MEDICARE SET-ASIDE (MSA)
Medicare Secondary Payer Compliance as it relates to Medicare “futures” has become such a concern for all parties that settlements are frequently delayed over these issues. Having a thorough understanding about the obligations of all parties when it comes to this issue is of paramount importance. First and foremost, the issue only arises when a settlement involves a Medicare beneficiary or someone with a “reasonable expectation” of becoming a Medicare beneficiary within 30 months. The information contained herein will provide an overview of the issues counsel should be concerned about when it comes to Medicare Secondary Payer Compliance.
If a client is a Medicare beneficiary or has a “reasonable expectation” of becoming one in 30 months, then we can help. We focus on the intricacies of the MSP so you don’t have to. Rely on us to assist with navigating the difficult MSP related issues. To learn more about select MSA related topics, use the links below to jump to a selected topic.
Medicare is a federal health insurance program. Medicare entitlement comes 2 years after the date of disability under Social Security’s definition. Medicare coverage is available without regard to the client’s finances.
If an injury victim is covered by Medicare, you have to worry about the Medicare Secondary Payer (MSP) statute. The MSP is a series of statutory provisions enacted during the 1980s as part of the Omnibus Reconciliation Act with the goal of reducing federal health care costs. The MSP provides that if a primary payer exists, Medicare only pays for medical treatment relating to an injury to the extent that the primary payer does not pay. CFR Title 42, Part 411, Subpart B, Section 411.20 (2) provides “Section 1862(b)(2)(A)(ii) of the Act precludes Medicare payments for services to the extent that payment has been made or can reasonably be expected to be made promptly under any of the following” (i) Workers’ compensation; (ii) Liability insurance; (iii) No-fault insurance. There are two issues that the MSP deals with: (1) Medicare payments made prior to the date of settlement (“conditional payments”) and (2) future Medicare payments for covered services.
Enforcement of the MSP as it pertains to future Medicare covered services began back in 2001 when the Centers for Medicare and Medicaid announced in a memorandum the requirement to set aside a portion of Workers’ Compensation settlements allocated to future Medicare covered expenses. This memo was the genesis of a whole new way of settling cases for Medicare beneficiaries and was the start of Medicare set asides.
Recently, there have been some developments that indicate that the MSP may be enforced to a greater extent in liability settlements for future Medicare covered expenses. There are two CMS memorandums that have been issued in relation to set asides for liability settlements. The first one was issued by the Dallas Regional Office and summarizes the obligations of the parties to protect Medicare’s “interests” in liability settlements. The second was issued by the Baltimore HQ office and provides a method of avoiding the need for a liability Medicare set aside when the treating physician certifies there will be no need for future medical care.
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. Medicare may approve the amount to be set aside in writing and agree to be responsible for all future expenses once the set aside funds are depleted if the parties choose to submit the allocation to CMS for review.
An allocation is an estimate of future Medicare covered services related to an injury. A MSA allocator performs an in-depth review of the injured party’s medical records to determine the future anticipated amount of Medicare covered medical treatment. Medicare regulations establish the treatment Medicare would normally cover. The total allocation is based upon remaining normal life expectancy which is determined by the injury victim’s current chronological age, pre-existing medical conditions, accident/injury related medical conditions, and recommended medical treatment. Rated ages are used by CMS as evidence of impaired life expectancy. A projection is then made of the likely expenses for the injury related Medicare covers services based upon the applicable medical reimbursement fee schedule and injury victim’s life expectancy. This allocation is the amount that should be placed in the Medicare set-aside.
If a client is a Medicare beneficiary and has a workers’ compensation or third-party liability claim that is settled, there may be a need for a Medicare Set Aside 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 to be Medicare eligible within 30 months of the settlement.
As a starting point, any workers’ compensation settlement must be reviewed by the Centers for Medicare & Medicaid Services (CMS) if the claimant currently receives Medicare, and the settlement amount is greater than $25,000. CMS must also 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.
In liability settlements, there are no guidelines or review criteria yet. Parties must decide whether future medical has been funded and if so, what is the proper way to ensure compliance with the MSP. Obtaining a set aside allocation is recommended if the client is a Medicare beneficiary or has a “reasonable expectation” of becoming a Medicare beneficiary within 30 months. The allocation is evidence that Medicare’s interests were properly considered.
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 similar 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 greatly reduce the amount of the set aside, they should be considered in nearly every set aside arrangement.
There are two options assuming the client is competent: 1) the set aside may be self-administered or 2) professionally administered. If the client is incompetent, then the set-aside must be professionally administered. Regardless of whether it is self-administered or professionally administered, the funds must be put in an interest-bearing account and accounted for in terms of expenditures on Medicare covered services.
According to CMS, if it is self-administered then the claimant should submit an annual self-attestation form when monies have been exhausted. If it is professionally administered, the administrator of the set aside must forward annual accounting summaries concerning the expenditures to the CMS Medicare contractor responsible for monitoring the individual’s case (MSPRC).
When a personal injury case is settled for a Medicare beneficiary, be it workers’ compensation or liability, a Medicare Set-Aside (“MSA”) may be implemented. Once the decision is made to utilize an MSA, the question becomes how will it be administered? The criteria for MSA administration is that the funds may only be used to pay for future medical expenses of the type normally covered by Medicare for treatment of the injury victim’s injury related medical conditions. CMS’s guidelines (for workers’ compensation cases) indicate that set aside funds should be placed in an interest-bearing account and may be either professionally administered or self-administered. For most injury victims, administering their own set aside can be a daunting task because they must determine what is Medicare covered, pay the right amount for the Medicare covered services and keep records of all expenditures.
Professional administration is a much better alternative for larger set asides. The question becomes who do you turn to for administration services for a Medicare Set-Aside when one will be utilized? How do you choose between providers? These aren’t simple questions to answer. However, Synergy does have the answers and a solution to Medicare Set Aside administration. Synergy’s Medicare Set-Aside Administration program is different because it employs a Medicare Set Aside Trust arrangement instead of a custodial agreement like most other professional administration programs.