Pitfalls in MSP Futures Compliance and How to Avoid Them

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.