Medical Cost Projections & Medicare Set Asides (MSAs)

 

When people get hurt in a worker’s compensation case, they often end up with lifelong injuries. This means you’ll need medical services for the rest of your life. Knowing this, it makes sense to think about how you’ll pay for these future medical expenses as you get older.

This is even more true of people who get hurt when they’re older. If you’re within a few years of collecting Medicare, you don’t want to jeopardize your entitlement to medical coverage. This is why your personal injury attorney should set up a Medicare set-aside. This fund will cover your accident-related medical expenses as you get older.

If you don’t set up a Medicare set aside, or set one up without getting it approved, you can’t protect your Medicare interests. This is why it’s so important that you have a professional administrator handle your Medicare Set Aside once it’s created by your lawyer.

What is a Medicare Set-Aside?

A Medicare set-aside is a fund you create to pay the government back for medical expenses they’ll cover years from now. If you are currently covered under Medicare, or will be one day, you need to set up this fund at the time you receive your legal settlement. Most set-asides are created as the result of a worker’s compensation settlement.

Most set asides are created for worker’s compensation cases. This is because of the nature of workers comp claims. They tend to involve long-term injuries. They also involve mandatory coverage by your employer’s worker’s comp insurance.

In a worker’s comp case, you are pursuing your employer for an injury that took place at work. If this injury causes you to be permanently disabled, you won’t be able to work again. So, you’ll likely end up on SSDI or SSI. This means the government will be providing you with your health insurance. If the government has to pay for medical care that was caused by a worker’s comp case, they are going to want to be reimbursed. If they know you got thousands (or millions of dollars) to cover future medical expenses, they aren’t going to be willing to pay for it.

Do You Need a Medicare Set-Aside?

If you get hurt at work, you’ll file a worker’s compensation claim. If it’s determined that you are partially or totally disabled as a result of your work-related accident, you’ll receive compensation. This compensation will cover future medical expenses related to the accident. When you settle your worker’s comp case in a lump sum, a portion of the money is designated for medical expenses.

Once you go on disability, your healthcare will be covered by Medicare. The government will be responsible for paying for your medical treatment. They have no problem doing this if you become disabled. However, they’re only going to cover your general health care. They aren’t going to be willing to cover medical care that is related to an accident that you sued your employer for. Once they know you settled your case, they’re going to have one question: Why should they pay for medical expenses when you were already given the money to do so?

Knowing this, when you settle your case, you should set up something called a Medicare set-aside. This fund is created as part of your legal settlement. It’s designed to reimburse the government for medical expenses related to your accident. The government will be made aware of this fund. They will also be made aware of your settlement.

Why Create a Medicare Set-Aside?

Medicare is going to be aware of any medical treatment they cover. They get EOB (explanation of benefit) forms for all treatment you receive. When they see that certain procedures or appointments are related to a prior accident, they are going to exclude it from coverage. If you don’t have a set-aside fund set up, you are going to run into problems.

It’s a good idea to have an accountant help you create the account at the time of your legal settlement. Your personal injury attorney can help you do this. Your legal settlement will identify the amount of money that is being attributed to future medical expenses. This amount should be used to create your Medicare set-aside account.

If Medicare finds out that you are attempting to have them cover care that is related to your settlement, they will take action. You could be accused of committing Medicare fraud. Or, they will make you reimburse them for coverage extended. When you think about the costs of medical care, this is not something you want to do.

What About Personal Injury Cases?

Although most MSA are created for workers comp cases, that doesn’t mean they aren’t used for regular personal injury cases. In fact, a Medicare set aside is a great idea for any type of settlement. If you’re going to need future medical care, you really should create a MSA.

An MSA for a personal injury claim works the same way as one for workers comp. The only difference is that it won’t automatically be approved by the Centers for Medicare and Medicaid Services (CMS.) For workers comp claims, there are established guidelines your attorney can use to make sure he puts enough money in your MSA.

For personal injury cases, it’s a good idea to get your MSA approved by the CMS. If you do, you’re protected in the future. So, if your money runs out at some point, you don’t have to worry about losing your general Medicare benefits.

If your fund wasn’t approved and you run out of funds, you risk losing your Medicare benefits all together. If your case settles within thirty (30) months of becoming eligible for Medicare, you risk losing all of your Medicare benefits.

How Much Should You Put in Your Medicare Set-Aside?

It’s hard to know just how much you need to put into your MSA. For workers comp cases, the guidelines specify how much to put in there. For other personal injury cases, there are no guidelines.

Your attorney will consider the following when determining how much you should put into your fund:

  • Age
  • Life expectancy
  • General health
  • Projected Medicare related expenses

Once he sets up your fund, he’ll submit it to be approved by the CMS. If they approve it, you’ll be protected in the future. If they reject it, they won’t give an amount you should change it to. You’ll have to set up an entirely new plan and submit it once again for approval. There is no formal appeals process.

Your personal injury attorney can help you do this.

Some Things to Keep in Mind

There are a few things you need to do when you decide if and how to create a Medicare Set Aside account. If you follow these guidelines, you’ll protect yourself and your Medicare benefits in the future. You can also make sure the insurance carriers are taken care of.

  • Keep your MSA funds in a separate, interest-bearing account
  • Only use these funds for medical expenses related to your personal injury
  • File an annual report with CMS showing how the money for that year was used
  • Medical provider fees have to be in compliance with the approved fee schedule produced by CMS
  • If you use all of your MSA funds, make sure you let CMS know. If you don’t do this, you could risk your Medicare coverage in the future

Even with these guidelines in place, a lot of people still make big mistakes when it comes to an MSA. Don’t make any of these mistakes and you should be okay.

  • Don’t forget or choose not to create an MSA
  • Make sure you use a special needs trust, otherwise, it will count as an asset and you could fail a needs test when it comes to state or federal benefits such as social security disability
  • Do not fund your MSA with cash – buy an annuity so you can take advantage of the tax benefits.

Your attorney understands these things are important. However, not all personal injury attorneys are skilled at handling the management of Medicare Set Asides. This is why it’s important that you and your attorney find a professional to help you do this.

Your Personal Injury Attorney Can Help Create the MSA

When you discuss your settlement with your personal injury attorney, he’ll talk to you about a Medicare set-aside. Your attorney is very familiar with these accounts. He can partner you up with a financial planner or accountant to help create your fund. It’s important that you follow his advice. If you don’t create this account, you are creating a financial and administrative nightmare for yourself.

If you have any questions about a Medicare set-aside arrangement, contact an attorney who understands Medicare subrogation. He can answer any questions you may have. He’ll also direct you to someone who can help you manage your plan in the future. There is too much at stake to try to handle this yourself.