Why It is Your Responsibility to Protect Medicare
We all know (or at least have heard) that Medicare costs are skyrocketing. As a countermeasure, the U.S. Congress enacted a collection of laws known as the Medicare Secondary Payer Act (commonly referred to as MSP). The basic premise is this: if someone is injured, and a source of funds (other than medicare) exists to pay for the past and future medical expenses as a result of that injury – such other source of funds should be used. Only when NO OTHER source of coverage exists, will Medicare pay for the medical treatment related to the injury (this, of course, assumes that the person in question is eligible to recieve Medicare benefits).
If Medicare pays for treatment that should have been paid for by anther source of funds or coverage, Medicare will seek reimbursement. Regarding prior Medicare payments (before settlement or recovery) this is a no brainer. Attorneys will take funds out of your settlement proceeds and repay the government. It is protecting medicare’s future interests that provides problems because, if an error is made, Medicare may elect to cut off a recipient’s future benefits.
To protect both the client and the attorney, personal-injury attorneys will recommend that their clients, with significant future medical expenses, create a Medicare Set Aside. (commonly referred to as an MSA).
Medicare Set Aside (MSA)
- Make an MSA allocation: based on the need for future medical treatment as a result of the injury. The allocation calculus is performed using a client’s medical records for the prior two years, a life-care plan that was completed for the injured person (in cases with sigificant future medical bills, this will be often be done in preparation for, and to be used as evidence during, trial).
- Fund the MSA accounts: this can be done via lump sum or structured settlement out of the client’s personal injury recovery; and
- Administer the MSA: a Medicare Set Aside can be self administered by the client, or they can pay a third-party professional (read, shift liability) to a professional third party administrator.
Beginning January 1, 2012 all bodily injury claims worth at least $5,000.00, involving medicare beneficiaries, must be reported to Medicare.
MSAs are required, not only from current medicare recipients, but also if the injured individual is expected to begin participating with mediare within 30 months of the settlement date and future medical expenses are expected to be greater than $250,000.
How to Calculate a Reasonable Amount to Set Aside
Theoretically, the entirety of the proceeds from one’s case will not need to be put in the MSA. The set aside amount is held to a reasonableness standard. There is a formula that takes procurement costs, legal costs, life expectancy, prior medicals and anticipated future medicals in to consideration in order to calculate an appopriate MSA amount that will usually allow the client to pocket some money as well. Practically speaking, this is uncharted territory and CMS holds all the cards in determining what is, or is not, reasonable.
Failure to Comply
Failing to comply, or adequately protect Medicare’s interest, may result in risk to the medicare beneficiary (i.e. losing future medical coverage or benefits) and/or the beneficiary’s attorney (penalty of up to $1,000 / day).
The Medicare Secondary Payer Act and Medicare Set Aside requirement is causing much confusion. In fact, an entire cottage industry as arisen that specializes in the creation and administration of these Medicare Set Asides. Please consult with your attorney before making any decisions regarding this subject matter.
Also, remember that medicaid is a state-funded program, so the set-aside principles described above, do not apply to medicaid cases (however, you still need to protect medicaid’s interests as well).