Medicare Set-Asides
A Medicare Set-Aside (MSA) is a tool that allows injury victims to preserve Medicare benefits by setting aside a portion of the settlement money in a segregated account to pay for future Medicare covered services. The funds in the set aside can only be used for Medicare covered expenses for injury related care. Once the set aside account is exhausted, an injury victim gets full Medicare coverage without Medicare ever looking to the remaining settlement dollars to provide for any Medicare covered future health care. Medicare may approve the amount to be set aside in writing and agree to be responsible for all future expenses once the set aside funds are depleted if the parties choose to submit the allocation to CMS for review and it a reviewable MSA. Advising injury victims about Medicare compliance and set asides are an integral part of the responsibilities of a trial lawyer at settlement.
Below are our Synergy InSights on all things related to MSAs, written by our industry leading Medicare compliance experts.
If your personal injury practice involves Medicare beneficiaries, conditional payment resolution is not optional. It is a legal requirement and a high-risk area if mishandled. Understanding the process and taking the right steps can protect your client, your firm from malpractice risk, and your firm’s reputation. Here’s what you need to know.
- Notify Medicare Immediately
Once a claim is opened, you must report the case to the Benefits Coordination and Recovery Center (BCRC). This alerts Medicare to a potential recovery situation and initiates their file. Failing to notify early risks delays and future complications. You also need to submit proof of representation and required authorizations. Without that, you won’t get access to key information.
- Review the Rights and Responsibilities Letter
After notice, BCRC issues a Rights and Responsibilities (RAR) letter. This letter outlines what documentation is required and what you can expect. From this point forward, all communication must include Medicare’s correspondence cover sheet. Many firms overlook this and delay their own timelines.
- Audit the Conditional Payment Letter (CPL)
About 65 days after issuing the RAR letter, BCRC will send a Conditional Payment Letter. This is not the final amount Medicare is owed. It’s a snapshot of what Medicare has paid so far for injury-related treatment. You must audit this document and dispute unrelated charges. If you skip this step, your client may pay more than necessary.
- Watch for a Conditional Payment Notice (CPN)
If CMS learns about the settlement before you’ve submitted final details, it issues a CPN. This gives you 30 days to act. You must dispute unrelated items, send in procurement costs, and provide settlement documents. If you miss this window, CMS will issue a demand without accounting for your client’s legal costs.
- Submit the Settlement Details
Once the case resolves, send final settlement information to BCRC immediately. Medicare needs this to calculate the correct demand, apply reductions, and set the final repayment amount by issuing a final demand.
- Receive and Pay the Final Demand
Medicare issues a Final Demand letter after receiving the settlement notice. This is the only binding amount. Do not rely on earlier numbers. The Final Demand reflects all related charges up to the settlement date and includes reductions for procurement costs. You have 60 days to pay it. After that, interest accrues monthly. At 90 days, you receive an Intent to Refer notice. At 150 days, it goes to Treasury and that referral adds federal collection pressure to your file.
Why You Cannot Rely on the CPL
CMS makes this clear: the Conditional Payment Letter is not final. It is an interim figure. If you disburse based on the CPL, you risk underpaying Medicare. One law firm that did so faced enforcement and financial penalties from the Department of Justice. Always wait for the Final Demand before cutting checks.
Process Summary: Pre- and Post-Settlement
Pre-Settlement Steps:
- Report the case and submit documentation
- Receive and review the RAR letter
- Review the CPL and dispute unrelated charges
Post-Settlement Steps:
- Submit final settlement details
- Receive Final Demand letter
- Pay the demand within 60 days to avoid interest and Treasury referral.
Why This Matters to Your Practice
The process is not just time-consuming. It creates liability. Conditional payment obligations are statutory. Errors can trigger malpractice claims, interest charges, and DOJ action. Outsourcing this process to experts like Synergy ensures compliance and protects your recoveries. Our specialists know the CMS logic, portal limitations, and dispute strategies that matter.
The firms that treat Medicare compliance as core risk management, not an afterthought, avoid the pitfalls and deliver more value to their clients.
Written by: By Jason D. Lazarus, J.D., LL.M., MSCC | Founder & Chairman of Synergy | Founder of Special Needs Law Firm | Author of Amazon Best Sellers – Art of Settlement & Litigation to Life | Host of Trial Lawyer View by Synergy Podcast | Peak Practice by Synergy Curator
Medicare conditional payments are a persistent challenge for personal injury firms resolving cases for Medicare beneficiaries they represent. If a client is a Medicare beneficiary, you’re automatically dealing with the Medicare Secondary Payer Act (MSPA). The stakes are high. A misstep can expose lawyers and the firm to liability, government enforcement, and impact your client’s Medicare eligibility. Here’s how to approach conditional payment resolution with clarity and control.
Understand What Medicare Is Entitled To
Medicare is a secondary payer. If a third party is responsible for medical costs, Medicare will pay conditionally, expecting reimbursement after settlement. CMS can recover from anyone who receives settlement funds, including lawyers and personal injury firms. It has the right to sue and collect double damages if a conditional payment is not properly addressed.
Start Early with the BCRC
Best practices are to begin the resolution process early, before resolution of the case. Contact the Benefits Coordination and Recovery Contractor (BCRC) to open a case and request a Conditional Payment Letter (CPL). This preliminary letter shows what Medicare has paid but isn’t a final demand. Still, it’s critical for auditing and identifying unrelated charges that shouldn’t be reimbursed.
Don’t Rely on the CPL
Once the case resolves, report the settlement to Medicare. Only then will Medicare issue a Final Demand. This is the amount you must pay, and it must be satisfied within 60 days. Fail to pay on time and you trigger interest above 10% and risk referral to the U.S. Treasury for collection.
Know the Resolution Methods
Medicare’s repayment formula under 42 C.F.R. § 411.37 provides limited relief for procurement costs but ignores liability facts, policy limits, and damages caps. If the math doesn’t work for your client, you have three options after paying the Final Demand:
- Appeal – A four-stage internal process before reaching a federal judge. Slow, and interest accrues while you wait.
- Compromise – Request a reduction based on equity, reviewed by CMS under the Federal Claims Collection Act.
- Waiver – Apply for relief based on financial hardship or best interest of the program, via Sections 1870(c) or 1862(b) of the Social Security Act.
Successful waivers or compromises result in refunds to the beneficiary or their lawyer.
Avoid the Compliance Pitfalls
Relying on a CPL instead of a Final Demand is a documented risk. One firm paid $250,000 to settle claims after using a CPL that underreported the amount owed. Others have faced enforcement for failing to repay Medicare or resolve conditional payments after referring cases to co-counsel.
A pattern is clear: The government enforces Medicare’s reimbursement rights — regardless of firm size, intent, or delegation.
Build a Compliant Process
To stay protected:
- Identify Medicare beneficiaries early.
- Open files with the BCRC.
- Don’t disburse funds until receiving and paying the Final Demand.
- Audit CPLs for unrelated charges.
- Use compromise and waiver tools to maximize recovery for clients.
- Document all steps and client communications.
Why This Matters to You
Failure to address Medicare conditional payments can trigger malpractice claims, jeopardize settlements, and threaten eligibility for clients. More important, CMS’s enforcement actions show no tolerance for noncompliance.
Your firm’s reputation and financial exposure are at stake. Don’t treat Medicare compliance as an afterthought. Treat it as a legal obligation and a strategic advantage.
If you want to protect your clients and your practice, contact Synergy to explore how our Medicare resolution services support full MSPA compliance and help you close files with confidence.
Written by: By Jason D. Lazarus, J.D., LL.M., MSCC | Founder & Chairman of Synergy | Founder of Special Needs Law Firm | Author of Amazon Best Sellers – Art of Settlement & Litigation to Life | Host of Trial Lawyer View by Synergy Podcast | Peak Practice by Synergy Curator
Demystifying Medicare Set-Asides: What Every Legal Professional Should Know
What is a Medicare Set-Aside and why should legal professionals be concerned about them? It all centers around the questions of Medicare’s future interests. That’s where Medicare Set-Asides (MSAs) come in. But even experienced trial lawyers and paralegals find MSAs confusing. No statute requires them. CMS guidance is limited. Liability settlements have zero guidance in this regard.
So what are you supposed to do?
Here’s what you need to know and what your law firm should be doing now to stay compliant and protect your clients.
What Is a Medicare Set-Aside?
An MSA is a portion of a settlement earmarked to cover future Medicare-covered treatment for injury-related care. If one is set up as part of a settlement, Medicare isn’t supposed to pay for these services until the set-aside funds are properly exhausted.
The amount of the set-aside is determined case by case. In Workers’ Compensation claims, MSAs can be submitted to CMS for approval if they meet certain review thresholds. For liability cases, CMS review is rare. Most regional offices won’t review submissions.
Key point: even though MSAs are common in Workers’ Comp, there’s no federal statute requiring one not even in Comp.
Why Are MSAs a Big Deal?
The Medicare Secondary Payer Act (MSP) prohibits Medicare from paying when another primary payer exists. That includes settlement proceeds intended to cover future medical care.
In practice, this means that if Medicare thinks your client was compensated for future care but didn’t set money aside, they could possibly deny payment for that care. And if it did, the appeals process is lengthy and punishing.
Lawyers often ask: If CMS doesn’t review liability MSAs, and no statute mandates them, why bother?
Because CMS has been clear, shifting the cost of future care to Medicare violates their interpretation of the MSP. Failing to consider Medicare’s future interests can harm your client and expose your firm to risk.
The Regulatory Reality
There are no clear laws. No formal rules. And yet, Medicare’s expectations haven’t changed.
Since 2001, CMS has released guidance via memos and its Workers’ Comp Set-Aside Reference Guide. In liability cases, there have been repeated attempts to codify rules but every time, CMS has pulled back due to practical and legal challenges.
In 2022, CMS formally withdrew a proposed rule that would have established new requirements for liability MSAs. That doesn’t mean personal injury firms are relieved of any obligations under the MSP. On the contrary, CMS has not changed its formal regulatory position.
Case Law You Should Know
Several trial court cases help clarify how MSAs may be handled when full value isn’t recovered:
- Aranki v. Burwell: No law requires MSAs, but Medicare’s future interests still matter. The court did not say you can ignore them.
- Sterrett v. Klebart: If a settlement doesn’t fund future medicals, an MSA isn’t required. The court recognized that compromise settlements don’t always compensate for future care.
- Benoit v. Neustrom: The court allowed a reduction to the MSA based on the proportion of the settlement compared to total damages. This is a blueprint for arguing that Medicare’s interests were reasonably considered when recovery is limited.
These cases offer practical tools, but no guarantees. They are not binding on CMS. They are persuasive authority to be used strategically when documenting your file and protecting your client.
Practical Steps for Law Firms
To avoid the risks of potential Medicare denials, malpractice claims, or other potential negative consequents, you need a process:
- Identify Medicare beneficiaries which you represent.
- Analyze whether future medicals were funded.
- Advise clients about the risks of not setting anything aside.
- Document your decision and your client’s consent.
- Coordinate with the defense on what ICD codes are reported under MIR.
This isn’t theoretical. The Department of Justice has pursued personal injury firms that failed to resolve conditional payments. Similar exposure could follow for future care if lawyers fail to address it during settlement.
What You Should Be Doing Right Now
Every firm should have a Medicare compliance checklist. Educate your clients. Consult experts on complex cases. Push back on unreasonable release language. And most of all, treat the MSP as a serious compliance obligation, not a box to check.
There are no shortcuts. But there are smart, defensible approaches that protect both your client’s recovery and your practice.
Written by: By Jason D. Lazarus, J.D., LL.M., MSCC | Founder & Chairman of Synergy | Founder of Special Needs Law Firm | Author of Amazon Best Sellers – Art of Settlement & Litigation to Life | Host of Trial Lawyer View by Synergy Podcast | Peak Practice by Synergy Curator
When you represent a Medicare beneficiary in a personal injury case, doing nothing about Medicare Secondary Payer (MSP) futures compliance is not a defensible option. Ignoring the risks can lead to denied care for your client and exposure to legal malpractice. Although Medicare Set-Asides (MSAs) are not mandated by law in liability cases, the Centers for Medicare & Medicaid Services (CMS) expects you to consider Medicare’s future interests. Failing to do so invites serious consequences.
The Trigger: Mandatory Insurer Reporting
Any settlement over $750 involving a Medicare beneficiary will trigger Mandatory Insurer Reporting (MIR). The reporting includes ICD codes for injury-related diagnoses, which Medicare uses to determine whether it should cover future treatment. Once those codes are submitted, Medicare can easily deny coverage for future care it believes should be funded from the settlement.
When a denial occurs, your client must exhaust a four-level administrative appeals process before reaching a federal court. This takes time, often years, during which your client may either delay treatment or pay out of pocket. In cases involving catastrophic injuries, the denial of care could severely impact your client’s long-term quality of life.
Exposure for You and Your Firm
In these scenarios, the consequences extend beyond the client. If the client was not advised of the risks of failing to set aside funds for future care, and Medicare later denies coverage, you may be liable for legal malpractice. The Department of Justice has already taken action against firms that failed to reimburse Medicare for conditional payments. While those cases didn’t involve future care, they send a strong signal: the federal government is watching and willing to pursue firms that fall short of MSP compliance obligations.
Where Most Lawyers Make Mistakes
One of the most common missteps is assuming that no action is needed because MSAs are not required by statute. Some practitioners rely on generic defense-side Medicare language in release documents without fully understanding the implications. Others neglect to document any client education about the risks of denied future care. Another major error is overlooking which ICD codes will be reported, a technical detail that can have long-lasting implications for Medicare coverage.
When Medicare Futures Compliance Applies
You only need to address Medicare futures if your client is a current Medicare beneficiary. If the settlement includes compensation for future medical expenses, you must assess whether any portion should be set aside. If future medicals are not funded or if the case settles far below full value, those facts affect your analysis. But in either scenario, the risks of doing nothing remain.
There Is No Standard Answer
Medicare compliance in the context of future care must be addressed on a case-by-case basis. No universal rule applies. But there is a clear standard of care emerging: lawyers must evaluate the risk, educate the client, and document every step.
Your process should begin by identifying whether your client is Medicare eligible. You then need to determine if the settlement includes future medicals and, if so, whether those are related to Medicare-covered services. You should then advise your client about the MSP and the risk of Medicare denying care in the future. Finally, it is best practice to document the advice given and your client’s informed decision. If the client chooses not to set aside funds, that decision and the reasoning behind it should be clearly recorded in the file.
What If Your Client Doesn’t Want to Use an MSA?
Even if you determine that future medicals are funded, a formal Medicare Set-Aside isn’t the only option. Alternatives include securing private health insurance, structuring the settlement to pay for medical care, using a medical preservation trust, or having the client pay as a self-payer.
The essential requirement is not that you create an MSA, but that you conduct a legal analysis to determine whether one is necessary and explain the reasoning to your client. This step is not about satisfying the defense or CMS, it is about protecting your client’s access to future care and safeguarding your firm from liability.
CMS’s Position on Future Care
CMS’s guidance is unambiguous. Medicare expects injury victims to use a portion of their settlement funds to pay for future Medicare-covered treatment before returning to Medicare for payment. While this is not a statutory or regulatory requirement, CMS treats it as policy. According to CMS, once a properly funded MSA is exhausted, Medicare resumes payment. But until that point, the agency may deny coverage.
What Law Firms Must Do Now
To reduce your exposure and protect your clients, you must develop a consistent process for handling MSP futures compliance. Begin by screening for Medicare eligibility at intake. Educate clients about the risk of Medicare denying future care. When appropriate, obtain an allocation and consider alternatives to a formal MSA by employing competent experts. Always document your legal analysis, the client’s decision, and any expert consultation.
It is equally important to understand what ICD codes the defense intends to report under MIR. Work with opposing counsel to ensure accurate reporting. Review release language carefully and push back on terms that are unnecessary or harmful.
Above all, start early. Do not wait until settlement is finalized to address these issues. Early intervention gives you more control, reduces client risk, and protects your practice.
Final Thought
There is no law requiring a Medicare Set-Aside in liability cases, but ignoring Medicare’s interest in future care is dangerous. CMS’s interpretation of the MSP Act is clear: Medicare should not pay for care already compensated by a settlement. Failing to address this issue invites denials and potential compliance issues.
MSP futures compliance is about protecting your client’s access to care and managing your firm’s risk. The stakes are too high to get it wrong.
Let Synergy help you handle these issues with confidence.
Written by: By Jason D. Lazarus, J.D., LL.M., MSCC | Founder & Chairman of Synergy | Founder of Special Needs Law Firm | Author of Amazon Best Sellers – Art of Settlement & Litigation to Life | Host of Trial Lawyer View by Synergy Podcast | Peak Practice by Synergy Curator
Why Medicare Compliance Can’t Be Ignored
If you represent injury victims who are Medicare eligible, strict Medicare Secondary Payer Act (MSPA) compliance is not an option. The risks are real, and the consequences can be serious. Missteps don’t only harm your clients, they also put your law firm in the government’s crosshairs. Enforcement actions, financial penalties, and malpractice exposure are becoming more and more common.
Government Enforcement Is Accelerating
The DOJ is very serious about MSP compliance. In one case, a Harrisburg personal injury firm paid over $53,000 to resolve its failure to reimburse Medicare more than $84,000 in conditional payments after settling a malpractice case involving a Medicare beneficiary. A Philadelphia firm settled a similar claim by paying over $6,600 and agreeing to firm-wide changes, including appointing a compliance officer and conducting regular debt reviews. In Baltimore, a firm that had referred a case to co-counsel was still held accountable when Medicare was not reimbursed. That firm paid over $91,000, and the DOJ made clear that joint representation does not absolve firms from their MSPA obligations. In another case, a Maryland firm paid $250,000 because it relied on a conditional payment letter rather than a final demand from Medicare before disbursing funds.
These enforcement actions underscore a consistent message: the government expects personal injury lawyers to address Medicare’s interests compliantly. Delegating the responsibility or assuming someone else will handle it is not a defense.
Common Errors That Create Risk
Several common mistakes repeatedly trigger liability. Disbursing settlement funds without waiting for a final demand letter from Medicare or relying upon a Conditinal Payment Letter is one common mistake. Others fail to identify or resolve Medicare Advantage (Part C) liens which can be a very costly mistake. Some lawyers assume that co-counsel or referring attorneys will take care of the Medicare obligations, but still end up being held accountable. Signing off on release language that includes misleading or overly broad “Medicare compliance” terms without proper review is another significant mistake. Failing to track the ICD codes reported to CMS or to educate clients about the potential impact on their future Medicare coverage are also frequent errors.
You do not have to willfully violate the MSPA to be exposed. Process failures or oversight can be enough.
What the Government Expects from Your Firm
In settlement enforcement actions, the Department of Justice has made its expectations clear. Law firms must appoint someone within the firm who is responsible for Medicare compliance. That individual must be properly trained. The firm must also regularly review and confirm compliance at least every six months.
Why Waiting Until Settlement Is a Mistake
A reactive approach to Medicare compliance is especially risky. Waiting until settlement to start Medicare compliance efforts often results in delays, misinformation, and missteps. Incorrect data may be reported to CMS through Mandatory Insurer Reporting (MIR). Conditional payments may be estimated too low if based on early letters rather than final demands. In some cases, settlement proceeds are disbursed before confirming the final Medicare lien amount, which can leave the firm directly liable for reimbursement. Late-stage engagement also means losing leverage to negotiate a compromise or waiver with CMS.
A Proactive Process Is Your Best Defense
The best way to manage MSP compliance is to treat it as a core part of case intake and your resolution process. This begins with identifying whether the client is a Medicare beneficiary or is likely to become one within 30 months. From there, you need to collect and verify their benefit status, consult Medicare compliance professionals early, and initiate the process of identifying and resolving all conditional payments and liens, including those from Medicare Advantage plans.
You also need to inform clients about the legal and practical risks of not addressing Medicare’s reimbursement rights or failing to plan for future injury-related care. If your client does not address Medicare’s future interest, Medicare may later deny coverage. Every step of this process, including the decision-making and client education, should be well documented in your file.
The Cost of Inaction
There’s more at stake than compliance. If your firm mishandles Medicare issues, the government may claw back funds, assess penalties, or face legal malpractice exposure if your client is denied care or forced to repay Medicare years later.
Medicare compliance is not a technicality. It’s a legal obligation with serious consequences when ignored.
How Synergy Can Help
Synergy’s MSP compliance experts work with law firms to prevent these problems. From identifying at-risk clients to final demand resolution and lien negotiation, we help your practice remain compliant and protect client recoveries.
The real cost of MSP mistakes is too high to ignore. Start protecting your clients and your firm now, before it becomes a problem you can’t fix.
Written by: By Jason D. Lazarus, J.D., LL.M., MSCC | Founder & Chairman of Synergy | Founder of Special Needs Law Firm | Author of Amazon Best Sellers – Art of Settlement & Litigation to Life | Host of Trial Lawyer View by Synergy Podcast | Peak Practice by Synergy Curator
Navigating Medicare compliance is a critical task when handling personal injury settlements involving Medicare beneficiaries. Ensuring total compliance with the Medicare Secondary Payer Act (MSP) requires a strategic approach and thorough understanding of the law/regulations. This blog post is a basic guide for trial lawyers when it comes to Medicare Secondary Payer compliance.
Identifying and Reporting Medicare Beneficiaries
The first step in Medicare compliance is to identify clients who are current Medicare beneficiaries or those reasonably expected to become beneficiaries within 30 months. Implement a screening method to flag these cases within your firm. Once identified, contact Medicare and report the settlement to obtain a Conditional Payment letter and ultimately a Final Demand. Carefully audit the Conditional Payment Letter and use the compromise/waiver process to achieve further reductions post payment of the Final Demand. Additionally, identify and resolve any Part C/Medicare Advantage Organization (MAO) liens.
Release Language
Release language is a vital component in Medicare compliance. Avoid overbearing or irrelevant language that can negatively impact your client. For example, make sure that the release doesn’t take away specific rights related to their government benefits. Also, ensure the release does not make the settlement contingent on CMS approval or other requirements that have no legal basis.
Early Intervention and Collaboration
Start the compliance process early in your case. Confirm disability eligibility with Social Security and gather all relevant insurance and government assistance documentation. Collaborate with opposing counsel on the information reported under the Mandatory Insurer Reporting (MIR) requirements. Ensure proper ICD codes are included to avoid future Medicare claim rejections.
Advising Clients on Medicare Futures Implications – Education and Expert Consultation
When dealing with Medicare beneficiaries, it’s crucial to assess whether future medical expenses are being paid as part of the settlement. If so, then: Consult, Advise and Document.
Educate your clients about the impact of not setting aside funds for future Medicare-covered expenses. Proper documentation of all compliance steps is crucial. Consult with experts to navigate the complexities of the MSP, including lien identification, conditional payment resolution, MSA creation, and release language. Expert guidance is essential to avoid mistakes that could lead to client dissatisfaction or legal malpractice claims.
If clients opt out of creating a Medicare Set-Aside (MSA), ensure they acknowledge the implications in writing. For those who choose to create an MSA, work with specialized companies like Synergy to perform the analysis and document the process accurately.
Avoid Complications at Settlement
The key takeaway is to manage Medicare compliance issues proactively to avoid disputes that could land you in federal court. Ensure proper ICD codes are reported and evaluate the necessity of an MSA with your client. Collaborate with experts and consider the potential for using the MSA as a negotiation tool to enhance settlement value. Carefully word the release to protect your client’s interests and avoid inappropriate language.
Conclusion
By following these steps, you can achieve total Medicare compliance, safeguard your clients’ interests, and navigate the complexities of the MSP with confidence. Proper planning and expert consultation are paramount to ensuring a smooth settlement process and avoiding legal pitfalls.
Turn to Synergy for experts who can help create a Medicare compliance strategy for your firm to mitigate liability risks and protect clients. Inadequate compliance processes can result in financial liabilities and worse yet damage to your firm’s reputation. Having a Synergy expert perform a Medicare Expert Case Evaluation (MECE) helps you educate your client related to future potential denial of care and then document your file appropriately. Ensure your Medicare processes protect both your clients and your practice by partnering with Synergy for total Medicare compliance.
Written by: Jason D. Lazarus, J.D., LL.M., CSSC, MSCC
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