MEDICARE SET-ASIDES

Preserving Medicare eligibility of the injured party is a crucial matter to consider with any settlement.

When the injured party in a workers’ compensation case or possibly other types of cases is a Medicare recipient or is likely to become a recipient within 30 months of the date of settlement, or when the amount of settlement is over $250,000, the interests of Medicare come into play.

Federal law states that when a Medicare beneficiary is injured as the result of the negligence of another, the medical expenses should be paid by what is considered a primary plan, which is the liability insurance policy of the insured. Medicare is considered a secondary payor.

When Medicare pays for medical expenses upfront, it seeks repayment from the settlement. Failure to report the settlement can trigger penalties paid from the insurer and the injured party and their attorneys.

Medicare requires that its interests be considered in certain circumstance when a case is settled.  Frequently, a Medicare set-aside is used to satisfy this requirement. The Medicare set-aside can pay for future medical services related to the lawsuit injury, illness, or disease. The amount is determined through an analysis of the circumstances of a particular case. Once a proper set-aside allocation is exhausted, Medicare becomes the primary payer.

Funding an MSA with a Structured Settlement – a few reasons why:

• Tax-free benefit – the interest earned on the structured settlement is completely tax-free.
• Rated Ages (substandard underwriting) can reduce the cost of funding an MSA.
• Guaranteed Payments. Unlike a lump sum settlement, a periodic payment settlement will provide guaranteed benefits at specified payment dates to assure the MSA is financially secure.
• A structured settlement is less expensive than funding the MSA with a lump sum. This provides the possibility of additional available unrestricted funds being available.
• With a lump sum funded MSA, the claimant must exhaust the funds in the MSA before Medicare will cover any expenses related to the injury. Whereas, by funding the MSA with structured settlement payments over time, Medicare will cover any expenses over the current MSA balance in a given year.

Learn more about these additional financial services:

• Financial Planning
• Qualified Settlement Funds