Most plaintiff’s attorneys know they must address Medicare’s conditional payments when resolving a personal injury case for a Medicare beneficiary. The harder questions arise when a settlement includes compensation for future medical expenses. How should those funds be allocated? Should a liability Medicare Set-Aside (LMSA) be established? If so, should the arrangement be professionally administered or self-administered? And what happens when Medicare keeps denying benefits because a no-fault insurer never reported the end of its Ongoing Responsibility for Medicals (ORM)?
These questions are related, but they involve different parts of the Medicare Secondary Payer (MSP) framework. The LMSA governs how settlement proceeds are allocated and spent on future injury-related medical expenses. Section 111 reporting creates the duty of insurers and other responsible reporting entities to notify the Centers for Medicare & Medicaid Services (CMS) of settlements and of ongoing responsibility for medical expenses. Faulty reporting creates a separate problem for the injured plaintiff: Medicare keeps treating the no-fault insurer as responsible for medical expenses long after the case has been settled.
Liability Medicare Set-Asides: What We Know and What We Do Not
The MSP Act precludes Medicare from paying for medical expenses when payment has been made, or can reasonably be expected to be made, under a workers’ compensation, liability, or no-fault plan, including self-insurance. Medicare may make conditional payments when a primary payer does not pay promptly, but Medicare recovers those payments once a settlement, judgment, or award establishes the primary payer’s responsibility.
The challenge for plaintiff’s attorneys is that CMS has very little less guidance regarding future medical expenses in liability settlements versus in workers’ compensation settlements. CMS has established procedures for reviewing Workers’ Compensation Medicare Set-Aside Arrangements (WCMSAs), published a detailed reference guide, and issued self-administration instructions. No comparable CMS review or approval process exists for LMSAs. CMS put a liability MSA rule on its regulatory agenda in 2018 and withdrew it in October 2022 without ever publishing it.
An attorney cannot submit a liability set-aside to CMS and obtain a formal determination available through the WCMSA review process. Nor does the absence of a review process eliminate the obligation to consider Medicare’s interests. The MSP Act’s payment bar applies to liability settlements just as it applies to workers’ compensation settlements.
An LMSA sets aside a portion of the settlement to pay future, injury-related medical expenses Medicare would otherwise cover. The purpose is to ensure that settlement funds are properly spent on those expenses before Medicare is asked to pay for them.
The amount allocated, the method of administration, and the supporting documentation should reflect the facts of the case: the nature and severity of the injuries, the anticipated course of treatment, the cost of future care, the terms of the settlement, and the plaintiff’s risk tolerance.
Because CMS has no LMSA approval process, attorneys must not represent to a client, an opposing party, or a court that CMS approved or endorsed a proposed allocation. The objective is a reasonable, well-documented allocation that protects the client while accounting for Medicare’s potential responsibility for future care.
Professional Administration of an LMSA
Under professional administration, a third-party administrator holds the set-aside funds, pays qualifying injury-related expenses, maintains records, monitors spending, and prepares accountings.
Professional administration is best suited when the plaintiff has significant future medical needs, complicated treatment, or limited ability to manage a separate account. It also makes sense when the set-aside is large or expected to last many years.
The principal advantage is that the plaintiff does not have to manage the account. A qualified administrator reviews each bill, determines whether the expense relates to the settled injury, confirms whether Medicare would cover it, and keeps a record of every payment.
Not every expense associated with an accident is a proper LMSA expenditure. An unrelated prescription, or a service Medicare does not cover, should not come out of the account.
Self-Administration of an LMSA
Under self-administration, the plaintiff manages the set-aside account, pays qualifying expenses, and maintains the necessary records.
CMS publishes a self-administration toolkit for WCMSAs covering account setup, permitted expenditures, transaction records, and annual attestations. Those materials are a useful model for administering an LMSA, but they are WCMSA-specific and should not be described as CMS rules governing liability set-asides.
Self-administration works when the plaintiff can manage the account, the arrangement is simple, and professional administration fees would consume too much of a modest set-aside.
The plaintiff must still understand the responsibilities. The funds belong in a separate, interest-bearing account, not commingled with personal funds, and the plaintiff must keep records of every deposit, withdrawal, and medical bill, with the purpose of each expenditure. Before paying any bill from the account, the plaintiff must confirm the expense relates to the settled injury and is a service Medicare would cover.
The plaintiff must also understand that money allocated to future medical expenses is not extra compensation for personal use. Spending it on unrelated expenses, or failing to keep records, leaves the plaintiff unable to prove the set-aside was properly exhausted if Medicare ever asks.
Before settlement, counsel should explain the difference between the client’s net settlement proceeds and the amount designated for future medical expenses. The client should understand the consequences of misusing set-aside funds and should receive written instructions covering account management, documentation, and expense handling. Put those instructions in the closing statement or a separate signed acknowledgment so the file shows the client was told.
Attorneys should also weigh whether the client’s age, financial sophistication, health, anticipated treatment, and ability to keep records make self-administration realistic. A client who is comfortable managing a bank account may still struggle to separate Medicare-covered, injury-related expenses from other medical expenses year after year.
Neither method eliminates the need for a defensible allocation and careful documentation. The choice should turn on the client’s circumstances, not on an assumption that one method is always better.
Section 111 Reporting and Ongoing Responsibility for Medicals
The LMSA question is separate from the reporting obligations imposed by Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA).
Section 111 requires liability insurers, self-insured entities, no-fault insurers, and workers’ compensation plans to report specified information about claims involving Medicare beneficiaries. The responsible reporting entity (RRE) is the applicable plan or entity identified under the statute and CMS guidance. It is never the plaintiff’s attorney, even though the attorney negotiated the settlement.
Two reporting concepts matter here: Total Payment Obligation to Claimant (TPOC) and Ongoing Responsibility for Medicals (ORM). TPOC reporting captures a settlement, judgment, award, or other payment obligation. ORM reporting captures an insurer’s assumption of ongoing responsibility for a claimant’s injury-related medical expenses. ORM is reported almost exclusively by workers’ compensation and no-fault insurers, because those are the plans that pay medical bills as they come in. In an auto case, that means the client’s own PIP or MedPay carrier.
CMS feeds ORM data into its claims-processing systems to flag medical services another payer should cover. While a record shows open ORM, Medicare denies claims tied to the reported injury’s diagnosis codes because it treats the no-fault insurer as the primary payer. Medicare will not reprocess those denied claims until its records show the ORM ended, whether by termination or by exhaustion of the policy limit.
The practical problem looks like this. The liability case settles, the no-fault carrier exhausted its policy limit months earlier, and the plaintiff has taken on responsibility for future medical expenses. But the no-fault carrier never reported an ORM termination date, so Medicare’s records still show it as the primary payer. The client’s next injury-related claim is denied, and the denial has nothing to do with whether the plaintiff properly established or administered an LMSA.
Correcting Faulty ORM Reporting
When a client reports that Medicare denied an injury-related claim because another insurer remains responsible, counsel should find out why before assuming the LMSA was mishandled.
The first step is to obtain the Medicare Summary Notice or the provider’s remittance advice, which will show the denial reason and identify the insurer Medicare believes is primary. Counsel should then compare that record against the settlement agreement, the no-fault carrier’s exhaustion or termination letter, and whatever Section 111 reporting information the carrier will share.
If the no-fault carrier’s ORM has ended, the carrier must submit a Section 111 update record with the ORM termination date. Counsel should contact the carrier or its reporting agent, request an update in writing, and ask for written confirmation that CMS accepted it. If the carrier will not act, the client can contact the Benefits Coordination & Recovery Center (BCRC), which maintains Medicare’s MSP records, and asks that the record be corrected, with the exhaustion letter as proof.
Once the record is corrected, the attorney should follow up with the provider so it can resubmit the denied claims. A corrected record does not mean every denied claim gets paid automatically. Each claim must still meet Medicare’s ordinary coverage and timely filing requirements, so the provider should resubmit it promptly.
Conclusion
Liability settlements involving Medicare beneficiaries require more than a decision about whether to establish an LMSA. Plaintiff’s attorneys must decide how future medical expenses will be funded, whether the client can realistically self-administer, and whether the facts justify professional administration.
An LMSA and Section 111 ORM reporting solve different problems. A properly structured set-aside does not fix faulty insurer reporting, and a corrected ORM record does not prove a set-aside was properly funded or administered.
The consequences of getting either one wrong fall on the plaintiff. A client who settled a case can still face denied Medicare claims, unpaid medical bills, and delayed treatment because an insurer never told CMS its responsibility ended.
Medicare compliance is not a closing task to handle after the settlement is negotiated. It belongs in the settlement process from the beginning. Before the release is signed, counsel should confirm what the no-fault carrier has reported and when its ORM ended, decide how future medical expenses will be funded and administered, and document each step. That is how plaintiff’s attorneys keep their clients out of avoidable trouble after the file is closed.
Written by: Rasa Fumagalli JD, MSCC, CMSP-F | Director of MSP Compliance at Synergy.