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What is a Medicare Set-Aside?

A Medicare set-aside (hereinafter 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 health care.  If Medicare review of the MSA is available, Medicare will be bound by its determination once the MSA amount is fully funded and properly exhausted.

When is a Medicare Set-Aside Recommended?

At present, if a client has a workers’ compensation claim that is settled either on its own or in conjunction with a third-party claim, a Medicare Set Aside may be appropriate to preserve their future eligibility for Medicare benefits. An MSA should be considered if the claimant is Medicare eligible or there is a reasonable expectation of Medicare eligibility within 30 months of the settlement. A Medicare set aside allows a claimant to preserve Medicare benefits by apportioning some of the settlement funds for Medicare covered expenses. The MSA funds should then be placed in a segregated account. Once the set aside account is properly exhausted, the claimant gets full Medicare coverage without Medicare ever looking to the claimant’s remaining settlement dollars to provide for his or her care. At this time, the Centers for Medicare & Medicaid Services (CMS) allows for the voluntary review of a Workers’ Compensation MSA (WCMSA) when a proposed settlement with a current Medicare beneficiary exceeds $25,000. CMS is also willing to review any workers compensation settlement if there is a “reasonable expectation” of Medicare enrollment within 30 months of settlement and the anticipated total settlement amount over the life or duration of agreement is greater than $250,000. A failure to meet CMS’ internal workload review thresholds does not provide a safe harbor when it comes to MSP compliance.

Are Medicare Set-Asides Recommended in Liability Cases?

There are no guidelines or formal review process for liability settlements at this time. However, according to CMS:

“… [u]nder the Medicare Secondary Payer provisions, Medicare is always secondary to workers’ compensation and other insurance such as no-fault and liability insurance. Accordingly, all beneficiaries and claimants must consider and protect Medicare’s interest when settling any workers’ compensation case; even if review thresholds are not met, Medicare’s interest must always be considered.”

CMS has also said:

“Third party liability insurance proceeds are also primary to Medicare. To the extent that a liability settlement is made that relieves a Workers’ Compensation (WC) carrier from any future medical expenses, a CMS approved Workers’ Compensation Medicare Set-aside Arrangement (WCMSA) is appropriate”.

If you have a settlement that is non-workers’ compensation but involves a Medicare beneficiary you should consider protecting Medicare’s interest under the MSP and the only known way to do that is with an MSA.

What is the Legal Basis for Medicare Set-Asides?

42 CFR 411.46 – Lump-sum payments.

(a) Lump-sum commutation of future benefits. If a lump-sum compensation award stipulates that the amount paid is intended to compensate the individual for all future medical expenses required because of the work-related injury or disease, Medicare payments for such services are excluded until medical expenses related to the injury or disease equal the amount of the lump-sum payment.

(d) (2) If the settlement agreement allocates certain amounts for specific future medical services, Medicare does not pay for those services until medical expenses related to the injury or disease equal the amount of the lump-sum settlement allocated to future medical expenses.

What are the Ethical and Legal Considerations regarding Medicare Set-Aside Arrangements?

According to CMS, when an attorney’s client effectively ignores Medicare’s interests in a WC case, the attorney should consult their national, state, and local bar associations for information regarding their ethical and legal obligations. Additionally, attorneys should review applicable statutes and regulations, including, but not limited to, 42 CFR 411.24(e) and 411.26.

When should I consider obtaining a Medicare Set-Aside Arrangement?

(Test 1) If the claimant is currently a Medicare beneficiary AND is likely to require post settlement injury related Medicare covered treatment.

— OR —

(Test 2) The claimant has a reasonable expectation of becoming entitled to Medicare within 30 months AND is likely to require post settlement injury related Medicare covered treatment.

How can a Medicare Set-Aside be funded?

A set aside may be funded with a lump sum or structured settlement.  The advantage to funding it with a structured settlement is that it typically reduces the amount that has to be set aside substantially.  In addition, a structured settlement “rated age” can be used as evidence of reduced life expectancy which also results in a lower figure for the set aside.  When a structured settlement is used to fund a set aside it operates similarly to a deductible.  Each year a payment is made from the structured settlement annuity into the set aside, that payment (plus any accumulation from past years) must be spent down before Medicare will pay for services.  Because structured settlements are tax-free and reduce the amount of the set aside dramatically, they should be considered in nearly every set aside arrangement.

How does CMS evaluate the sufficiency of a Medicare Set-Aside Arrangement?

Medicare considers the sufficiency of an arrangement on a case-by-case basis. Some factors they consider include basis for entitlement to Medicare benefits, nature and extent of the injury, age and workers’ compensation classification of the beneficiary, prior medical expenses paid by the insurance carrier, and the total amount of the settlement. Synergy’s Settlement Services’ staff of nurses thoroughly reviews the medical records, consults with the settling parties and ultimately makes a recommendation that adequately protects Medicare’s interests.

How long does it take to obtain CMS approval in a workers' compensation case?

As of 2020, CMS takes anywhere from 30-45 days to review and approve a WCMSA proposal absent a development letter… It is important to plan ahead and get the process moving forward if it is determined that a Medicare Set-Aside arrangement is needed.

What happens if Medicare’s interests with respect to future medicals in a WC settlement, judgment or award that includes an amount for future medical are not considered?

“If Medicare’s interests are not considered, CMS has a priority right of recovery against any entity that received any portion of a third-party payment either directly or indirectly- a right to recover, or take back, that payment. CMS also has a subrogation right with respect to any such third-party payment….. Medicare may also refuse to pay for future medical expenses related to the WC injury until the entire settlement is exhausted.”

How long will it take for completion of a Medicare Set-Aside Allocation report?

Once the information needed for completion is received, you will receive the Medicare Set-Aside report from Synergy Settlement Services within 10 business days. Rush report services are also available upon request for an additional fee.




The Synergy Settlements team will work diligently to ensure your case gets the attention it deserves. Contact one of our legal experts and get a professional review of your case today.

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