Individuals are required by law to consider Medicare’s interests when they receive a workers’ compensation or liability settlement to pay for future injury- or illness-related expenses. Failing to do so can impact a person’s Medicare eligibility at the worst time possible.
When an injured person has certain types of insurance coverage, those insurance companies are responsible for paying for medical expenses related to the injury or illness for which he or she has received a settlement. If that payment does not cover the full cost of services, Medicare may then become a “secondary payer” responsible for the balance of payment.
Medicare beneficiaries risk a denial of coverage for future medical expenses if the Centers for Medicare and Medicaid Services (CMS) determines that Medicare’s interests have not been appropriately considered. A Medicare set-aside (MSA) is the best way to protect Medicare’s interests and ensure much needed insurance coverage is not negatively affected.
The MSA Process
As a comprehensive settlement planning firm, Milestone Consulting is widely experienced with setting up MSAs. We suggest a streamlined, systematic approach to the MSA process to ensure those who have been injured are protected from losing their Medicare eligibility. Below is our recommended four-step process.
- Determine if a MSA is legally necessary based on the anticipated settlement amount, the potential need for and cost of future medical care related to the injury, and the individual’s current Medicare status and eligibility. Consult an expert if necessary.
- Determine the allocation early in the process. An expert allocator will take the time to understand the injured person’s covered and non-covered medical requirements. Choosing an MSA allocator should be based on the company’s treatment of both covered and non-covered medical expenses, as including the full picture of expenses can build the case’s value and may lead to a higher settlement recovery.
- Prepare for future compliance. While plaintiffs sometimes choose to self-administer their MSAs, self-administration could mean critical accounting errors and improper use of funds. A professional administration firm ensures MSA compliance is met.
- Implement the most cost-effective funding solution. MSAs should be funded with either a structured settlement annuity or a single premium immediate annuity (SPIA) for tax-saving purposes. Although the structured settlement annuity offers the benefit of tax-exempt growth, the SPIA is typically a less expensive option with greater flexibility.
By taking a logical, documented approach to the Medicare set-aside process, injured individuals can be assured they are complying with Medicare secondary payer laws and their future medical needs and Medicare eligibility will be protected.
Feel free to contact Milestone if you or your client is about to receive a settlement and is a Medicare beneficiary. We can get you on the right path toward Medicare compliance.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).