Medicare Set-Asides: Thinking Outside the Box to Drive Settlements
MARCH 20, 2024
Since their inception in the mid-1990s, Medicare Set-asides (MSA) has become a dirty word – synonymous with delay, difficulty, and distraction. Now is the time for all interested stakeholders in workers’ compensation and personal injury cases to see the positive side of MSAs – a tool to resolve cumbersome cases and drive them toward settlement.
What is a Medicare Set-Aside?
The term “Medicare Set-aside” is not found in federal statute or rule. It is a legal fiction first coined by plaintiff attorneys seeking to consider Medicare’s interests and protect their clients. It is a sum of money placed in an interest-bearing account to pay for post-injury medical care that is otherwise reimbursable by Medicare. This tool is preferred by the Centers for Medicare and Medicaid Services (CMS) to ensure Medicare remains the “secondary payer” post-settlement.
Using an MSA to Settle Your Case
There are many benefits to an MSA that are often overlooked. Stakeholders of all injury-related cases can use this tool to settle any case, especially those involving a Medicare beneficiary or a claimant who will be one in the foreseeable future.
Considering Obtaining Your Own MSA: Insurance carriers often obtain MSAs for settlement analysis. Like the preparation of income taxes, each service provider has their methodology when making these allocation calculations in a good faith manner. Getting your own allocation goes the extra mile and provides an additional opinion on future medicals. This allocation can be used in settlement negotiations to best advocate one side’s position. Not obtaining your allocation may also present professional responsibility problems for attorneys.
Administration of the MSA: Every MSA should consider professional administration. These costs were initially very expensive. However, many professional administration service providers now offer affordable full- or partial-administration services that can be used as bargaining chips in settlement discussions as they “add value” to an offer or demand. Any form of professional administration also adds peace of mind to ensure compliance.
Funding Mechanism of MSA: CMS requires the MSA amount to be paid in a lump sum or via a structured settlement/annuity. Trends suggest more parties to a workers’ compensation or personal injury settlement are using an annuity to fund the MSA. This route benefits all parties and helps protect the injured party from making significant errors or omissions if being self-administered. All parties also benefit from working with a funding specialist who processes all the paperwork to ensure compliance at no additional cost.
Reversionary Clause of the MSA: Every MSA should include a “reversionary clause,” which outlines where the residual funds are remitted when the claimant dies prior to exhaustion. This essential clause can also be discussed in mediation and settlement discussions to bridge the gap between parties.
Submit / Not Submit the MSA: Parties to a workers’ compensation settlement can submit the MSA to CMS for review and approval if it meets the workload review thresholds.[1] Remember – submission of an MSA in a workers’ compensation case is never required, but it can be used in settlement discussions to settle troublesome cases.
Resolving disputes without trial or a hearing on the merits promotes the desired public policy. It also allows parties to be creative in their agreements. Now is the time to reach more settlements by using an MSA in your personal injury and workers’ compensation settlement.
Other Benefits of MSAs
There are several other benefits to using an MSA allocation when exploring settlement. All parties seeking to resolve a case should consider using this tool to promote best settlement practices:
Quantifies the potential “exposure” when settling a case and clarifies the “grey areas” to future adverse action(s) by CMS;
Demonstrates good faith efforts to comply with the MSP Act;
Allows all parties to identify hidden dangers when the claimant is using opioid-based medications and provides an opportunity to ween that person off these dangerous drugs; and
Quantifies the “other medicals” of a case not covered by Medicare. Any allocation report worth its money should outline the non-Medicare reimbursable portions of a case.
These are some benefits of using an MSA to promote settlement in all injury cases.
Conclusions
Now is the time to use an MSA to drive cases toward settlement. The MSA allocation report clarifies the issues and hidden dangers of settling injury cases involving a Medicare beneficiary or someone near entitlement. It also helps mitigate costs and allows everyone to think outside the box when resolving cases to avoid unnecessary litigation.
[1] The CMS workload review thresholds are subject to change. Additional information can be found at the following: https://www.cms.gov/medicare/coordination-benefits-recovery/workers-comp-set-aside-arrangements