorandums relevant to worker’s compensation cases. Another helpful tool for administering MSA accounts is the, Worker’s Compensation Guidebook. To view the guide, use the following link:

For liability cases, CMS has yet to issue a memorandum with guidelines for the administration of Liability MSA’s. Although it is perfectly “legal” for the plaintiff to self‐administer a liability MSA account, it can be a daunting task and create huge liability. If the plaintiff elects to self‐administer their account, they must have both the financial and medical administrative competency to do so. There are no “Medicare set aside police” monitoring set asides but if the MSA is improperly administered; it can lead to a loss of coverage for injury related Medicare covered services.

Attorneys should explain to their injury victim clients the intricacies of self-administration and let them make an informed decision before opting to self-administer. Professional administration is the recommended method to ensure full compliance with Medicare Secondary Payer requirements and to eliminate any possibility of the plaintiff ever losing their Medicare coverage. There is an additional cost for professional administration but with that cost, comes the peace of mind that Medicare coverage will not be jeopardized.

Synergy offers a Medicare set aside administration program through the use of a formal trust agreement with a corporate trustee and a separate professional Medicare set aside administrator. With a Medicare set aside Trust, the plaintiff has a professional trustee that has a fiduciary duty paired with a set aside Administrator, who handles managing the set aside funds and reporting to CMS. Administrative fees/expenses for administration of the MSA and/or attorney costs specifically associated with establishing the MSA cannot be charged to the set aside arrangement (Ref: 5/7/04 Memo).  Therefore, the professional administration costs must be paid for by the injury victim.

For all of your Medicare secondary payer compliance needs, please visit us at or call us at 877-242-0022.

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