Liability Medicare Set-Aside Requirements

The General “Requirements” of an LMSA: A Technical Review

do you need an msa

Medicare Set-Asides (“MSA”) cannot exist without Medicare’s right to reimbursement first being stated in the law. Those rights arise from the Medicare Secondary Payer Statute, 42 U.S.C. § 1395y(b)(2) (“MSP”) and 42 C.F.R. 411 et. seq. Then we must note that, MSP regulations and Centers for Medicare and Medicaid Services (“CMS”) guidance in the context of a third-party settlement currently provide no procedure for determining the need for, basis of, or allocation amount for a Liability Medicare Set-Aside.

Medicare Set-Asides are a vehicle to help attorneys, carriers, and Medicare beneficiaries make certain that Medicare maintains its “secondary payer” status. In turn, Medicare may obtain secondary payer status under the MSP if payment has been made, or can reasonably be expected to be made, under a workers’ compensation law of a state or under an automobile or liability insurance policy, both of which are defined in the statute as a “primary plan.” 42 U.S.C. § 1395y(b)(2)(A)(ii). A primary plan’s responsibility for payment can be determined by judgment or settlement. 42 U.S.C. § 1395y(b)(2)(B)(ii), 42 C.F.R. § 411.22(b)(1–3). Where Medicare is the secondary payer, it then follows that it should only pay if the primary payer’s funds for the underlying case have been exhausted. This statement is the basis for any MSA, in any situation, as there is no explicit statement that an MSA is legally required anywhere in the law.


How We Look at the Need for Medicare Set-Asides

An MSA may be necessary wherever a settlement honestly anticipates the need for future medical care and provides for the funding of that care. Alternatively, the parties must avoid being found to have intentionally shifted future costs to Medicare and away from a primary responsible party (i.e., the defendant, notwithstanding settlement agreements’ denials of liability). We take this to mean to mean that future care must be something more than just possible. At MASSIVE, we analyze the need for an MSA by addressing four questions:


  1. Did the plaintiff plead for and did the defendant release future medical expenses?*
  2. Does the plaintiff honestly and more likely than not require future medical care?
  3. What allocation methodology has been used to determine future medical needs?
  4. What methodology protects Medicare from paying for future medical expenses?


Answering any or all of these questions in the affirmative does not mean that an MSA is required. They are just the beginning of the analysis as to the need for an MSA.


*Also note Question # 1 includes that the settlement should provide for the funding of that care. We often suggest this means that the settlement is able to cover all known and incurred economic damages first. For example, a $10,000.00 settlement could not logically include dollars to pay future medical treatment – even where future treatment is required – if a $15,000.00 Medicare lien for past treatment exists.


So, do you need a Medicare Set-Aside? While the above questions will get you started, feel free to contact the experts at MASSIVE if you have any additional questions.