What is Medicare and the MSP?

Medicare is a federal health insurance program normally for the Elderly, starting at age 65. However, many seriously injured plaintiffs start receiving Social Security Disability (SSD) and their Medicare entitlement comes 2 years after the date of disability under Social Security’s definition. Medicare coverage is available without any regard for your client's assets and/or income as it is not a needs based program.
If an injury victim is covered by Medicare, you have to adhere to the Medicare Secondary Payer (MSP) statute. The MSP is a set 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 requires 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 or Self insurance; and (iii) No-fault insurance. The MSP deals with: (1) Medicare payments made prior to the date of settlement (“conditional payments”) and (2) future Medicare payments for covered services.

As it concerns the future Medicare covered services, enforcement of the MSP started 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 (WCMSA accounts). This memo was the source of settling cases for Medicare beneficiaries and was the origin of Medicare set-asides. In the Workers Compensation area there are set guidelines and rules that Medicare enforces and prefers. There is also a review process depending on the total settlement value of Workers’ Compensation cases. In Third Party Liability matters, the same MSP law exists and must be complied with but no set of enforceable rules have been set by Medicare nor is there a review process.
Recently, there have been some ongoing developments that indicate that the MSP may be enforced to a greater extent in liability settlements for future Medicare covered expenses as CMS may be issuing similar rules and regulations. In the meantime, there are two CMS memorandums that have been published in relation to set asides for liability settlements. The first one was released by the Dallas Regional Office and outlines the obligations of the parties to protect Medicare’s “interests” in liability settlements. The second was released by the Baltimore HQ office and details 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.

What is a Medicare Set Aside?

A Medicare set aside (MSA), is a tool that allows injury victims to preserve their Medicare benefits by setting aside a portion of their settlement money in an interest –bearing account, either professionally administered or self-administered, that holds the funds to pay for future lawsuit related Medicare covered services. The funds in the set aside account can only be used for Medicare covered expenses related to the injury in the lawsuit. Once the funds of the set aside account have been properly exhausted, a plaintiff can go back to Medicare and Medicare will pay for the lawsuit injury related care without reimbursement rights. An exhaustion period can be when a full MSA lump sum is used up or a MSA funded by an annuity stream is used up. If you plan correctly with Saber Solutions LLC, the plaintiff will be set up for success in their future maximizing their settlement dollars, complying with the law and preserving their remaining settlement monies that they need for life.

What is a Medicare Set Aside Expert Allocation Report?

A MSA Expert Allocation Report is report prepared by a team of experienced nurse professionals who provide an estimate of future Medicare covered services related to an injury/lawsuit. These expert professionals will evaluate the injured party’s medical and prescription records to determine the total anticipated amount of Medicare covered future treatment. The factors in this report determine the amount to be allocated into a Medicare Set- Aside checking account. These factors are based on the normal life expectancy of the injured 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. An estimate is then made of the likely expenses for the injury related Medicare covered services based upon the applicable medical reimbursement fee schedule and injury victim’s life expectancy. With successful planning, this estimate is the amount that should at the very least be demanded, recovered and then placed in the Medicare set-aside.

When is a Medicare Set Aside Necessary?

A Medicare Set- Aside is needed if an injured party is a Medicare beneficiary or will be a Medicare beneficiary within 30 months of a workers’ compensation or third party liability claim that is settled. A Medicare Set-Aside is a way to satisfy Medicare’s requirement to protect its future interest and evidences that compliance with the Medicare Secondary Payer Act (MSP).

How can a Medicare Set Aside be Funded?

A Medicare Set-Aside can be funded in two ways: (1) the full lump sum deposited in the MSA or (2) an upfront cash seed deposit along with an annual tax free structured settlement annuity stream deposited over a claimant’s Life expectancy into a MSA. The most common way a Medicare Set-Aside is funded and provides the best advantage to the injured party is to fund with a tax free structured settlement. First, the structured settlement reduces the amount of the settlement allocated to the set-aside by using rated ages which are evidence of reduced life expectancy. Second, as a tax free vehicle it also lowers the cost for the set-aside. In addition to the savings on the total cost of funding the MSA, another advantage of utilizing a structured settlement to fund the set-aside is once the funds are exhausted in the MSA account, the injured party has the right to go back to Medicare to cover any (allowable Medicare) healthcare costs relating to the injury. If one funded a MSA with a lump sum they will not exhaust their MSA until all funds are properly used, which can be a big hurdle. If a structured settlement annuity is used to fund the MSA with an annual payment stream for the individual’s life expectancy, a plaintiff's exhaustion period can exist earlier and Medicare would have to pay injury related treatment until the next annual annuity payment is deposited into the set-aside account. In almost all cases, a structured settlement is the best option for the injured party to fund a Medicare Set-Aside.

How can a Medicare Set Aside be Administered?

Saber Solutions has teamed up with Ametros to offer CareGuard, a professional administration service for Plaintiff’s post settlement MSA accounts.

After settling your case using Saber’s LMSA and/or MCP, CareGuard will manage your MSA account for you.  You will receive a CareGuard card that you will use like a health insurance card when you visit the doctor or pay for prescriptions.  You will also receive an expert advocate to assist you.  These services will save you money on doctor’s visits, prescription, equipment and more, all while helping coordinate your care.  You’ll never touch a medical bill and CareGuard experts will file any necessary MSA reporting on your behalf.  Relax knowing that CareGuard is managing everything for you, ensuring you stay compliant with the law, so you can focus on your health.  You did not settle your legal case without an attorney by your side, do not manage your MSA without a professional by your side. Mention Saber Solutions sent you for priority service!!

Ametros CareGuard

Who Needs an MSA and Why do you Need One?

If you are currently a Medicare beneficiary or Medicare-eligible and you settle your case you may need an MSA. In addition, if you are not a current Medicare beneficiary but have a “reasonable expectation” of Medicare eligibility within 30 months of the settlement date then you may need an MSA. Assuming you fall into one of these two categories, you may need to establish an MSA because if you do not you could lose Medicare eligibility for your personal injury related medical conditions and SSD.

Who Determines the Amount Set Aside?

A professional who specializes in “allocations” examines your medical records/payouts and makes recommendations based on the amount of future care you will require that is covered by Medicare. The company hired to perform the allocation determines how much of your future medical care is covered by Medicare and then applies that to your remaining life expectancy to determine the suggested amount of the set aside. Medicare does not necessarily simply accept the allocation recommendation if it is submitted to them for review on a WC case. Medicare, if the WCMSA set aside is submitted, could require more to be set aside than the amount suggested in the WCMSA allocation. But because they do not review Saber Solutions LLC suggests a conservative Best Practices for the Plaintiff Bar.

How is the Set Aside Funded?

The set aside can be funded with a single lump sum out of the settlement proceeds or with future periodic payments using a structured settlement. A single lump sum funding can be used but then more money must be taken from your settlement to set- aside. If one funds their MSA with a tax free future periodic payments via a structured settlement annuity, it is not only a much cheaper way of funding the set aside but by having annual streams over one’s life expectancy it may permit one to go back to Medicare much earlier during an exhaustion period. When a set aside is funded with a large lump sum, a plaintiff must wait until this large lump sum account is exhausted. This is a Big Hurdle for plaintiffs to get the most out of their Medicare for injury related health care. However, when a set aside is funded with periodic payments via a structured settlement annuity it functions much like a yearly insurance deductible. Each year, the structure payment would flow into the set aside and when the funds are exhausted in that year Medicare would begin paying for services related to the injury. If the funds are not all spent in the year the periodic payment is made, the funds in the set aside carry over to the next year. Thus, Medicare only pays once all funds for any given year have been exhausted but this can happen much earlier in the process. A Smarter plan.

Why is a Rated Age with a Structured Settlement so Important to my MSA?

Age ratings can save on the cost of the structured settlement annuity and reduce the out of pocket cost of the set aside. A rated age is a life expectancy adjusted age used to calculate the cost of a structured settlement. If you receive a rated age it means that the life insurance company has decided that your life expectancy is less than normal due to your medical conditions. Accordingly, the annuity will be priced as if you were older. Shortened life expectancy translates into a lower structured settlement cost when compared to a structured settlement priced with normal life expectancy. Additionally, CMS considers a reduction in life expectancy when determining how much must be set aside. As evidence of reduction of life expectancy, CMS will look at the median age rating issued by the life insurance companies issuing age ratings. Therefore, not only does it cost less to fund a set aside with a structure, it also reduces how much must be set aside in the first place.

Why Should I fund my MSA with a Structured Settlement Annuity?

There is a cost savings by purchasing a stream of benefits today that will provide benefits tomorrow especially if there is a rated age. As a result, less money must be set aside when a structure is used to fund the set aside. In addition, interest earned on the funds in the structured settlement is not taxable. The structure becomes a tax free investment to fund the set aside. CMS routinely approves set asides being funded with structured settlement annuities and mentions their use in their memo as a preferred method. This allows a plaintiff to walk away with more of their settlement dollars to be put to use as they wish (i.e. income, college funds, retirement, investments).

If I am not yet eligible for Medicare, Can I use the MSA Funds?

For those who are not yet Medicare beneficiaries and for whom CMS has reviewed a Medicare Set-aside Arrangement, the MSA may be used prior to becoming a beneficiary because the amount of the set aside was based on the date of the expected settlement. Use of the MSA is limited to services that are related to the personal injury conditions and that would be covered by Medicare if the injury victim were a Medicare beneficiary.

Will the MSA Also Protect my Medicaid and SSI Eligibility?

No. An MSA only protects future Medicare and SSD eligibility (Federal Entitlement Program). If you receive Medicaid and SSI (Needs Based Programs based on Assets or Income thresholds) in addition to Medicare, a special needs trust (hereinafter SNT) might be necessary to preserve Medicaid eligibility and monies in a SNT are not considered assets or income to make one ineligible. If it is necessary, a hybrid MSA/SNT can be created to deal with these issues.

If I am no Longer Entitled to Medicare can I Withdraw Funds from the MSA?

No. You are not entitled to release of the MSA funds if you lose your Medicare entitlement. However, the funds in the MSA may be expended for medical expenses specified in the MSA agreement until Medicare entitlement is re-established or the MSA is exhausted.

What Happens to the Funds in the MSA Should I Pass Away?

The MSA funds, either in lump sum or structured settlement (if guaranteed), would go to your beneficiaries under the MSA agreement. Medicare only requires the funds to be used for your future Medicare covered injury related expenses. Therefore, once you pass away those funds can flow to your family or named beneficiary. If a structured settlement is set up and you want money to go to your family or named beneficiary, you should request that the annuity be “guaranteed” instead of life only.

Can I waive my right to future Medicare coverage to avoid an MSA?

“There is no means by which a . . . [injury victim] can permanently waive his or her right to certain specific services related to a . . . [PI] case and, thereby, reduce the amount of a . . . MSA. CMS cannot approve settlements that promise not to bill Medicare for certain services in lieu of including those services in a Medicare set-aside arrangement. This is true even if the claimant/beneficiary offers to execute an affidavit or other legal document promising that Medicare will not be billed for certain services if those services are not included in the Medicare set-aside arrangement.”

What if the Claimant has Group Health, a Managed Care Plan or VA Coverage?

“In a . . . [PI] settlement, a . . . MSA is recommended where the claimant is covered under a GHP or a managed care plan or has coverage through the VA. A . . . MSA is still appropriate because such other health insurance or health service could in the future be canceled or reduced, or the injured individual may elect not to take advantage of such services. It is important to remember that . . . [liability insurance] is always primary to Medicare and many other types of health insurance coverage for expenses related to the . . . claim or settlement.”