Medicare set-aside agreements (MSAs) constitute an evolving area of law that should be considered by anyone settling a third party liability claim. The issue dates from passage of the Medicare Secondary Payor Act of 1986, which mandated that settlements in workers’ compensation cases evaluate Medicare’s potential role in covering related health costs – though the topic’s urgency was recently heightened by changes in Medicare regulations. When appropriate, “set-aside accounts” are created to hold funds earmarked to pay for future medical care that Medicare would otherwise be expected to cover.
If Medicare later finds that its interests have not been considered and protected, the agency may refuse to cover needed health care. It may also decide to seek restitution from any party to the settlement—defendant, plaintiff, insurance company or attorneys.
The process is fraught with confusion, however, since no formal guidelines have yet been issued for personal injury cases. In theory, set-asides could be required for anyone who might ever file a Medicare claim due to the injury in question—for instance, a 60-year-old who suddenly experiences a flare-up related to a childhood incident. In practice, though, many attorneys and settlement planners have relied upon standards established for workers’ comp cases, which require that set-asides be considered if:
- the plaintiff is currently on Medicare and the settlement is greater than $25,000 or
- the plaintiff, though not currently on Medicare, is likely to begin coverage within 30 months and the settlement is greater than $250,000.
Differences between regional Medicare offices have compounded the problem, with some suggesting that attorneys use the workers’ comp criteria and others declining to give any advice whatsoever – or, unhelpfully, simply advising that plaintiff’s counsel be careful to protect Medicare’s future interests. While the announcement of formal guidelines has long been expected, there’s no reliable indication of when they will be forthcoming or precisely what they will say.
In the meantime, cautious personal injury attorneys would be wise to apply the workers’ compensation thresholds and, if applicable, to contact an MSA analysis professional to determine how much they might need to allocate to a set-aside account. They should bear in mind, however, that if such professionals recommend a large apportionment, they will be hard pressed to adopt any other course of action.