Funding Medicare Set-Asides with a Structured Settlement

Posted by John Cattie

Question:
I have a case where they are considering using a structured settlement for a claimant who is on SSDI and not on Medicare yet. What if she spends the seed money in the first year? Will Medicare pay her medical before she is eligible for Medicare? I would think not. Would this case have to be approved by CMS even if it did not fall within the threshold for them to pay? How would a structured settlement protect the claimant if they would not pay? Can the seed money be more than 2 years of medical expenses to protect the claimant in this case? Has anyone had a case that was similar to this?

Answer:
When an MSA is established using an annuity, it is to be funded every period with a predetermined amount of money. CMS tells us in its memos about MSAs and Workers Comp settlements that, for any given period where the MSA proceeds for that period have been exhausted, it is proper to bill Medicare for injury-related care received that would otherwise be covered by Medicare for the duration of the given period.

At the end of the given period, the annuity funds the MSA again, and then the claimant would use MSA proceeds again. However, if the MSA contains a balance at the end of a given period, those funds roll over into the next period and are counted as a portion to be exhausted prior to being able to bill Medicare again.

You are correct in thinking that Medicare will not pay for injury-related care until the claimant becomes Medicare-eligible. However, the memos also tell us that the MSA may be used to pay for injury-related care otherwise covered by Medicare prior to the claimant becoming entitled to Medicare. Approval of a WCMSA proposal is not required. In fact, in certain situations, when the gross settlement fails to achieve the workload review thresholds, CMS will not review it.

My interpretation is that the seed money must be a minimum of 2 years plus costs of first contemplated surgery. I see nothing in the memos which would prohibit the seed money being more than this amount.I hope you find this helpful.

Please contact me if you would like to discuss MSAs further.

My best,
John Cattie