Settlement of a Workers’ Compensation claim may require establishment of a Medicare Set-Aside (MSA) in situations where a workers’ comp claim is settled but there is a need for future medical treatment. Essentially, the concept here is that Medicare is a secondary payer as long as a primary payer exists.
For work injuries, workers’ compensation is the primary payer of medical medical treatment. If the workers’ compensation claim is settled, Medicare doesn’t want to be stuck paying for treatment that otherwise would have been covered under the claim.
Since most workers’ compensation claim settlements result in closure of the entire claim (an exception to this is an “indemnity-only settlement”), medical treatment for work related injuries is no longer paid by workers’ compensation.
An MSA essentially is an interest-bearing checking account, separate from personal checking or savings accounts, that is funded by a portion of the workers’ compensation settlement proceeds. The money in this account is used to pay for future medical expenses that otherwise would have been paid under the workers’ compensation claim.
Just how much of the settlement money has to be put into the MSA is determined by estimating the cost of future treatment by evaluating the cost of and need for past treatment. Such determinations can be complicated and often require evaluations by specialized companies whose sole purpose is to prepare a proposal that may be submitted for approval by the Centers for Medicare and Medicaid Services (CMS).
The MSA proposal must be approved by CMS, a process that typically takes many months. Once the approved MSA is appropriately spent, Medicare will provide further treatment.
CMS approval should be obtained when:
- The claimant is CURRENTLY Medicare eligible and the total settlement is greater than $25,000; or
- The claimant is REASONABLY EXPECTED to be Medicare eligible within 30 months of the settlement date and the settlement is $250,000 or over.
For settlements not falling into one of these two categories, explicit CMS approval isn’t required. However, Medicare’s interests still must be considered when settling any workers’ compensation claim.
There is not, as yet, any cut off where one does NOT need to take Medicare’s interests into account.