The Use Of Medicare Set-Asides In Liability Claims

One of the most frequently asked questions I get in my practice is whether Medicare set-asides are required in personal injury/liability claims that do not have a workers' compensation component. Here is a quick reference guide, which addresses the requirements of the Medicare Secondary Payer Statute as it pertains to personal injury/liability claims.

It is important to first point out, that at the present time, there are no specific provisions, statutes or memorandum from CMS requiring the need for a Medicare set-aside in a purely personal injury/liability settlement. To the extent that a personal injury/liability settlement also involves a workers compensation settlement or moratorium on future medical benefits, CMS does require that a Medicare set-aside be pre-approved. CMS presently has no official procedure to review an MSA done on a liability case with the sole exception of liability settlements that replace Workers' Compensation from the obligation for future medical expenses. See 42 C.F.R. §§ 411.44 and 411.47. To the extent a liability settlement also relieves a Workers' Compensation carrier from any future medical expenses, an MSA must be established with sufficient funds to cover future Medicare covered medical and prescription expenses. However, no MSA is required if the case is settled and the workers' compensation claim is left open without a moratorium. See CMS Policy Memo April 22, 2003.

What then should the reasonable practitioner do to adequately consider Medicare's interests in a personal injury/liability settlement that does not contain a workers' compensation component?

One option is to include language in the settlement documentation that identifies a specific amount for future Medicare expenses. The language should state that the Plaintiff agrees to be the primary payer from this amount before Medicare is required to start paying injury related bills. The language should specify the amount for both medical treatment and prescription expenses. There should also be a clause as to how the amount was arrived at (vendor analysis, life care plan or medical cost run) and that the parties agree it is sufficient to consider Medicare's interest. Our office can assist you in arriving at the specific amount and/or drafting sufficient language to protect all parties involved.

The most prudent way to consider Medicare's interests and to insure that the settlement does not affect the Plaintiff's future Medicare coverage is to use a voluntary set-aside. A voluntary set-aside is an account, funded out of the proceeds of the settlement, which is specifically dedicated to pay for future injury related medical and prescription costs. Voluntary set-asides are becoming a popular method of insuring that Medicare does not deny coverage for injury related medical and prescription bills thus leaving the Plaintiff with the burden of appealing a Medicare payment denial to an administrative law judge.

It is also important to remember that the parties must always resolve conditional payment issues before settling a personal injury/liability claim when a Plaintiff has been Medicare eligible at any point during the pendency of the claim.