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At the beginning of settlement talks in personal injury cases, clients frequently ask: “What will happen with my Medicare benefits when the settlement money comes in?”

In a nutshell, Medicare helps pay for hospital and nursing care, doctors’ fees, medication, and other medical services and supplies for people age 65 and older and for those who have been receiving Social Security disability benefits for at least two years. However, Medicare is considered a secondary payor by law. In other words, Medicare does not pay for the medical expenses of those bringing a worker’s compensation claim or personal injury liability lawsuit until the culpable party pays for a certain percentage of the care. That’s why protecting Medicare’s interests is critical when settlement arrives. Failure to do so can disqualify a person for future benefits. If some of the settlement proceeds are intended to cover injury-related expenses, creating a Medicare set-aside may be necessary.

A Medicare set-aside is a fund that’s literally put aside to protect a person’s future Medicare eligibility. It is a voluntary arrangement that demonstrates a good-faith effort to fund your future care without relying solely on Medicare. By establishing a Medicare set-aside, you are signaling to the Centers for Medicare Services that you are not trying to extract undue funds from the Medicare system.

There is a general four-step process to establishing a Medicare set-aside:

  1. Determine if a MSA is legally necessary by working with your attorney or a settlement planning expert.
  2. Determine the allocation of funds by working with an expert allocator, who will base a recommendation on the injured person’s covered and non-covered medical requirements.
  3. Prepare for future compliance, whether through self-administration or with the help of a professional administration firm.
  4. Implement the most cost-effective funding solution using tools like a structured settlement annuity or a single premium immediate annuity.

Taking action will protect your rights to receive Medicare benefits while ensuring your settlement is as beneficial to your future as possible.

Your future medical coverage is important. Complying with Medicare is an important part of the settlement process. If you or your client is wondering if a Medicare set-aside is necessary, we welcome you to contact Milestone for advice.

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