People commonly ask us this question. Not just claimants, but their friends and loved ones as well. Should a claimant pass away, what happens to the Medicare Set Aside (MSA) portion of their settlement? This is a perfectly reasonable question, because by law, Medicare is considered a secondary payor, so many assume that the money goes away. This is not the case.
Before we get into this particular question, let’s first review the basics of an MSA. For those of you comfortable with the definition and parameters of a Medicare Set Aside, scroll down to the 5th paragraph, where the question from the title is answered.
So first thing’s first: what is a Medicare Set Aside or an “MSA?”
An MSA is an account created in the settlement of a Workers’ Compensation or liability case. It’s funded using a portion of the settlement proceeds that is to be used to pay for future medical expenses related to the job injury/illness that would otherwise be payable by Medicare. Funds must be established in insured accounts and may be managed by the claimant or set up in a custodial account. See our previous post here on the definition.
Now that we’re clear on what exactly an MSA is, let’s talk about what happens to this money in the case of a claimant’s death. If the claimant has passed away before the MSA proceeds are exhausted, AND they’ve named a beneficiary on the account, the money will go to that person. If there is no named beneficiary, then these funds would pass in accordance with state intestacy statutes.
That’s only for the amount of money already in the MSA as cash. The vast majority of MSA’s are annuitized by the Workers Compensation Carrier, and unfortunately, most are set up with life only annuities with no remainder interest to any beneficiaries. This is a potential huge windfall to the insurance company who wrote the annuity. More than likely the broker who set up the annuity only had a duty to the work comp carrier to buy the cheapest annuity.
Pursuant to the CMS Workers Compensation Guide Published this year, the use of annuities in MSA’s are not mandatory. So the educational point here is before you allow a good portion of your monies to be placed into an MSA, get your own expert. Know that they can be funded with cash(that your loved ones will get if you pass), or an alternative annuity arranged specifically for your circumstances. It’s your settlement money, you were the one injured, and you have the right to understand what’s being done with your settlement money, and by who.
See the CMS guide 5.1 and 5.2 here.
If your MSA has been done by a plaintiff/claimant loyal advocate who you hired, then all of the monies allocated to your MSA would go to your loved ones, or your Estate, assuming that’s the design you want.
For more general information about MSAs, check out my blog post from October of last year on the basics of a Medicare Set Aside.
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).